Saturday, July 20, 2024

MinRes to sell down gas infrastructure

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Mineral Resources has flagged plans to sell an interest in its Perth Basin gas infrastructure as it progresses the partial sale of an iron ore haul road in the Pilbara.

Releasing its March quarter report today, the company said the process to sell a 49 per cent interest in the dedicated haul road for the Onslow Iron project was well progressed.

The sale was on track to be signed in the June quarter.

The partial sale of the 150-kilometre haul road, which is akin to a toll road, is likely to appeal to big investment funds looking for steady long-term returns.

The company said it intends to adopt a similar approach to fund the proposed development of its gas processing facility in the Perth Basin.

The proposed asset sales come after market analysts raised concern over the level of debt carried by the company.

It also follows the sale of two small assets during the March quarter, namely shareholdings in ASX companies Azure Minerals and Develop Global.

The company is looking to develop its Lockyer Deep gas field in the Perth Basin, with the project currently going through environmental and other approvals.

A final investment decision is due to be taken in the June quarter but remains subject to the state government agreeing to allow partial export of the gas.

That would align Lockyer Deep with Mitsui & Co’s Waitsia gas project, which was the first Perth Basin development to be granted an export exemption.

MinRes said an exemption would support development of a larger project.

The company has previously said it would need a gas plant able to produce 30TJ/d just for its own needs but could invest up to $850 million to build a plant with a capacity of 250 TJ/d if partial exports were approved.

Executive general manager corporate development James Bruce said the sell-down would help fund construction of new gas infrastructure.

“We see it being very similar to the Onslow Iron project where there’s infrastructure that we will want to construct and we will look at how we will finance that construction with partners.”

He offered no specifics when asked to define the scope of the sale.

“It’s about partnering on the infrastructure, we would look at all sorts of partners for that, he said.

“Hopefully someone with a big chequebook, that would be excellent.”

Asked about the opportunity for more capital recycling, Mr James said the business currently has “$4 to $5 billion of capital that sits on our balance sheet that isn’t yet earning income”.

“We’ve got significant options around how we think about partnering and how we think about recycling capital,” he said.

“At the same time, just to throw something else out there, we’ve found a reasonable amount of oil over the last year and we’re pretty excited about that as well.

“As we constantly do, we’ll manage for value and for recycling of capital.”

Meanwhile, Mr James said the company was well placed to take advantage of an improvement in lithium prices, which averaged $US1,030 per tonne in the quarter.

“The spodumene price improved late in the quarter,” he said.

“We sold 22,000 tonnes from Mount Marion at an SC6 price of US$1,300 a tonne.

We believe we’ve seen the bottom in the lithium prices.”

The company has maintained its volume and cost guidance for its iron ore and lithium operations despite soft results in the March quarter.

Iron ore shipments decreased six per cent to 4.5 million wet metric tonnes (wmt).

Pilbara shipments were affected by a vessel breakdown in January while production at its Yilgarn hub was limited by onsite haulage constraints.

The company’s iron ore production will increase rapidly once the Onslow Iron project kicks off, with first ore-on-ship targeted for June 2024.

Lithium production at Mt Marion was down 20 per cent following implementation of cost reduction measures.

The Wodgina lithium mine is forecast to be on the low end of volume guidance and upper end of cost guidance for FY24.


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