Mineral Resources’ Ambition Raises Concerns

Australia | 1:41 PM

Mineral Resources' FY26 profit, a turnaround from an FY25 loss, beat expectations, but the market responded poorly to talk of expanding into another commodity and perhaps geography.

• Mineral Resources’ FY26 performance beat expectations
• The recommencement of dividends was the major surprise
• Possible move into copper, maybe offshore, spooked the market
• One broker’s valuation raises eyebrows

By Greg Peel

Mineral Resources ((MIN)) is a leading mining services and diversified resources company with operations in iron ore and lithium. The company delivered what was largely considered a strong FY26 result, with record revenues, an earnings beat, and a recommenced dividend.

FY27 guidance was also better than expected overall.

Revenues of $6.5bn increased by 44% on FY25, in line with consensus, on record volumes and improved commodity prices. Underlying net profit of $822m, compared to a -$112m loss in FY25, was 7% ahead of consensus, helped by lower D&A, but operationally, all segments (mining services, iron ore, and lithium) beat expectations.

MinRes (as the company refers to itself on its website) reduced net debt by -$1.1bn in the period to $4.3bn and this will fall to $3.1bn on a pro-forma basis after the Posco transaction completes in the first half of FY27.

South Korean-based Posco is acquiring a 30% stake in MinRes’ lithium business. The deal involves MinRes selling its 50% ownership in the Wodgina and Mt Marion lithium mines. The new joint venture will allow Posco to acquire an indirect 15% interest in each mine while MinRes will continue to operate the mines under existing agreements.

Debt reduction has allowed the company to recommence paying dividends, declaring a fully franked final dividend of 83c per share, representing a 20% payout of underlying profit.

Forecasts ranged from a small amount to nothing at all for the dividend, averaging to a consensus forecast of a mere 7.4c.

By segment, Mining Services experienced record volumes, up 22% on FY25, as Onslow (iron ore) reached full nameplate capacity and the business won four third party contracts and completed six renewals.

Iron ore revenue was bolstered by Onslow as well as higher realised prices. In lithium, earnings rose as sales increased by 28% on higher recoveries and utilisation rates and improved lithium prices.

Guidance

MinRes’ FY27 guidance was broadly better than expected, particularly at Wodgina (lithium) where volumes are higher and costs lower than anticipated.

Heading into FY27, the company will focus on growing volumes by 18% at Wodgina through the running of three trains on clean ore versus two trains in FY26, increasing volumes at Onslow (iron ore), ramping-up the restarted Bald Hill (lithium) mine, lifting installed capacity at Mt Marion (lithium), and completing the Posco transaction.

More contentiously, management flagged potentially expanding the Mining Services division into copper and offshore opportunities.

Ord Minnett notes the latter has typically been challenging for mining companies.

Copper Risk

If it wasn’t already, copper is now the go-to metal that everyone would like a piece of. When one thinks of BHP Group ((BHP)), for example, one thinks of iron ore, but the miner now generates more earnings from its copper interests.

MinRes Management confirmed copper is "high on the agenda for everyone", with the preferred model to partner with an owner of a shovel-ready copper project and provide the full “design, construct and operate” mining services offering, replicating the model already proven in WA iron ore and lithium.

MinRes is targeting another geography and believes it can make progress over the next 12-18 months, but wouldn't disclose specific projects or counterparties. With no project, timeline, capital or return profile disclosed, Morgans warns the risk to capital allocation discipline and execution uncertainty on a new commodity and geography increases.

Morgans also notes major copper producers, such as BHP and Sandfire Resources ((SFR)), have pointed to the scarcity of pre-production copper projects globally that can be acquired at an attractive price.

While MinRes’ Mining Services business offers a source of additional value in any such deal, Morgans questions whether pursuing a new commodity in a new geography is the right path so soon after rebuilding its balance sheet.

Analysts highlight that despite a strong result and positive outlook commentary, the share price closed down -2.3% on the day of release, having had a wild 11% intraday ride. The stock rose 6% on the result print but then fell back -5% following the later management conference call, at which the subject of copper/offshore was raised.

Barrenjoey believes potential causes of this were a volatile day (3% swing) for Chinese lithium futures, which eventually closed flat on the day, and concern over MinRes’ Mining Services margins, which declined -20c per tonne year on year to $2.00/t.

Barrenjoey notes this is reflective of FY25 benefiting from a higher margin at Onslow during ramp-up, with $2.00/t in line with MinRes’ long term guidance.

Further acknowledged causes were profit taking by some who were positioned long ahead of what was expected to be a good result, and, finally, talk of Mining Services entering into a new commodity and geography, which has traditionally not worked well for mining companies.

On the latter, this is not the first time we have heard of MInRes looking to go abroad or consider other commodities, Barrenjoey notes. It was a few years ago the company contemplated crushing opportunities in Brazil, while talk of leveraging its design, build and operate skills (honed through Wodgina and Onslow) were first mentioned during the Wodgina site visit of May 2026.

At the time, Barrenjoey questioned this logic, but management said that it would look to utilise standard off-the-shelf copper concentrating technology (not looking to reinvent the wheel) and that hard rock mining was in the business's “wheelhouse”.

Barrenjoey thinks it's too early to get concerned until we see what is on offer and the economics.

UBS would welcome MinRes’ Mining Services business leveraging into copper projects, but expects disciplined deployment as per the company’s strategy, which suggests domestic copper is seen as lower risk than offshore.

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