Only a few weeks ago MM wrote a report titled “Our favourite 3 lithium plays” but as is so often the case in these volatile & hot sectors news flow runs thick and fast and over the weekend we saw Mineral Resources (MIN) bank a very healthy ~$330m profit from its investment in Pilbara Resources (PLS), only taken on back in 2016. The major miner / mining services company sold 160 million shares (5.4% of PLS) around $2.06 on Sunday afternoon in a block to institutions, not too hard an exercise as most of them would be at home! The logic for the sale reads ok, basically MIN were very happy with the result of their investment and now wanted to use the funds for its own developments – nothing too scary there.
PLS may now have become a $6.6bn lithium play but I can imagine a number of investors are considering if this is the top for the lithium stock, undoubtedly some healthy demand has been satisfied. PLS was one of our preferred lithium plays in our previous report and we still like it around current levels but investors should be mindful that some meaningful profit taking might emerge into fresh highs, 15-20% higher. As we saw with the likes of the “Hot” BNPL space (Afterpay, Zip etc) selling into strength often pays dividends, especially in a staggered fashion.
Occasionally it’s fun to go out on a limb and illustrate what we believe will unfold for a particular stock – see PLS chart below. We are bullish in the bigger picture but some choppy volatility might be on the cards over the next 3-6 months, nothing unusual for the stock / space.
MM is bullish PLS looking for fresh highs into Christmas
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