Mineral Resources/MIN

Min res is the mining services + iron ore + lithium play.

They are: mining services (very good at it) + iron ore (expensive mines, but a new development is coming on by late June this year that will transform them to an upper quartile producer) + lithium (middle of the pack for Aussie spod + battery chems).

Overall, we think it a well-run company with good assets and operations; and yet, lithium, iron ore, if they weaken (weaken in the case of iron ore, due to China, or fail to recover, in the case of lithium, as new technologies like sodium-ion replace lithium) then MIN could have a problem.

Particularly, as they continue to ramp up (free cash flow is negative, as those big new mines cost money to develop) it is quite easy to see balance sheet pressure mount.

ND/EBITDA is 2.4x, and will fall quickly if they hit production targets and markets do not worsen.

So, the bad thing may well not happen, and in any case they should be fine say a year from now even if prices do head south, but for now risks are there. For example, the Onslow iron ore development has a payback period that is very short. MIN aren’t exposed to the risk for too much longer.

And the longer run production/tonnes processed targets are enormous.

The stock dropped a lot from $90s to $60s today on the back of some of these worries, and clearly it is a bit “fork in the road”-ish. If they execute in line with the above, they are worth a multiple of the current share price.

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