Mineral Commodities Ltd reported a steep net loss of USD 65.1 million for H1 2024, driven by operational disruptions at its Tormin mine and strategic moves including the sale of its Skaland Graphite Project.
- Revenue up 19% to USD 18.1 million despite net loss
- Net loss widened dramatically to USD 65.1 million due to impairments and operational setbacks
- Tormin mine operations ceased funding following maritime incident and environmental damage
- Binding agreement signed to sell Skaland Graphite Project for USD 11.75 million
- Negotiations underway to acquire remaining 49% interest in Munglinup Graphite Project
Financial Overview and Loss Drivers
Mineral Commodities Ltd (ASX: MRC) has released its half-year results for the period ending 30 June 2024, revealing a challenging operational and financial landscape. The company posted a net loss after tax of USD 65.1 million, a staggering 7,392% decline compared to the prior corresponding period. This loss was despite a 19% increase in revenue to USD 18.1 million, underscoring the severe impact of operational disruptions and asset impairments.
The loss includes significant impairment charges totaling USD 38.5 million, primarily related to the Tormin mineral sands project, reflecting the Board’s reassessment of asset values following adverse events. Additionally, inventory adjustments of USD 18.5 million were recorded, linked to historical stockpile agreements.
Operational Challenges at Tormin
The Tormin mine in South Africa faced a series of operational setbacks throughout the half-year, including equipment failures, seawater intake damage, and a critical maritime incident post-reporting period. On 10 July 2024, the MV Ultra Galaxy container ship ran aground near the mining beaches, causing an oil spill that contaminated key mining areas and disrupted seawater supply essential for processing.
These events culminated in the Board’s decision to cease funding Tormin operations, leading to the appointment of a Business Rescue Practitioner on 5 August 2024 under South African law. The mine is currently on care and maintenance, with future operations and creditor arrangements managed by the appointed practitioners. This development marks a significant turning point for Mineral Commodities, as Tormin had been a core asset.
Skaland Graphite Project Sale and Strategic Focus
In a bid to shore up liquidity and streamline operations, Mineral Commodities entered into a binding agreement on 16 December 2024 to sell its 100% interest in the Skaland Graphite Project in Norway to Norge Mineraler Holding AS for USD 11.75 million. The transaction includes a non-refundable exclusivity fee and a refundable deposit already received, with completion expected around March 2025, subject to shareholder and regulatory approvals.
The sale is expected to provide crucial funding to the company, particularly as it navigates the fallout from Tormin and seeks to manage its working capital position. Norge Mineraler assumes all liabilities related to Skaland, except intercompany loans, and Mineral Commodities is restricted from competing in Norway for three years post-sale.
Munglinup Graphite Project Acquisition Efforts
Meanwhile, Mineral Commodities is advancing its position in the Munglinup Graphite Project in Australia. The company announced an in-principle agreement to acquire the remaining 49% interest from joint venture partner Gold Terrace Pty Ltd for AUD 7.5 million in cash. This acquisition, pending regulatory and shareholder approvals, would consolidate Mineral Commodities’ ownership to 100%, reinforcing its strategic focus on battery-grade natural graphite supply.
The Munglinup project is central to the company’s ambitions in the high-demand battery anode market, with a definitive feasibility study outlining production potential of approximately 52,000 tonnes per annum over 14 years.
Liquidity and Funding Initiatives
Facing a working capital deficiency of over USD 43 million at June 2024, Mineral Commodities has taken steps to bolster liquidity, including entering into convertible loan facilities totaling AUD 2.4 million with existing shareholders. The loans carry a 20% interest rate and include options for conversion into equity, subject to shareholder approval.
The company’s cash position stood at USD 0.9 million at the half-year end, down from USD 1.1 million at December 2023. The proceeds from the Skaland sale and potential additional capital raises are critical to sustaining operations and meeting creditor obligations.
Outlook and Market Position
Mineral Commodities is at a pivotal juncture, balancing the operational cessation of Tormin with strategic asset sales and project consolidation. The company’s ability to navigate regulatory approvals, finalize the Skaland sale, and complete the Munglinup acquisition will be key determinants of its future trajectory.
While the impairment charges and operational setbacks weigh heavily on near-term results, the focus on battery-grade graphite aligns with growing market demand for critical minerals in energy storage technologies. The company’s engagement with government initiatives and research collaborations further underscores its commitment to innovation and market relevance.
Bottom Line?
Mineral Commodities’ next chapter hinges on completing the Skaland sale and securing Munglinup ownership amid ongoing financial pressures.
Questions in the middle?
- What is the timeline and likelihood for shareholder and regulatory approvals on the Skaland sale and Munglinup acquisition?
- How will the business rescue process at Tormin impact Mineral Commodities’ financial exposure and future asset portfolio?
- What additional funding strategies will the company pursue if convertible loans and asset sales fall short?