MinRes is a mining services, iron ore, and lithium play.

Iron ore is a big chunk of group EBITDA. Lithium (spodumene) too, should current pricing continue.

And, just as in the table above, MIN’s NPAT has more or less quadrupled given the strong pricing backdrop.

Which is why the current environment of falling iron pricing is so interesting. Note the below, in which MIN’s product sold at a realised price of US$78/dmt, a 48% discount to the Platts 62% average.

In a hot market, low quality grades get bid. When demand retreats, preferences shift towards the higher grades, leading to larger spreads (discounts).

MIN’s grades, moisture content, and overall cost profile are not great. It gives MIN tremendous operating leverage to rising prices, leverage that cuts both ways.

Forward looking sales and earnings estimates are declining…

…which strongly suggests you shouldn’t rely on earnings based multiples to assess valuation.

Look at price to book ratios or even just as a sales multiple give a clear sense of how expensive MIN is.

You would need to be very confident of either a) lithium or b) that China reverses course on the property crackdown, to be a keen buyer here.

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