{"id":2505,"date":"2023-12-01T05:50:43","date_gmt":"2023-12-01T05:50:43","guid":{"rendered":"https:\/\/economicherald.net\/?p=2505"},"modified":"2023-12-01T05:50:43","modified_gmt":"2023-12-01T05:50:43","slug":"monsters-of-rock-minres-has-paid-840m-for-lithium-in-just-five-months-is-it-a-display-of-tactical-genius","status":"publish","type":"post","link":"https:\/\/economicherald.net\/?p=2505","title":{"rendered":"Monsters of Rock: MinRes has paid $840m for lithium in just five months. Is it a display of tactical genius?"},"content":{"rendered":"

\u00a0<\/p>\n

Jarden analyst Ben Lyons says MinRes has spent an estimates $840 million in just five months hoovering up stakes in lithium projects<\/strong>
\nThe strategy could put short term stress on the balance sheet, but could also become the turning point in Chris Ellison\u2019s bid to turn MinRes into a major global mining player<\/strong>
\nChampion Iron price target lifted 14.8%: Jarden<\/strong><\/p>\n

\u00a0<\/p>\n

Mineral Resources (ASX:MIN)<\/a><\/strong> has been extraordinarily active in the corporate scene in boss\u00a0Chris Ellison\u2019s bid to \u2018control the rock\u2019<\/strong>.<\/a><\/p>\n

Now Jarden\u2019s Ben Lyons has tallied up the cost of that splurge, putting an $840 million bill on MinRes\u2019 five month shopping spree, which included $500m alone on minority interests in Azure Minerals (ASX:AZS)<\/strong><\/a>, Wildcat Resources (ASX:WC8)<\/strong><\/a> and Delta Lithium (ASX:DLI)<\/strong><\/a>.<\/p>\n

It\u2019s also re-upped its stake in Bill Beament\u2019s Develop (ASX:DVP)<\/a><\/strong> \u2014 today revealed as the winner of a $46m contract to develop an underground exploration decline at MinRes\u2019 50% owned Mt Marion mine near Kalgoorlie \u2014 and spent $76m picking up tenements near Mt Marion and the lithium rights at the Norseman gold mine.<\/p>\n

Lyons said a reported $260 million spend on the Bald Hill lithium mine, which could add $140-150 million in EBITDA over the next couple years, came at a valuation of $425m on Jarden\u2019s numbers, suggesting Ellison and Co. got a pretty good deal.<\/p>\n

That added 85c to Jarden\u2019s valuation of MinRes, but lower lithium prices have seen the investment bank drop its valuation on the stock from $50.30 to $48.30, well below its current trading price of $60.42.<\/p>\n

Jarden\u2019s balance sheet concerns have led it to be 20%, 7% and 13% below consensus on MinRes EBITDA in FY24, 25 and 26, with Lyons forecasting net debt of $4.6b at the end of FY24.<\/p>\n

But he said the purchases were on strategy, and could be long-term winners in the fullness of time.<\/p>\n

\u201cDespite the frantic pace of MIN corporate activity, we view the acquisitions as largely on strategy,\u201d Lyons said.<\/p>\n

\u201cDespite our increased concerns over the mounting short-term balance sheet pressure, if we cast our minds forward ~10 years, it is conceivable that MIN will control an equity interest in five or six large lithium operations in a Tier-1 jurisdiction \u2013 a position unlikely to be rivalled by any global player.<\/p>\n

\u201cWe may well look back on this period as a pivotal point in the growth of MIN to be a global mining player.<\/p>\n

\u201cHowever, MIN are playing in a highly competitive space, particularly with Hancock Prospecting Pty Ltd, with some increasingly complicated share registers to resolve to determine eventual control (AZS, DLI).\u201d<\/p>\n

Jarden predicts SC6 spodumene prices will hit a floor at US$1200\/t in the March quarter, reducing its full year price forecast by 19% to US$1863\/t.<\/p>\n

It\u2019s reduced the EBITDA forecast for MinRes for FY24 9% to $1.22b, but lifted FY25 and FY26 earnings 9% and 17% respectively to $1.88b and $2.23b.<\/p>\n

\u00a0<\/p>\n

Champion Iron in the good books<\/h2>\n

At the same time Jarden\u2019s Jon Bishop has lifted its target price on Champion Iron (ASX:CIA)<\/strong><\/a>,<\/strong> ramping up its 12 month TP 14.8% to $8.54 despite boasting a 62% Fe long term price of US$75\/dmt.<\/p>\n

Jarden sees prices falling from US$112\/dmt in FY24 to US$83\/dmt by FY26.<\/p>\n

But Champion\u2019s high grade product from its Bloom Lake mine in Canada, where it is in the process of increasing capacity from a previous 7.5Mtpa to 15Mtpa, garners a premium over that.<\/p>\n

And Bishop says it will be able to fund a 7Mtpa direct reduction pellet feed project \u2014 costing around C$470m to develop \u2014 with operating free cash flow.<\/p>\n

He thinks the company could conceivably ramp up to over 18Mtpa with debottlenecking, but thinks an additional expansion by developing the untouched Kami deposit would cost over US$1 billion.<\/p>\n

\u201cAll mining companies face operational risks and labour and inflationary issues persist,\u201d Bishop said.<\/p>\n

\u201cHowever, Phase II is complete and CIA managed COVID and natural disaster headwinds admirably and should benefit from a \u201ccut \u2018n\u2019 paste\u201d approach to further expansion, shoring up our base case.<\/p>\n

\u201cCommodity prices are a key risk ahead of FID and execution of key growth and value enhancement projects in the form of the DRPF project, possibly Kami expansion and pelletisation.\u201d<\/p>\n

The materials sector closed the day down 0.08%, with battery metals stocks beaten up and gold miners halting their strong run this week as gold prices stagnated around US$2045\/oz.<\/p>\n

Coal stocks Whitehaven and Yancoal ran higher with energy up 0.12% on a so-so day for the local market.<\/p>\n

\u00a0<\/p>\n

Monstars share prices today<\/h2>\n\n

<\/span>\u00a0
\n<\/span><\/p>\n

The post Monsters of Rock: MinRes has paid $840m for lithium in just five months. Is it a display of tactical genius?<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

\u00a0 Jarden analyst Ben Lyons says MinRes has spent an estimates $840 million in just five months hoovering up stakes in lithium projects The strategy [more…]<\/a><\/p>\n","protected":false},"author":0,"featured_media":2506,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-2505","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"\nMonsters of Rock: MinRes has paid $840m for lithium in just five months. 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