Mineral Resources Increases Exposure in Iron Ore Segment; June 2020 Quarterly Highlights

Mineral Resources Increases Exposure in Iron Ore Segment; June 2020 Quarterly Highlights

Summary

  • Australian Iron ore mining seems to be flourishing over the high demand for iron ore across China in the wake of a supply lag from Brazil.
  • Many ASX-listed iron ore mining companies such as Fortescue Metals Group Limited (ASX:FMG), BHP Group Limited (ASX:BHP) have witnessed a strong performance from the iron ore segment, pushing their stock to reach either a record or a multi-period high.
  • The surge in iron ore prices has prompted many ASX-listed multi-commodity companies such as Mineral Resources Limited (ASX:MIN) to take a high exposure in the iron ore segment, which seems to have boomed well during the June 2020 quarter.

The June 2020 quarter has been a roller coaster ride for many listed companies across the exchange with some from ASX-listed oil & gas companies space reporting large impairment and earnings loss due to the plunge in the oil & gas demand across the international front.

However, the June 2020 quarter has been one of the best quarters witnessed by ASX-listed iron ore mining companies in the wake of a rush in iron ore prices due to supply challenges and robust demand from China.

Also Read: Iron Ore Price Rally Tail Winds Aid BHP Group Post Strong Performance in FY20

Many ASX-listed iron ore mining companies such as Fortescue Metals Group Limited (ASX:FMG), BHP Group Limited (ASX:BHP) have witnessed a strong performance from the iron ore segment.

To Know More, Do Read: Fortescue Metals Surpasses All Expectations, Stock Hits Another Record High

The surge in iron ore prices and robust demand for the Australian iron ore across China in the wake of a supply lag from Brazil have prompted many ASX-listed multi-commodity companies such as Mineral Resources Limited (ASX:MIN) to take a high exposure in the iron ore segment.

The high exposure towards the iron ore segment seems to be additional kicker for companies with iron ore exposure, such as MRL demonstrating a strong performance for the June 2020 quarter.

Mineral Resources Limited (ASX:MIN)

MIN stated in its report released to the exchanges that the COVID-19 outbreak did not materially impact the June 2020 quarterly and FY2020 saw a record-breaking performance from the iron ore business end and a stable lithium business.

June 2020 Quarterly Performance

Iron Ore Segment

  • MIN produced 4,195 wet metric tonnes of iron ore during the June 2020 quarter, which remained ~ 22.0 per cent up against the previous quarter.
  • Likewise, the Company managed to ship ~ 52.91 per cent higher iron ore during the period same against the previous quarter at 4.430 million wet metric tonnes.
  • MIN holds exposure to two iron ore operations, namely, Koolyanobbing, and Iron Valley, both of which witnessed a strong quarterly performance.

Koolyanobbing operations ramped up to an annualised run rate of 12.7 million tonnes per annum in June 2020 with the successful transition of both Deception and Jackson pits to lower-strip ore delivery phase.

  • MIN largely focused on the Deception pit during the June 2020 quarter, and the Stage 3 cut back, and waste stripping progressed well while the mining of ore from Stage 2 remained on schedule.
  • The Company mined 2.236 million wet metric tonnes to produce 2.521 million wet metric tonnes of iron ore during the June 2020 quarter, which remained ~ 43.89 per cent up against the previous quarter, leading to a ~ 68.17 per cent surge in the iron ore shipment against the previous quarter at 2.647 million wet metric tonnes.
  • The FY2020 iron ore shipment from the prospect climbed to 7.4 million wet metric tonnes.

During the June 2020 quarter, the mining at Iron Valley increased in line with the medium-term mine plan of the Company with the Stage 1 of the C10 pit cutback progressed in line with the development plan for the quarter while the stage 2 commencing early.

  • MIN mined ~ 70.44 per cent high ores during the June quarter against the previous quarter; however, despite strong mining operations, the production from the prospect declined slightly.
  • But the shipment from the prospect during the same period soared by ~ 34.76 per cent against the previous quarter at 1.783 million wet metric tonnes.

Iron Ore Growth Story

In April 2020, the Company completed the transaction to purchase the Buckland Project, which included the Bungaroo South ore reserve, related haulage licences, designs, under a series of agreement with BIC Minerals Limited (ASX:BCI).

  • The transaction composed of a purchase agreement for Buckland Project for $20,000,000 in cash and the optimisation of the current Iron Valley Agreement, in which, the company would participate in the capital investment required to extend the mine life.
  • The Company further suggested that the above-mentioned transaction would increase its footprints in the Pilbara region, where MIN already holds exposure in the Iron Valley and is conducting exploration and development activities at the Kumina Iron Ore Project.
  • MIN previously rescheduled a follow-up drill campaign at Kumina planned for Q4FY2020 into Q2FY2021 to update the mineral resource estimation, which the Company would release in Q2FY2021 in the group’s resource and reserve update.

Furthermore, the Company suggested that the drilling and metallurgical test work at Marillana Iron Ore is moving in line with expectations with the Farm-in and JV agreement entered into on 21 January 2019 with Brockman Iron Pty Ltd- a subsidiary of Brockman Mining Limited (ASX:BCK).

Pursuant to the Farm-in and JV agreement, the Company may farm-in by satisfying the Farm-in obligations to earn 50 per cent interest in the Marillana Project, and MIN anticipate that it would meet the Farm-in obligations by the end of the second half for the year 2020.

  • Additionally, MIN is planning for a 10,000m reverse circulation program along with a 700m of diamond drilling, during the first quarter of the financial year 2021 at the Lambs Creek Iron Ore project, with an aim to support the technical studies.

Lithium Segment Performance

Apart from a high performance from the iron ore segment, the Company witnessed a strong production quarter from the lithium segment with the total spodumene production of 146 million wet metric tonnes during the June 20202 quarter, which remained ~ 31.53 per cent up against the previous quarter.

Iron Ore Lithium Performance Snippet (Source: Company’s Report)

  • MIN witnessed a strong production from the Mt Marion Lithium Project, which further translated into higher shipment with the spodumene shipment surging by ~ 15.15 per cent during the same period against the previous quarter at 114 million wet metric tonnes.

While the Company is currently focusing on optimising the Mt Marion mine with lowering the processing throughput to achieve higher yields, it has put the Wodgina Lithium Project, which is structured as an unincorporated joint venture between the Company (40 per cent) and the global lithium behemoth - Albemarle Corporation (60 per cent), on the care and maintenance due to the challenging global lithium market conditions.

Also Read: Supply Disruptions, Production Pullbacks, Increased Subsidies- The Trident of the Lithium Space

In a nutshell, the June 2020 quarter of the Company largely circulated around strong performance from the iron ore segment and careful implementation of the lithium strategy with the Company producing and managing yields of its Mt Marion prospect while putting the Wodgina Lithium Project on care and maintenance due to market challenges.

Additionally, the Company seems to be increasing its exposure in the iron ore segment with several developments and resource definition activities due to the booming iron ore market.

Furthermore, the iron ore segment seems to be having a strong production with an increase in both production and shipment during the June 2020 quarter.

The stock of the Company last traded at $26.410 (as on 3 August 2020), up by 2.6 per cent against its previous close on ASX.

 


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