Earnings call transcript: Metro Mining’s Q2 2025 record shipments drive growth

Metro Mining (ASX:MMI) reported a strong second quarter of 2025, highlighted by record shipments and significant increases in revenue and margins. The company’s stock, however, saw a decline of 4.23% to $0.068 following the announcement, reflecting broader market volatility. According to InvestingPro data, the company has shown impressive revenue growth of 14.79% over the last twelve months, with a market capitalization of $1.21 billion.

Key Takeaways

• Metro Mining achieved a 19% year-on-year increase in shipments for Q2.
• FOB net unit revenue rose by 41% to $72 per ton.
• The company paid $9 million in deferred royalties, boosting its cash balance.
• Tropical storms caused operational disruptions, impacting production.
• Metro Mining is targeting top-end annual production guidance and aims to be net cash positive in Q3.

Company Performance

Metro Mining’s Q2 performance was marked by robust growth in shipments and revenue. The company expanded its production to a 7 million tonne annual rate and commenced exploration activities, despite challenges from tropical storms affecting operations in May and June. The increase in shipments and revenue reflects Metro Mining’s strong position in the bauxite market, which remains volatile but promising. With a beta of 1.24, the stock shows higher volatility than the broader market. InvestingPro analysis indicates that while the company has weak gross profit margins of 37.79%, analysts expect both sales and net income growth this year.

Financial Highlights

• Revenue per ton: $72, up 41% year-on-year.
• Margin increased by 500% compared to the same quarter last year.
• Cash reserves were bolstered by deferred royalty payments of $9 million.

Outlook & Guidance

Metro Mining is optimistic about its future, aiming for the top end of its annual production guidance. The company is also expecting to become net cash positive by Q3. It is exploring long-term channel dredging solutions and continues to optimize operational efficiency, despite the challenges posed by market volatility and environmental factors.

Executive Commentary

Simon, CEO of Metro Mining, emphasized the company’s financial health, stating, "We’re going to be net cash in terms of the balance sheet. So that’s a pretty exciting place to be as a junior." Nathan, CFO, added, "We would like to see mid-25s once we’re fully up in Q3," highlighting the company’s focus on cost reduction.

Risks and Challenges

• Market Volatility: The bauxite market’s instability could impact future revenues.
• Environmental Disruptions: Tropical storms have already affected operations and could pose ongoing risks.
• Regulatory Changes: Restrictions in Guinea could alter the competitive landscape.
• Cost Management: Achieving target cost reductions will be crucial for maintaining margins.

Metro Mining’s Q2 results demonstrate strong operational and financial performance, setting a positive tone for the remainder of the year. However, the company must navigate market and environmental challenges to sustain its growth trajectory. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value, suggesting investors should carefully consider entry points. The company maintains a healthy current ratio of 3.77, indicating strong short-term liquidity despite operational challenges.

Full transcript - Metro Mining (MMI) Q2 2025:

Peter, Moderator/Host: We have the CEO and CFO of Metro Mining, Solar Wednesday and Nathan Quinlan, here to discuss the highlights from the June quarterly activities report. I’ll hand it over to Simon to run through, and we’ll have a few questions at the end. Thank you, Simon. Thank you, Nathan.

Simon, CEO, Metro Mining: Thanks, Peter. Good afternoon, everyone in Australia or wherever you are. Thank you for joining this call. We wanted to give the chance to present some of the key elements of our Q2 release that we released this morning onto the ASX. So I might just share that on the screen.

So just bear with me. Okay. So this release is available on the website today and you can obviously pick it up off the ASX as well. So look, a very positive quarter for us. I mean, we’d already released the operational results at the start of the month, but record shipments for Q2.

That’s obviously our expansion has ramped up during the back half of last year. And now we’re into our first full year of production at that 7,000,000 tonne rate. So that’s up 19% year on year. I think, I mean, the comment I made on the front page, we’ve obviously timed that into a pretty robust market. The price of bauxite reached record highs at the 2024 and has come down a little, but we were still able to, during the quarter, back ourselves onto that high pricing environment.

And so we’ve had significant price uplift over Q4 last year, which was our last full operating quarter. And then we had some tonnage in Q1 this year, a low tonnage. So I mean, the FOB net FOB unit revenue up about 41% to $72 per ton. So that’s generated along with our delivery of some very positive costs between sort of the SIF and FOB level about just under $32 per tonne. And so that’s obviously a huge amount from a margin.

