Mineral Resources (ASX:MIN) share price tumbles 7% on quarterly update

The mining services company said COVID-19 had impacted its operations.

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A group of disappointed board members.

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Key points

  • The Mineral Resources share price fell 7.45% today
  • COVID-19 border closures and lockdowns impacted operations
  • Mining production volumes were 5% lower than the previous quarter

The Mineral Resources Ltd (ASX: MIN) share price fell today after the company released its quarterly exploration and mining activities report.

The mining services company’s shares finished the day at $57.12, down 7.45% on the previous close. For perspective, the S&P/ASX 200 Resources Index (ASX: XJR) dropped 3.19% today.

Let’s take a look at what the company announced today.

Highlights of the quarterly report

  • Mining services production volumes of 71.4 million tonnes (Mt) were 5% lower quarter on quarter (qoq) but 14% higher than the prior corresponding period (pcp) of Q2 FY21
  • Iron ore shipments of 4.9 million wet metric tonnes, in line with previous quarter but a 12% gain on pcp
  • Average iron ore price of US$63.23 per dry metric tonne (dmt), 19% less qoq
  • Spodumene production at Mt Marion of 98k dmt, 3% lower qoq and 24% lower on pcp.
  • Average realised spodumene price of US$1,153 per dmt, 56% higher qoq
  • Safety performance improved with no lost time injuries and 3% improvement qoq on total reportable injury frequency rate

What else happened at Mineral Resources?

Mineral Resources reported border closures and lockdowns due to COVID-19 impacted operations. Production volumes were impacted by forced restrictions on staff movements.

The company said operating costs are also under pressure due to rising fuel prices, less productivity and higher off-site costs for shipping and haulage.

The iron ore shipment growth of 12% compared to the pcp was driven by headway at the company’s Utah Point Hub.

Engineering and design work at the Ashburton project in the Pilbara region of Western Australia continued. Two transhippers were contracted for construction at a COSCO shipyard in China. The build will start once government and regulatory approvals are granted.

Mineral Resources also signed port and rail agreements with Hancock Prospecting Pty Limited and Roy Hill Holdings Pty Ltd for a new iron ore export facility at South West Creek in WA. The company is confident approval for the development of this project will be granted soon.

The company’s realised price for iron ore was impacted by adjustments for prior quarter shipments of US$29.4 million. Had it not been for these modifications, shipments for the quarter would have achieved a price of US$69.16 per dmt.

Shipments at Mt Marion in WA were 92% higher qoq due to the previous quarter’s shipment being delayed.

The company also updated its COVID-19 management plan to help prevent the virus impacting operations in the future.

What’s next?

The company’s mining services business is on target to meet its FY22 volume guidance of a 15-20% increase.

Iron ore shipments for FY22 are on track to meet the full-year guidance of 18.5 to 19.5 million tonnes per annum.

Spodumene production at Mt Marion is also expected to meet its FY22 guidance of 450-475 ktpa.

The company is moving ahead with construction of the 50ktpa Kemerton lithium hydroxide plant. Spodumene ore has been introduced into the plant with commercial production earmarked for mid-2022.

Mineral Resources is also restarting the Wodgina lithium mine with the first spodumene production planned for the first quarter of FY23.

Mineral Resources share price snapshot

The Mineral Resources share price has soared 47% in the past 12 months. In the past month, it has climbed almost 4% but it has fallen 12% in the past week.

For perspective, the S&P/ASX 200 Index (ASX: XJO) Index has returned 2% in the last 12 months.

Mineral Resources has a market capitalisation of nearly $10.8 billion based on its current share price.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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