Mineral Resources Ltd (ASX: MIN)'s coffers are soon set to swell with the company announcing it will receive a $200 million contingency payment after its Onslow Iron haul road hit its targets.
The lithium and iron ore miner struck a deal with Morgan Stanley Infrastructure Partners (MSIP) late last year to sell a 49% stake in the haul road, which connects its Onslow Iron mine in Western Australia's Pilbara region to the port.
MSIP paid MinRes an initial $1.1 billion, with an extra $200 million payment contingent on the road reaching haulage targets.
MinRes confirmed on Monday that those targets had been met, and it would in November receive the $200 million payment.
MinRes managing director Chris Ellison said that achieving nameplate capacity at Onslow Iron over three consecutive months was a significant achievement for the company.
I'm proud of the dedication and expertise that has brought the project to consistent nameplate levels, showcasing the extraordinary capability of our people and the strength of our innovative pit-to-ship supply chain. Securing the contingent payment is a strong financial outcome that rewards this operational success, and we thank Morgan Stanley Infrastructure Partners for their continued support.
Image source: Getty Images
Not all smooth sailing
The haul road has been plagued by rollover incidents since the mine came into production, but MinRes said in September that the necessary upgrades to the road had been completed, "enabling unconstrained haulage to resume at normal speeds".
As the company detailed at the time:
Roadworks included seal binder upgrades and cement stabilisation to enhance pavement strength and moisture resistance, as well as asphalting along the entire length of the sealed road. Minor ancillary works off the road continue and are scheduled for completion next month.
MinRes shares were 1.4% higher on the news on Monday at $45.60. The shares are not far off their high of $46.89 over the past 12 months and have more than tripled from lows of $14.05 during that period.
RBC Capital Markets, which has a price target of $45 on MinRes shares, said the contingency payment news was positive for the company.
It was, the RBC team, said:
A strong operational milestone confirming nameplate throughput at Onslow, validating Mineral Resources' haul-road monetisation strategy and further easing balance-sheet pressure. Also, importantly, the transaction (in general) reinforces Mineral Resources' capital-recycling model (build, de-risk, monetise) and supports future options across lithium portfolios.
The company will hold its annual general meeting on 20 November.
