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Mineral Resources Ltd (MIN) $33.87

UPDATED 03/03/2025 16:05

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This morning after addressing portfolio underperformance we’ve revisited our weakest holding which has been hit with a trifecta of bad news:

Iron ore, around 50% of revenue in 2024, while holding consistently above $US100/MT its forecast to fall over the coming months/year.
As we all know lithium prices have been smacked over 80% from their early 2023 high, not great when the commodity contributed over a quarter of the company’s revenue in 2024.
The elephant in the room has been the behaviour of Chris Ellison et al with ongoing investigations by ASIC likely to reveal some poor governance standards but this is no longer fresh news. – the stock was already hit over 35% after the issues initially came to light.

As we discussed last week following their December Quarter, operationally MIN is performing okay with iron ore moving toward delivering significant cash generation by the end of 2025. As we said at the time we believe MIN now has a “free option over lithium” as iron starts to deliver. Hence the question around whether we should continue to hold MIN comes down to a couple of factors:

Is MIN our preferred iron ore play if the bulk commodity defies sceptics and holds above $US100/MT – remember for example FMG yields strongly making it easier to be a patient holder.
What is the value of a free call option over Li, obviously nothing if the price of the alkali fails to recover anytime soon.

If we had no position MM would classify MIN as a buy leaving enough flexibility to average if we see a dip below $30, obviously depending on the reasons why. At this stage we prefer MIN for its Li upside but the correlation between FMG and MIN is very strong which might surprise some subscribers considering the ructions at MIN over the last six months. However, if we decide to “beef up” our iron ore exposure and a lithium recovery is looking increasingly distant with Trump in power, a switch is a possibility.