Mineral Resources Faces Dividend Halt Amid Commodity Price Pressures
Mineral Resources Limited reported a challenging FY25 half-year with a 9% revenue decline and a 55% drop in underlying EBITDA, yet its Mining Services segment and Onslow Iron project show promising growth trajectories.
- FY25 half-year revenue of $2.3 billion, down 9% year-on-year
- Underlying EBITDA fell 55% to $0.3 billion, impacted by weaker commodity prices
- Mining Services EBITDA surged 49%, driven by Onslow Iron ramp-up
- Onslow Iron progressing towards 35Mtpa capacity with key infrastructure operational
- Dividend suspended amid financial pressures, with strong liquidity maintained
Financial Overview and Market Context
Mineral Resources Limited (ASX: MIN) unveiled its FY25 half-year results on 18 February 2025, revealing a revenue contraction to $2.3 billion, a 9% decrease compared to the prior corresponding period. The company’s underlying EBITDA took a more pronounced hit, plunging 55% to $302 million, primarily due to subdued commodity prices across its iron ore and lithium segments.
Despite these headwinds, the company’s cash position remains robust at $720 million, supported by $1.5 billion in total liquidity, including undrawn debt facilities. This financial cushion provides Mineral Resources with flexibility as it navigates a volatile commodity environment and invests in growth projects.
Mining Services and Onslow Iron: Bright Spots Amid Challenges
The standout performer in the half was the Mining Services division, which posted a 49% increase in EBITDA to $379 million. This growth is largely attributable to the ramp-up of the Onslow Iron project, which is advancing steadily towards its nameplate capacity of 35 million tonnes per annum (Mtpa). Key infrastructure milestones include the commissioning of three NextGen crushers, an operational 150km haul road, and the deployment of a jumbo road train fleet expanded to 110 units.
Onslow Iron’s haul road, a dedicated private 150km route from Ken’s Bore mine to the Port of Ashburton, has been a critical enabler of this growth. The company successfully sold a 49% stake in the haul road to Morgan Stanley Infrastructure Partners for up to $1.3 billion, reflecting strong investor confidence in the asset’s long-term value. The haul road’s operational efficiency is underscored by over 18,000 trips completed in the past six months.
Commodity Segments Under Pressure
Conversely, Mineral Resources’ iron ore and lithium segments faced significant margin pressures. The Pilbara Hub iron ore operations shipped 4.9 million wet metric tonnes (wmt) at a steady FOB cost of $74 per wmt, but revenue declined due to softer Platts index prices. The Yilgarn Hub transitioned to care and maintenance as planned, with a notable write-down of unsold stockpiles contributing to a negative EBITDA of $87 million.
Lithium operations at Mt Marion and Wodgina also experienced cost challenges, with FOB costs rising to US$667/dmt and US$628/dmt respectively, despite ongoing cost reduction initiatives. The Bald Hill lithium mine was placed into care and maintenance in November 2024, reflecting the company’s strategic response to market conditions.
Capital Expenditure and Investment Focus
Capital expenditure for the half totaled $1.1 billion, with a significant portion directed towards Onslow Iron’s Stage 1 development, including infrastructure, haul road, port facilities, and autonomous road trains. The company anticipates FY25 capex of $2.1 billion, reflecting continued investment in growth projects balanced by reductions in sustaining and exploration spend.
Mineral Resources also reported net investing activities of $442 million, bolstered by proceeds from the Onslow Iron haul road stake sale and a gas transaction with Hancock Prospecting, which yielded upfront proceeds of $780 million.
Balance Sheet and Debt Profile
The company’s net debt increased to $5.1 billion, reflecting peak investment phases, with net debt to underlying EBITDA rising to 7.4x from 4.2x in the prior year. However, Mineral Resources maintains a covenant-light capital structure with no significant debt maturities before mid-2027 and strong bond investor support. The company targets a long-term gross leverage ratio below 2.0x EBITDA, with a clear path to deleveraging as Onslow Iron ramps up production and earnings.
Outlook and Strategic Priorities
Looking ahead, Mineral Resources is focused on completing the ramp-up of Onslow Iron to 35Mtpa, targeting a mine life exceeding 30 years. The company expects iron ore attributable volumes of 8.8 to 9.3 million tonnes and lithium shipments in line with market demand. Mining Services production volumes are forecast between 280 and 300 million tonnes for FY25, underpinning steady earnings growth.
Operational priorities include advancing lithium plant improvements at Mt Marion and Wodgina, managing costs prudently, and pursuing exploration in the Perth and Carnarvon basins following the Hancock gas deal. The company also emphasizes sustainability initiatives, including a 3.8MW solar array installation and a decarbonisation fund across operations.
Despite the suspension of dividends due to financial performance pressures, Mineral Resources’ strong liquidity and strategic asset development position it well to capitalize on future commodity market recoveries and operational efficiencies.
Bottom Line?
Mineral Resources faces a pivotal period balancing ramp-up investments and market headwinds, with Onslow Iron’s success key to its financial recovery.
Questions in the middle?
- How quickly can Onslow Iron reach and sustain its 35Mtpa production target?
- What impact will ongoing commodity price volatility have on Mineral Resources’ lithium and iron ore margins?
- When might dividend payments resume given the company’s deleveraging plans and cash flow outlook?
