Onslow Iron Scale-Up Will Support Global Industrial Demand

Key Takeaways

• Expansion of iron ore and lithium operations, combined with infrastructure investment, positions the company to benefit from strong global demand and operational efficiencies.
  
• Diversified, long-life asset base and disciplined capital management enhance revenue stability, downside protection, and long-term earnings growth.
  
• Elevated financial and operational risks, driven by heavy investment, volatile commodity prices, and internal constraints, threaten future growth, cash flow, and shareholder returns.

Catalysts

Together with subsidiaries, provides mining services in Australia, Asia, and internationally.

• The successful ramp-up and scale-up of the Onslow Iron project, with guidance to exceed nameplate capacity (~35Mtpa) and minimal additional capital outlay, positions the company to benefit from sustained global urbanisation and industrialisation which are expected to uphold long-term iron ore demand and support future revenue and EBITDA growth.
  
• Ongoing investments in infrastructure, logistics (haul roads, transshippers), and automation are already driving operational efficiencies and enabling margin expansion in Mining Services, with future benefits expected to accrue as volumes increase and cost per tonne decreases, supporting earnings and net margin growth.
  
• Mineral Resources' diversified, long-life, low-cost asset portfolio is underpinned by stable, long-term Mining Services contracts (with high retention rates and 85% >15 years), enhancing revenue predictability and providing downside protection during commodity cycles.
  
• The company's ability to scale lithium operations quickly when market conditions improve-owing to established assets, JV partnerships, and idle capacity at Wodgina and Mt Marion-positions it to capture anticipated accelerating demand from the global energy transition and EV adoption, creating potential upside to revenue and EBITDA when lithium prices recover.
  
• Disciplined capital management (reduced FY26 CapEx, proactive asset recycling, and no imminent equity raise needed), combined with improving cash flows and deleveraging, will strengthen the balance sheet, enhance financial flexibility, and support sustainable long-term earnings growth.

Mineral Resources Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Mineral Resources's revenue will grow by 9.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from -20.2% today to 4.9% in 3 years time.
• Analysts expect earnings to reach A$284.7 million (and earnings per share of A$3.15) by about September 2028, up from A$-904.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting A$659.0 million in earnings, and the most bearish expecting A$-42.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.5x on those 2028 earnings, up from -7.9x today. This future PE is greater than the current PE for the AU Metals and Mining industry at 15.5x.
• Analysts expect the number of shares outstanding to grow by 0.12% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.31%, as per the Simply Wall St company report.

Mineral Resources Future Earnings Per Share Growth

Risks

• The company's heavy recent capital expenditure (A$1.9 billion in FY '25, with high ongoing investment needs for Onslow Iron and other growth projects) creates risk of elevated debt levels and interest expenses, which, in periods of weaker commodity prices, could pressure net margins and reduce returns on capital.
  
• Significant operational exposure to volatile lithium and iron ore prices (highlighted by sharply lower lithium prices and care and maintenance decisions at Bald Hill and cost-cutting at Wodgina) introduces ongoing uncertainty for future revenues and earnings.
  
• The need to "repair the balance sheet," lack of a dividend this year, persistent asset recycling and inorganic deleveraging, and the stated need for sustained higher lithium prices before additional investment, indicate internal financial constraints that could limit future growth or shareholder returns.
  
• Care and maintenance of assets (Yilgarn and Bald Hill) and pulling back on sustaining or expansionary capital projects unless prices recover demonstrate potential for underutilised capacity and lower revenue growth if market conditions do not improve.
  
• Long-term execution risks remain regarding major new projects (Onslow Iron ramp-up, Pilbara Hub expansion, potential Lucky Bay Garnet acquisition), as delays, cost overruns, regulatory issues, or integration missteps could negatively impact free cash flow and overall profitability.

Valuation

• The analysts have a consensus price target of A$33.74 for Mineral Resources based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$58.0, and the most bearish reporting a price target of just A$14.8.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$5.8 billion, earnings will come to A$284.7 million, and it would be trading on a PE ratio of 29.5x, assuming you use a discount rate of 8.3%.
  
• Given the current share price of A$36.32, the analyst price target of A$33.74 is 7.6% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.