The leverage, obviously, over margin is much greater. So about a 500 increase from the same quarter last year and about an 83% increase over Q4 twenty twenty four. So very pleasing result. And as I mentioned in the paper, it’s really indicative, I think, of the type of cash generation potential that we’ve got here at the Bauxite Hills asset. So I mean, not everything, I guess, went to plan in the last quarter.

We did have a tropical storm around Easter time, and that did unfortunately damage quite significantly our channel. I mean it’s a late storm in the season after we had already done the bed leveling where we sort of clear out the channel for operations. And we already sort of spent quite a lot of time and effort doing that in early March. And so that was an unfortunate incident and that restricted our barging through the May and into June. And that was sort of probably around 1,400 tonnes per barge that we weren’t able to put on.

So that also affected our ability to bring empty barges back. The tidal windows were also reduced. So it’s a combination of both capacity per barge and the number of barges that we were able to get in and out in any specific day. So we did take the opportunity to bring forward some maintenance. And so we shut down the site and the transshipping for three days to get that done.

And so that should also enable us a bit more of a clear run during this coming quarter. Look, so operationally, still a reasonable result up on last year, but we were certainly targeting probably 15% more volume this year, sort of roundabout that sort of 1,000,000 to 1,900,000 tons. Let me just touch I’ll pass over to Nathan in a minute to go a bit more into the operational results and some of the financials as well. But I’ll just touch a bit on the market before I do that. So there’s quite a good and lengthy explanation as we always try and do in the quarterlies.

Bauxite isn’t the most transparent of markets, but it’s structurally in a good direction generally. There would clearly be some volatility. We’ve seen that over the last six to nine months with alumina pricing, as you can see on that graph. I mean, our customers are making alumina. And so it’s an important factor that occurs in our market and with our negotiations.

So that did go up significantly at the end of twenty twenty four. There was a correction, but it sort of has sort of stabilized through the last quarter. And at these sorts of levels, RMB 3,000 per ton, most customers are making reasonable money. So that puts the market in a relatively stable position again, albeit a bit below where you saw the levels in 2024 before the run up. So we did see some alumina producers exiting the market.

They were in Q1. That was really mostly inland refineries that were using high cost domestic bauxite. A few of those have back online. But that swing has also cemented somewhat this transition between inland domestic refineries and coastal refineries in terms of the trend that’s occurring in China. Those coastal refineries have either built or expanded and they’re quite they’re all exposed to imported bauxite.

So that’s and you can see that sort of occurring there in the total bauxite consumption of domestic and imported bauxite in China up until the May. And so you can see there that imported number is still that slice is still growing. And what we’ve seen in the first half of the year, is a record another record. So the fourth year in a row, we’ve had first half record tons over the previous half. And indeed, just over 100,000,000 tons has been imported.

Some of that has gone into inventory. And that’s also, I guess, created a little bit of context for a reduction in the bauxite price that’s also sort of been driven by that alumina price reduction. But as you can see from that chart, if you compare it with the alumina chart, certainly the bauxite price has not dropped to the same level as the alumina price. And that’s because the bauxite market dynamics are different. And so we’ve seen again that although there’s been very strong imports in the first half of the year, the second half of the year is much more difficult to predict.

Indeed, there’ll be, I think, increasing volatility again in that price. The Guinea government has continued to exercise its rights in terms of the mining leases that it has been, in terms of asking producers to consider doing studies on refinery capacity. Some are compliant. Many are not. And there are also other grapes that are there from the government.

So at the present time, and I flagged at the AGM that there might be just over 40,000,000 tonnes of bauxite capacity, annualized capacity in Guinea exposed to these restrictions. Well, that’s now risen probably to around 70,000,000 tons of annualized capacity. So at some level, either some of those licenses have been canceled and others are under restrictions or constraints being placed on them by the Guinea government. The Guinea government’s also decided to exercise some rights in gaming access to some bauxite to be able to sell itself, which is obviously going to create some dissonance in the market. And they’ve also flagged to those producers that they want bauxite placed on Guinea registered bulk ships, which again is going to create, I think, a bit of dissonance in that market.

So I think we’re going to continue to see, obviously, the largest bauxite traded bauxite producer in the world out of Guinea is going to continue to be quite volatile over the next certainly over the next six to twelve, probably eighteen months at least.

