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Mineral Resources Ltd (ASX:MIN) has seen a dramatic 25% surge in its share price over the past week, and analysts at Bell Potter believe this is just the beginning. The brokerage firm argues that the ASX 200 mining stock is currently undervalued and poised for further gains.
Key Developments and Analyst Insights
Bell Potter's bullish outlook is supported by recent developments at Mineral Resources. The company has received Foreign Investment Review Board (FIRB) approval for the sale of a 49% stake in the Onslow Iron Haul Road. This approval is expected to bring in an upfront consideration of AU$1.1 billion within the next three weeks.
Additionally, Mineral Resources has identified approximately AU$300 million in cost savings for FY25 without affecting production guidance. The company has signaled that it is exploring further cost reductions, which the broker believes may obviate the need for a capital raising.
Bell Potter notes:
“MIN announced receipt of FIRB approval for the sale of 49% of the Onslow Iron Haul Road. Following the approval, upfront consideration of AU$1.1 billion is expected within 3 weeks. On cost reductions, MIN identified AU$300 million in FY25 cost savings, without impacting production guidance, with more being investigated.”
No Immediate Need for Capital Raising
According to Bell Potter, the significant cash inflow from the Onslow Iron Haul Road sale, combined with the cost savings, suggests that Mineral Resources is unlikely to require new equity capital in the near term. The firm highlights:
Strong Buy Rating and High Price Target
In light of these developments, Bell Potter has reaffirmed its "buy" rating on Mineral Resources with a price target of AU$66.00. This represents a potential upside of 72% from the current share price of AU$38.27.
The brokerage attributes the recent share price weakness to high net debt levels and weak commodity prices. However, Bell Potter is optimistic about the company's future, citing management's forecast of AU$1 billion in Mining Services EBITDA per annum from FY26 as a key factor in deleveraging the balance sheet.
The recent 16% price increase following the Business Update is seen as a positive indicator. Bell Potter comments:
“MIN's share price appreciated 16% on the Business Update, a very strong response to (1) a well-guided capital release, and (2) speculation of a modest quantity of marginal Chinese lithium production suspension.”
Optimistic Outlook on Lithium Prices
Bell Potter's optimism is also influenced by its expectation of an imminent recovery in lithium prices. The firm believes that as good news on the balance sheet and commodity sentiment emerges, Mineral Resources’ share price could experience a substantial rally.
