Fitch Revises Outlook on Mineral Resources to Stable; Affirms Rating at 'BB-'

Fitch Ratings has revised the Outlook on Australia-based Mineral Resources Limited's (MinRes) Issuer Default Rating (IDR) to Stable from Negative. At the same time, Fitch has affirmed MinRes' IDR and the rating on its senior unsecured US dollar notes at 'BB-'.

The revision of the Outlook follows the announcement of the sale of MinRes' 15% stake in its lithium assets, including Wodgina and Mt Marion, to POSCO Holdings. We believe the transaction will not have a material impact on MinRes' business profile, which is supported by increased exposure to mining services and the iron-ore segment as its flagship Onslow iron-ore project ramps up. The company also retains the ability to scale up its participation in lithium operations through higher production.

At the same time, MinRes' EBITDA net leverage will improve, as the company intends to use the sale proceeds to reduce debt. We expect the company to continue demonstrating capital allocation discipline and focusing on a strong balance sheet, which could lead to positive rating action.

Sale Improves Leverage: Fitch believes the transaction will widen MinRes' rating headroom due to the company's intention to use the sale proceeds to reduce debt. We estimate MinRes' EBITDA net leverage will improve to 2.7x in the financial year ending June 2026 (FY26) from 7.7x in FYE25.

MinRes has signed a binding agreement with POSCO for the sale of its 15% interest in each of the Mt Marion and Wodgina mines. MinRes will retain a 35% interest, continue to operate the mines and provide mining services. The total consideration is USD765 million, which it expects to receive in 1H26.

Lower Exposure to Lithium: We estimate a 5% decline in MinRes' EBITDA due to the transaction. POSCO will take over MinRes' rights to a 15% offtake of lithium gross production (on a 100% basis), which will reduce MinRes' exposure to the lithium market, where pricing conditions remain challenging. At the same time, low spodumene prices will limit the impact on the group's EBITDA from the reduction in spodumene offtake. We also believe MinRes will be able to scale up production at its lithium mines when commodity prices improve sufficiently.

Capital Allocation Discipline: MinRes significantly reduced its appetite for new investments and dividends to address its large debt in 2024. The company cut growth capex and postponed its growth projects other than the Onslow iron-ore project. The company indicated capex will drop to AUD1.1 billion in FY26, from AUD3.4 billion in FY24. We expect the company to resume its growth plans following deleveraging, but we also expect it to maintain a conservative balance sheet through the cycle.

Onslow's Rising Cash Generation: Onslow reached production of 35 million tonnes per annum (mtpa) and is set to meet its FY26 production guidance of 30-33mtpa following completion of the upgrade to its haulage road. The company also expects production to increase to 38mtpa in FY27 when the last two transhippers arrive. This supports our forecast for MinRes' incremental EBITDA of around AUD1 billion on average in FY26-FY29 attributable to Onslow, in addition to AUD750 million in carry-loan repayments to MinRes from its partners.

Earnings Diversification: We expect Onslow's ramp-up will also boost MinRes' earnings diversification. MinRes' mining services receive a fixed fee per tonne mined for the project, which also generates toll revenue for the company's road trust, the owner of the haulage road connecting the mine with the port. This will complement MinRes' already strong position in lithium spodumene mining and mining services.

Corporate Governance Issues: MinRes' rating reflects shortcomings in corporate governance that increase credit risk. The company has taken steps to address these issues by appointing a new board chair and four independent directors, and implementing enhanced procedures for related-party transactions, capital allocation, disclosure and succession planning. We anticipate continued progress, which should alleviate rating pressure.

Unique Model: MinRes' strength lies in the provision of pit-to-ship, life-of-mine services to mines. It funds a mine's design and construction in return for equity before securing a life-of-mine contract that charges based on production units, with no direct exposure to commodity prices. MinRes earns a margin on the volume. Current investments and developments tie the company's cash flow to lithium and iron ore markets through its vertical integration options.

Prepayment Treated as Debt: MinRes presold iron ore under an agreement for USD400 million (around AUD600 million), with delivery over FY25-FY28. MinRes includes the prepayment as non-debt in its financial statements. However, we treat the prepayment as debt, as we believe the agreement creates an obligation for MinRes. There are costs under the agreement that are akin to interest payments and the arrangement is an alternative source of funding for the company.