Peter, Moderator/Host: Look, in terms of our

Simon, CEO, Metro Mining: own offtake contracts, as we talked about before, they’re predominantly with larger high quality customers. Some are integrated, some trade alumina on the market. Our bauxite goes into a combination of high and low temperature refineries. So I do get asked this question quite a lot, but the line has blurred between those technologies. The Chinese, they have done in many industries, have sort of innovated quite considerably in the use of raw materials and in the technology development as they build out their industries.

And what we’re finding with our customers, those that are innovative and willing to trial and blend and work with our technical teams is that what we’re seeing is that they like the high level of gypsitic aluminum that we have in our bauxite. And because we have a relatively high level of quartz, so our silica levels exist in both the kaolin element and also the quartz element, but our relatively high level of quartz, which dissolves between two thirty and two forty degrees, if they can control their operating conditions, they can minimize what’s called that quartz tack, that’s called the dissolution of the quartz. And so our reactive silica is somewhat better than the chemical silica that exists on our specification. Look, in any case, this is an ongoing piece of work that we’re doing with all of our customers and we believe we do provide a very strong value proposition to those customers. In terms of upgrading price, spot bauxite market versus where we were negotiating before Q2 and now in Q3, those contracts that we have been agreeing are about 10% below the price that we agreed for those contracts.

And there are also some legacy priced contracts, fixed price contracts that we agreed some time ago in 2022 and 2023 that we’re still having to deliver on. There’s about 1,000,000 tonnes of those contracts left to deliver through the back half of this year. So in terms of tonnage, we’ll be looking at roundabout trying to catch up some of the loss that we had in tonnage in the last quarter. It’s not a huge amount. And so we’re still confident that we’re tracking towards the top end of guidance.

We’ll be looking to produce probably around 5,000,000 tonnes in the second half. So that million tonnes will be approximately 20% of that sales volume. Okay. Nathan, I’m going hand over to you.

Nathan, CFO, Metro Mining: Do you have any comments? Thanks, Simon. So look, from a quarter perspective, as you can all see from the table, a fantastic result on a margin basis, which we’re all expecting given the pricing environment. Site costs have naturally been impacted by the channel restrictions, which saw reduced volume than what we had set out for initially at the start. There’s still some pleasing structural savings that we’ve seen come through that give us greater confidence over the flow sheet, particularly at this activity level, and definitely expecting to see with the channel restriction now lifted, expecting to see full realization of those scaling benefits into So pleasing to see that site margin.

Look, from a cash perspective, as you would have seen, cash balance has built up quite nicely. From a thirty June perspective, the cash balance will have been impacted a little bit by just timing of shipments. So I think we had roughly around 200,000 tonnes of bauxite shipped over the rails over that period. So I have a fairly large trade receivables balance with our customers of around $25,000,000 most of which has been subsequently received. So in combination of cash and working capital, we’re in a very good position.

In addition to that, some of the highlights for the quarter, we’re in a position where we’ve now essentially paid all of the deferred royalties that we’ve had. So we paid $9,000,000 in deferred royalties this period that you would have seen come through the cash flow. And so that will be the first time in many periods where we have fully paid out all royalty obligations. And so that’s a big moment for Metro and one that we’re really pleased with. In terms of, I guess, highlights, we’ve been pleased to be able to restructure the hedge book on the FX.

So you might recall at the end of last year, we had fairly significant unrealized losses. So it’s been pleasing to make sure that we haven’t had to crystallize those losses and we’ve been able to convert some of those foreign exchange contracts that were at $0.68 We’ve now been able to hedge out our book for the remainder of the year at $0.63 which is think sitting in a pretty good position relative to where the spot rate currently is.

Simon, CEO, Metro Mining: Yes. All good. And then I think a couple of other points to make, which we flagged we have flagged, but we are commencing exploration activity this year again in earnest. We did do a bit of that around some of our pits at the back half of last year, but we will be doing greenfield as well as continuing with that pit extension work. We are going to go and look at some greenfield stuff.

So North of the Skarden River, we have a fairly large bauxite tenement just on the northern side. We currently operate on the Southern side of the river. So it’s near enough, but we’ll be going in there. And look, just of note, we’ve reached some commercial terms with profit resources to farm into a tenement. We’ve got a tenement on the Western Side Of Aracunae right on the coast about 180 kilometers sort of south of our current operation.

