Mineral Resources shares soar on approval of $1.3b haul road sale
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The news: Shares in Mineral Resources rocketed at market open after the Foreign Investment Review Board (FIRB) approved the sale of the miner's 49% interest in its Onslow Iron project's haul road to Morgan Stanley Infrastructure Partners (MSIP).
The numbers: MinRes shares jumped 20.7% to $36.57 by 11am AEST on the ASX, having shed nearly 50% since the turn of the year.
The deal with MSIP, worth $1.3 billion, will see MinRes receive an upfront cash consideration of $1.1 billion.
A deferred cash consideration of $200 million will be paid to the miner subject to Onslow achieving a run rate of 35 million wet metric tonnes per year (Mtpa), for any quarter before 30 June 2026.
MinRes said that it will cancel its USD750 million ($1.13 billion) undrawn bridge facility upon receipt of the $1.1 billion payment.
The context: The 150 kilometre Onslow haul road is a key component of MinRes' transportation infrastructure, which has helped to unlock stranded iron ore deposits in the West Pilbara region of Western Australia.
MinRes said the haul road is due to be completed by October and is on track to reach its nameplate 35Mtpa run rate from June next year. The miner will retain majority ownership of the road, including rights to use it for mine-to-ship delivery of iron ore from the project.
Citi analysts said that while FIRB approval was expected, the announcement is still an "incremental positive". They also noted that the deferred $200 million payment, contingent on Onslow hitting its target 35Mtpa run rate before June 2026, gives MinRes "additional incentive" to meet its guidance 25Mtpa by the middle of the 2025 calendar year.
Jarden analysts noted that less than two weeks since disclosing its FY25 guidance, MinRes has identified $180 million of FY25 capital expenditure savings and $120 million of FY25 operating expenditure savings.
What they said: "We will interrogate these initiatives in due course, however, we have reservations at this stage given the lack of detail around where such savings will be realised," the analysts said.
"We maintain caution around company guidance, noting that [MinRes] are yet to address the issue of the FY24 accounts not reconciling to quarterly disclosure," they said.
Mineral Resources managing director Chris Ellison said: "Importantly, under this unique partnership, MinRes maintains majority exposure to the stable earnings that the haul road will deliver over the project's life".
"As foreshadowed in our full year results, MinRes is focused on reducing costs and preserving cash in response to a period of low lithium prices and a softer iron ore price," he said.
The sources: ASX announcement, Citi research, Jarden research
