Is Mineral Resources (ASX: MIN) share price a bargain on lithium?


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The Limited mineral resources The share price (ASX: MIN) has been very disappointing in recent months.

Since peaking at an all-time high of $ 65.38 in July, shares of the mining and mining services company have fallen 39% to $ 40.15.

Why has the Mineral Resources share price fallen?

A few months ago, things were looking incredibly positive for the Mineral Resources share price. Iron ore prices were at very high levels and lithium prices were booming and on an upward trajectory.

However, since then, as lithium prices have firmed, the price of iron ore has fallen sharply.

This is particularly the case for the low grade iron ore to which Mineral Resources is exposed. And, as with the Fortescue Metal Group Limited (ASX: FMG) share price, this put significant pressure on the company’s shares.

Is this a buying opportunity?

The team at Citi seem to believe that the weakness in the Mineral Resources share price could be a buying opportunity.

In fact, based on the broker’s target price, the company’s stock could arguably be considered a good deal at this time.

According to the memo at the start of the week, Citi has maintained its buy rating but reduced its price target on the company’s shares to $ 55.00.

Based on the current Mineral Resources share price, this implies a 37% upside potential for investors over the next 12 months.

And that doesn’t include dividends. Citi also expects a fully franked dividend of $ 1.27 per share in fiscal 2022. If you include that, the total potential return increases to over 40%.

What did the broker say?

Citi is pleased with the company’s performance in the first quarter of fiscal 2021 and looks positive for the future with its lithium plans. The broker expects this to make up for any weakness in its iron ore operations going forward.

He commented: “MIN has achieved good production performance, announced commercial production at the Kemerton lithium hydroxide plant by mid-2022, and that mining would resume at the lithium mine. from Wodgina in the first quarter of fiscal 23. The price received for its lithium concentrate from Mount Marion was double the average price received in fiscal 21. ”

“However, this was overshadowed by a sharp contraction in demand for iron ore (MIN’s dominant product generating income over the past twelve months), the resulting drop in the price of iron ore and the increase in grade and quality discounts applied to product ~ 58% Fe MIN. “

Positively, however, the broker believes recent policies in China will put a floor on iron ore prices. He appears to believe this should allow investors to focus more on his booming lithium operations, rather than worrying about falling iron ore prices.


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