Why Mineral Resources Limited Soared 22%

After an underperforming year for its stock price, amidst a volatile commodities market, Mineral Resources Limited [ASX:MIN] has posted impressive gains this morning, shooting up almost 22% to $15.15. A gain of $2.70.

MIN is an Australia-based mining service, contracting, processing and commodities production company. MIN’s portfolio of market brands comprises of: PIHA, Crushing Services International and Process Minerals International; its minerals producer market brands are Polaris Metals and Mesa Minerals.

Why is Mineral Resources on the up?

MIN announced this morning that it entered into an exclusivity agreement with Albemarle Corporation [NYSE:ALB] in relation to the potential sale of a 50% interest in the Wodgina Lithium Project, and formation of a 50:50 joint venture that will produce spodumene concentrate and lithium hydroxide.

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While the joint venture is subject to negotiation, it would combine Albemarle’s world-class lithium production and marketing expertise with Mineral Resources Limited’s (MRL) leading regional presence and mining capabilities.

According to the company statement, the purchase price for the sale would be US$1.15 billion (AU$1.58 billion), which Albemarle expects to fund with available cash and new credit facilities.

The execution of the agreement follows the sale of the Wodgina Lithium Project first announced May 2018, which resulted in strong interest being received from a range of global participants in the battery minerals and chemicals value chain.

MIN and Albemarle will jointly manage the venture through a company to be owned in equal shares by the respective parties.

What’s next for Mineral Resources?

Mineral Resources held it AGM today, iterating a solid FY18 performance. Revenue reached $1.7 billion with EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) reaching $506.7 million, increases of 16% and 9% respectively.

Guidance for FY19 EBITDA was given at $280 million to $320million with Mining Services EBITDA of $240 million to $260 million.

Mineral Resources Managing Director, Chris Ellison, expects the marriage of the two companies through the Wodgina lithium project will create outstanding business with a 30-year horizon.

The company also announced a capital expenditure of approximately $490 million in relation to Wodgina and several other current projects.


Ryan Clarkson-Ledward,
For Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

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