So we’ve farmed into a tenement there next to our current one, and that’s effectively doubled the size of that tenement. So that’s yet to kind of be fully stamped and approved by the government, but that we expect that to happen in the next sort of week or two. And so we would be looking to also get some exploration done on that property subject to commercial compensation agreements with the local traditional owners, which discussions are underway. So we’re certainly going to start executing on that exploration task as we had flagged. So look, I might just pause there.

Peter, we usually get a few questions. Are there any questions out there that people want to get a bit more color on?

Peter, Moderator/Host: We have a few and a good audience this afternoon as well. Thanks, Tom. And we have a question here. Would you mind talking through the drop in shipping costs that appear to have dropped by roughly $10 per ton versus June last year? Is the June shipping costs indicative for the rest of the year?

Simon, CEO, Metro Mining: I’ll take the first one and Nathan can maybe talk about the indicative outlook. Yes, so that drop is a function of a couple of things. So obviously, the FOB revenue we ship FOB and SIP. So the FOB revenue is the full sort of the fully allocated, if you like, the fully allocated revenue and unit revenue for all of our tons for the quarter. So that’s the number you should look at.

The SIF pricing is based upon a realized pricing for the SIF sale. So we did have a very slightly higher sort of FOB price on some of those sales. But the main difference, as I guess indicated in the question, has been really from two areas. One is freight for sure. So there’s definitely several dollars a ton reduction in our freight costs.

So that’s as a result of long term contracts that we signed last year, which taken effect in 2025 and we’ll see us moving forward. And then also one of the differential issues is the reduction in some penalties, which we’ve seen across several of our contracts over the last couple of years. And what we’ve done there is move our contract specifications much closer to our reserve and resource grade. So we’re not seeing anywhere near the level of penalties that we saw in previous years. So it’s a function those are the two main movements.

That’s right. And I suppose in terms

Nathan, CFO, Metro Mining: of year on year differences, we include within that freight number demurrage as well. So we did have some demurrage in Q2 this year as a result of that April weather event, but in relative terms, a better demurrage result than what we had year on year. I think what you’re also seeing is the benefit of much higher utilization of Newcastle MAX vessels as well. So we’ve really tested our train shippers and making sure that we’re lighting the absolute biggest ships we can. So not only is there a productivity advantage there for us in loading those larger vessels, there’s also a slight freight differential, which we’re benefiting from as well.

Peter, Moderator/Host: Thanks, Nathan. We’ll probably hear from you too. One of our audience wants to confirm the trade receivables balance of circa $25,000,000 as of June 30. Would that be correct?

Simon, CEO, Metro Mining: Yes, that’s correct. That’s correct.

Peter, Moderator/Host: Now the royalties question, is the state royalty based on FOB or CIF revenue? And how long do those royalty payments continue?

Nathan, CFO, Metro Mining: So in terms of the state royalties, so those payments will continue life of mine. It’s based on FOB, so freight is a deduction from those royalties.

Peter, Moderator/Host: And a comment on the silt buildup in the river. Is there a permanent solution? Obviously, it’s pretty difficult. It’s something you have a lot of control over. But what sort of solutions do you have the silt buildup in the river?

And how much does it impact your margin?

Simon, CEO, Metro Mining: Yes, it’s a great question. Yes, look, we’re in a tidal estuary where you get obviously over the wet season with monsoonal, I guess, weather patterns and cyclones and tropical storms, we can see quite a lot of water activity. Most the seabed is sand. There’s very little rock or even seagrass or anything else. It’s a pretty benign environment.

But it does mean that it’s sort of exposed to that weather. Now normally we conduct what we call bed leveling. So we actually use a plow to just sort of it’s about sweeping, effectively like sweeping out the hallway, if you like, between the river and the transshipment area, the offshore. So we normally conduct that twice a year with equipment that we have on-site. So we use our existing tugs and a cloud to do that.

And normally, we do that just before the season recommences, so in February, early March. And then we also plan to do one sort of a maintenance, if you like, a maintenance leveling in just at the beginning of Q4 to ensure that we get what we want there. So it’s a really critical part of our business. It’s a shallow it’s a very shallow channel. It’s at lowest annual tide, it’s 1.8 meters deep.

