MinRes denies Wodgina sale as debt woes rattle investors

Australia’s Mineral Resources (ASX: MIN) has denied speculation it plans to raise capital or sell its stake in the Wodgina lithium mine in Western Australia’s Pilbara region.

The rumours, reported in The Australian’s DataRoom column this week, claimed the Chris Ellison-led miner had “quietly” begun a sales process for Wodgina and tested investor appetite for a capital raise aimed at reducing its A$5.1 billion ($3.2 billion) net debt as of December.

MinRes reiterated last week and again in its half-year results that it has “no plans” to sell its Wodgina interest or launch an equity raising.

Despite that, market concerns persist. The company’s shares have slumped in recent months amid growing scrutiny of its debt-heavy balance sheet, corporate governance issues and downgraded credit agencies ratings.

Founder Chris Ellison, a self-made billionaire from New Zealand who left school at 15, is preparing to exit the company following an internal probe that found he failed to recognize the need for transparency and timely disclosure of conflicts of interest.

MinRes has struggled in its lithium division, with low prices forcing it to mothball operations at Bald Hill, near Kalgoorlie. The company has also scaled back iron ore production, suspended dividends, and faces unexpected costs to repair its Onslow iron ore haul road.

Net debt rose by A$656 million ($406m) by December last year, despite the company raising A$1.9 billion ($1.2bn) through the sale of a 49% stake in its Onslow iron haul road and its gas assets. In October, Australia’s richest woman, Gina Rinehart, acquired MinRes’ energy business for A$1.1 billion ($680m).

Still, the company has said it remains confident in weathering the “miserable” lithium market, weak iron ore prices, and the impact of a “once-in-40-year” rainstorm that damaged its Onslow haul road in March.

Shares in MinRes surged 18.13% to A$17.01 on Thursday following the denial of the Wodgina sale rumours. The stock is down 51% since January and has lost 76% over the past year, dragging MinRes’ market capitalization to A$3.34 billion — well below its total debt.