Mineral Resources shares race higher on $1.3b asset sale

This miner is swimming in cash after selling a stake in its haul road.

| More on:
A happy construction worker or miner holds a fistfull of Australian money, indicating a dividends windfall

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Mineral Resources Ltd (ASX: MIN) shares are racing higher on Thursday morning.

At the time of writing, the mining and mining services company's shares are up 4% to $72.49.

Why are Mineral Resources shares racing higher?

Investors have been buying the company's shares today after responding positively to the release of an announcement after the market close on Wednesday.

According to the release, Mineral Resources has entered into a binding agreement with Morgan Stanley Infrastructure Partners (MSIP) for the sale of a 49% interest in the Onslow Iron project's dedicated haul road.

Management expects the sale to generate total proceeds of $1.3 billion.

Mineral Resources will retain a 51% interest in the asset. It will also have exclusive rights to use, operate and maintain the road. The arrangement with MSIP will ensure seamless mine-to-ship delivery of Onslow Iron product to customers.

What is the Onslow haul road?

The Onslow Haul Road is a key component of an innovative transportation infrastructure solution that was developed by Mineral Resources. The company highlights that the road unlocked stranded iron ore deposits in the West Pilbara region of Western Australia.

The 150 kilometre dual lane road links the Ken's Bore mine site to the Port of Ashburton. It will be fully sealed, fenced and equipped with fibre optic cabling to support the operation of autonomous road trains.

Transaction details

The release reveals that the transaction vehicle will receive a life-of-mine CPI-adjusted tolling fee per tonne of iron ore transported through the Onslow Haul Road of $8.041 (100% basis). This will be capped at 40 million wet metric tonnes per annum (Mtpa).

The tolling fee will be reset at a reduced rate after 30 years. Any tolling payments for volumes above 40Mtpa will be fully owned by Mineral Resources.

Management notes that the transaction values the Onslow Haul Road (100%) at $2.7 billion. This represents a 9.4 times pro-forma EBITDA multiple based on the 35Mtpa nameplate capacity.

The gross proceeds are payable in cash and comprise upfront consideration of $1.1 billion and a deferred consideration of $200 million. The latter is subject to achieving a 35Mtpa run rate for any quarter before 30 June 2026.

'World-class credentials'

Mineral Resources managing director Chris Ellison commented:

I am proud of the strategic relationships we have formed with global industry leaders and pleased to welcome Morgan Stanley Infrastructure Partners as a partner in the Onslow Haul Road.

This transaction is a strong endorsement of Onslow Iron's world-class credentials, after the project last month delivered first ore on ship ahead of schedule.

As the first transaction of its kind in the Australian iron ore industry, it showcases the considerable value of MinRes' portfolio of infrastructure assets and our ability to unlock significant capital.

The transaction also establishes access to a new pool of capital to further accelerate our growth and continue to deliver returns for our shareholders.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Scott Phillips.

More on Materials Shares

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Materials Shares

Why is this ASX lithium stock crashing 16% today?

Why is this stock having such a poor start to the week?

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Materials Shares

Core Lithium share price hits a multi-year low: Will the tide change soon?

Are analysts now seeing value emerge from the lithium miner's shares?

Read more »

Yellow rising arrow on a brick wall with a man on a ladder.
Materials Shares

Brickworks share price jumps on big Soul Patts news

Brickworks has just built more stability to its business.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Materials Shares

Meet the speculative ASX stock that could rise 200%

Bell Potter thinks this high risk stock could triple your money.

Read more »

A female miner wearing a high vis vest and hard hard smiles and holds a clipboard while inspecting a mine site with a colleague.
Materials Shares

Guess which ASX 200 mining stock is making a $276m UK acquisition

BHP failed in its UK takeover attempt but this mining stock is having more luck.

Read more »

A man in his 30s with a clipped beard sits at his laptop on a desk with one finger to the side of his face and his chin resting on his thumb as he looks concerned while staring at his computer screen.
Materials Shares

Where could the Pilbara Minerals share price be in 12 months?

Will the market be kind to this lithium giant? Let's see what analysts are expecting.

Read more »

A female worker in a hard hat smiles in an oil field.
Materials Shares

Buy Rio Tinto and these 4 ASX mining stocks in June

Analysts think these miners could offer outsized returns over the next 12 months.

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Materials Shares

Why are Sayona Mining shares down 80% in a year?

This lithium miner is having a tough time. What's behind this?

Read more »