So that obviously means that we have to load our barges so they can, on the predicted tide, they can actually get in and out or they can certainly get out on the way in that the tugs are the constraint coming back in. But on the way out, we obviously try and load as much as we possibly can according to the tide. So when we get when we get movement in that, we’ve got a 60 meter wide channel that we have to keep and and the harbor mask obviously takes us on like a keen interest on on the the pilot to job the tugs and barges through that channel. And so when we do have these incidents, we survey, and we we then have to kind of do some maintenance on that. So I guess a late a late storm like this, if you remember, it’s for those of you who know the area, sort of tropical storm didn’t quite become a cyclone, came in and sort of kissed the coast and then went south.

That created a sort of fairly unique set of kind of wave patterns that moved some of that channel, quite a bit of the channel, a bit of the walls on the channel into the middle of the channel itself. So we had a fair bit of activity to be able to move that out. Now longer run, we obviously sort of taken that. That hasn’t happened to us before in the middle of the season. So we’ve taken that as a bit of a, I guess, a lesson and some obviously, we’re going to take some action on that.

So we’re looking at, I guess, how we improve that. So we’re doing looking at two things. Our tug Mandang, which is a new tug, which we got at the end of last year. It’s a more powerful tug than any of the other tugs that we have. And so we’re designing a new plow for that, a bigger, more powerful plow.

And then we’re also looking into contractor bed leveling, which does occur around the Gulf Of Carpentaria already in some of the other ports. And so there are contractors who do that work and with specialist vessels. In the longer run, we are talking with the relevant stakeholders, including the Harbormaster and Portsorf around potentially a dredging program. So that would obviously we would try and take that opportunity to probably widen the channel and maybe even make it a bit deeper. So if we were going to go into that level, but it does require a rather different level of approvals, and that takes some time.

So I’m not expecting that to be in place for this season or this coming wet season or the restart for next year. So that does take a lot of study, a lot of approval time and effort. But that is something that we will almost certainly put in place at some point in the near future.

Peter, Moderator/Host: Thanks, Simon. You knocked off quite a few questions there with that. Another question about operations. How do you see five shaping up grade wise?

Simon, CEO, Metro Mining: The Pit five BH2, as it was called, does have some areas of low silica material. So it does give us more flexibility in our operations. So one of the reasons we had that amount of bauxite on ships at the end of the quarter was that we actually held a vessel partially loaded and then switched to a second vessel to start loading because we wanted to we did a bit of a trade off on a grade penalty versus demurrage, and we decided to hold that vessel therefore to be able to top it up with better grade that we were going to be accessing from the new mining area. So that was what we did. And so Pit 5, it’s also a little bit closer than Pits 3 And 4.

So what was DH1. So that’s a closer, it’s near the airport for those people who know the area. And so that’s all now the road has been built and the mine has started in the first week of this month. So that will give us some extra flexibility in sort of managing our great control. Okay.

We’ll finish up

Peter, Moderator/Host: with a couple of more questions here. One is just wondering, somebody wanting confirmation that $53 of the FX is the for 100% of the sales for the balance of calendar twenty twenty five?

Nathan, CFO, Metro Mining: Yes, that’s right. We forecast sales, we expect to

Peter, Moderator/Host: be fully hedged. Thanks, Nathan. And is there any expectation for where the cost for the site costs will reduce in this quarter as a higher production rate is achieved?

Nathan, CFO, Metro Mining: Yes, we’re certainly expecting to see a couple of dollars drop off that site cost that you’re seeing in Q2. We would like to see mid-25s once we’re fully up in Q3 expectations.

Peter, Moderator/Host: Great. Thank you, Nathan. Thank you, Simon. That brings to close all our questions. Anything to leave our listeners with Simon?

Simon, CEO, Metro Mining: So look, think this is the year where we’re going to execute on the expansion. As said, I think the market is generally going to be in our favor as it was in Q2. I think it will be at periods again, although I sense it will be volatile moving forward. But I think with our cost structure, as we head towards, as Nathan said, sort of mid-20s and then lower again next year, then that will set us in a really good position to weather pretty much any pricing environment. So strategically, that is where we’re going.

And we’ve started now, obviously, to the cash that’s come in, we’ll certainly we’ll get to a point, I think, through this third quarter where we’ll be net cash in terms of the balance sheet. So that’s a pretty exciting place to be as a junior. So look, think that’s certainly where we’re headed and everything seems to be on track for that.

Peter, Moderator/Host: Wonderful. Thank you for a good update on the successful quarter. Thanks, Simon. Thanks, Nathan. Thanks to our audience for joining us.

There’ll be a video made on this webinar, which will be available, and we’ll send it out to those who have registered. Thank you very much.

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