Mineral Resources (MIN) – Cutting a deal

Mineral Resources offers mining services in Australia, Asia, and internationally, as well as having its own operations in iron ore and lithium.

Mineral Resources (MIN) has formed a joint venture with POSCO Holdings for its lithium assets that sees the giant Korean group pay US$765 million ($1.2 billion) cash for a 30% stake in the JV, with the Australian company holding the other 70%. The purchase price values the Australian company's remaining stakes in the Wodgina and Mt Marion operations at circa $4 billion, versus a consensus valuation of $2.8 billion previously, and implies a long-term spodumene price of circa US$1600 a tonne, comfortably above market expectations centred on US$1240 a tonne. Breaking the $4 billion down equates to around $20 per Mineral Resources share, up from the prior market valuation of $14 a share.

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Mineral Resources will still be the operator of Wodgina and Mt Marion as per current deals with US company Albermarle and Hong Kong-based Ganfeng Lithium, neither of which have any pre-emptive rights over the POSCO deal. Post the deal, we make no changes to our FY26 EPS estimate, but our FY27 forecast falls 17.4% to incorporate the effect of the sale and our FY28 number rises 1.1%. We maintain a price target of $55.00 on Mineral Resources and reiterate our Buy recommendation.