Despite the market sinking sharply lower, the Mineral Resources Limited (ASX: MIN) share price has managed to climb significantly higher this morning.
In early trade the miner and mining services company's shares are up 11.5% to $11.15.
What happened?
This morning Mineral Resources announced a revision to its full-year earnings guidance.
Considering the share price reaction, it may come as a surprise to learn that today's revision was actually a profit downgrade.
Previous full-year guidance was for EBITDA in the range of $480 million to $520 million. This guidance was based on a price of US$70 for the 62% Fe Platt's index, a discount of 25% for the lower grade nominal 58% Fe fines, and an AUD/USD exchange rate of 75 cents.
Unfortunately things haven't played out this way. The iron ore index pricing has fallen to a low of US$54 per tonne and the discount has widened to approximately 35%, according to management.
As a result, management expects EBITDA to be in the range of $460 million to $480 million.
Why has it jumped?
Rather than focusing on the downgrade, investors appear to be looking ahead to management's outlook for FY 2018.
Management appears confident that the strength of its mining services operations and the improving performance of its lithium production sites has put in it in a strong position to deliver an improved result next year.
Further supporting its share price today was a broker note from Morgan Stanley. Despite the earnings downgrade, the broker retained its overweight rating and $13.30 price target.
Whilst I do like Mineral Resources for its lithium assets, my preference in the industry remains Galaxy Resources Limited (ASX: GXY).
I expect lithium prices to remain high for the foreseeable future, allowing lithium miners and Galaxy in particular to deliver bumper profit growth.