MinRes' strong upstream lithium position, increasing iron-ore output, and integrated mining services underpin its rating and help stabilise cash flow during market downturns. Its broader earnings mix differentiates MinRes from Canada's Hudbay Minerals Inc. (BB-/Stable), whose concentration in copper amplifies cash flow volatility, and from PT Indika Energy Tbk (B+/Stable) and PT Golden Energy Mines Tbk (BB-/Stable), which are more heavily exposed to coal.

MinRes currently generates less EBITDA than First Quantum Minerals Ltd. (B/Stable), but we project its EBITDA will double in FY26 as Onslow ramps up, enhancing scale. Unlike First Quantum Minerals, MinRes is not exposed to higher-risk jurisdictions and maintains competitive cost positions in both lithium and iron ore.

We expect MinRes' financial profile to strengthen in FY26, supported by debt reduction using proceeds from the sale of its lithium operations. This will bring its financial metrics closer to that of peers, though they will remain somewhat weaker than PT Golden Energy Mines' more conservative leverage profile.

Fitch's Key Assumptions Within Our Rating Case for the Issuer:

-- Iron ore price of USD95/tonne (t) in 2025, USD85/t in 2026, USD75/t in 2027 and USD70/t thereafter, adjusted for impurity discounts

-- Spodumene concentrate price of around USD885/t in 2026 before increasing to USD1,153/t by 2029

-- Gradual ramp-up in MinRes' share of export volume from Onslow to 21mt by FY27

-- Spodumene concentrate sales of 400,000t (SC6 equivalent) in FY26 and 344,000t on average in FY27-FY29, reflecting the reduction to a 35% stake in Mt Marion and Wodgina

-- Bald Hill remains in maintenance and care across the rating horizon to FY29

-- No commercial production of lithium hydroxide over FY26-FY29

-- Dividend payments to resume in FY27 at a payout ratio of 25% of underlying net profit after tax

-- Capex forecast does not include any major growth projects after FY26

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

-- EBITDA net leverage rising above 4.0x for a sustained period;

-- Material loss of mining-service contracts.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

-- We do not anticipate positive rating action over the next 12 months as the company is implementing measures to address its corporate governance deficiencies. Fitch could consider an upgrade when there is greater certainty around these risks and the company demonstrates that EBITDA net leverage can be sustained below 3.0x.

MinRes had AUD412 million in cash in June 2025 and AUD705 million in undrawn revolving facilities expiring in 2027. In October 2025, MinRes issued new bonds to refinance USD700 million in bonds maturing in May 2027. Following the sale of its lithium business, the company plans to use the proceeds to reduce its debt. The remainder of its debt maturities is well spread out. The AUD600 million prepayment will be repaid through iron-ore deliveries; we expect AUD 400 million to be effectively repaid in FY26 and FY27.

MinRes is a mining and mining services company based in Australia. The mining segment operates iron ore and lithium mines located in Western Australia. The company also holds an interest in gas exploration and production assets in the Perth and Carnarvon Basins.

We have reclassified MinRes' prepayment of USD400 million (around AUD600 million) as debt. Further details are provided in the Key Rating Drivers.

MinRes has an ESG Relevance Score of '4' for Governance Structure due to corporate governance issues, including related-party transactions involving its executives, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

Mineral Resources Limited; Long Term Issuer Default Rating; Affirmed; BB-; Rating Outlook Stable

----senior unsecured; Long Term Rating; Affirmed; BB-

Contacts:

Primary Rating Analyst

Mikhail Lyamin,

Associate Director

+61 2 8256 0328

mikhail.lyamin@fitchratings.com

Fitch Australia Pty Ltd

Suite 15.01, Level 15 135 King Street

Sydney 2000

Secondary Rating Analyst

Bruce Li,

Associate Director

+61 2 8256 0327

bruce.li@fitchratings.com

Committee Chairperson

Nitin Soni,

Senior Director

+65 6796 7235

nitin.soni@fitchratings.com

MEDIA RELATIONS: Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: peter.hoflich@thefitchgroup.com

Leslie Tan, Singapore, Tel: +65 6796 7234, Email: leslie.tan@thefitchgroup.com

Additional information is available on www.fitchratings.com

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