Market analysts have raised concerns about Mineral Resources’ ability to achieve higher prices for its iron ore.
The Chris Ellison-led miner on Tuesday reported discounts for its low-grade product remained elevated during the December quarter. The average realised price of just $US63.23 per dry metric tonne was down 19 per cent on the previous quarter and achieve only 58 per cent of the benchmark Platts index.
MinRes reported production of 5.5 million tonnes was lower than expected as unplanned border closures and lockdowns put in place following COVID-19 outbreaks around the country had limited staff movements. It also warned costs remained under pressure, impacted by lower productivity, higher fuel prices and increased off-site costs for haulage and shipping.
Analysts from Ord Minnett on Thursday said the company had now reported two consecutive quarters of prices well below the benchmark.
“Overall, it was a soft iron ore pricing quarter in our view which likely sees consensus revised lower (based on achieved iron ore prices),” they said in a note.
It has a share price target of $46 but a hold recommendation.
MinRes shipped 4.9mt of iron ore in the quarter, down from almost 5mt in the previous three-month period but well up on the same time a year ago. It said it was on track to hit revised full-year guidance of between 18.5mt and 19.5mt.
Production volumes at its mining service business of 71.4mt was down 5 per cent on the previous quarter but 14 per cent higher on the same time year ago thanks to growth at its Utah Point Hub.
Analysts at Goldman Sachs raised their cost forecasts for most of MinRes’ operations over the remainder of the financial year as labour and supply chain constraints squeeze margins but was positive on its outlook for lithium prices.
The company’s Mt Marion lithium project produced 98,000t of spodumene, 24 per cent down on a year earlier as mining was “impacted by significant resourcing constraints”. However, it achieved a near 60 per rise in realised prices to $US1153/t.
The restart of its Wodgina lithium mine is under way with first spodumene production expected in the first quarter of FY23.
The company’s results were overshadowed by the shock news earlier this week that 13 workers contracted to build its lithium hydroxide plant near Bunbury with joint venture partner and US chemicals giant Albemarle had tested positive for COVID.
Dozens more close contacts at the Kemerton project are in isolation awaiting testing results.
MinRes has a 40 per cent stake in the 50,000 tonne-a-year plant, where staff shortage have already caused delays.
Its shares were down a further 4.8 per cent to $54.36 at 8.45am after starting the week at $63.84.