Is the Mineral Resources (ASX:MIN) share price a lithium bargain buy?

Is now a good time to buy Mineral Resources shares?

| More on:
asx share price increase represented by golden dollar sign rocketing out from white domes of lithium

Image source: Getty Images

The Mineral Resources Limited (ASX: MIN) share price has been a very disappointing performer in recent months.

Since peaking at a record high of $65.38 in July, the mining and mining services company’s shares have tumbled 39% to $40.15.

Why has the Mineral Resources share price tumbled?

A few months ago, things were looking incredibly positive for the Mineral Resources share price. Iron ore prices were at sky high levels and lithium prices were booming and on an upward trajectory.

However, since then, while lithium prices have strengthened, the price of iron ore has fallen heavily.

This is particularly the case for the low grade iron ore that Mineral Resources is exposed to. And, as with the Fortescue Metals Group Limited (ASX: FMG) share price, this has put significant pressure on the company’s shares.

Is this a buying opportunity?

The team at Citi appear to believe the weakness in the Mineral Resources share price could be a buying opportunity.

In fact, based on the broker’s price target, the company’s shares could arguably be classed as a bargain right now.

According to the note from earlier this week, Citi has retained its buy rating but trimmed its price target on the company’s shares to $55.00.

Based on the current Mineral Resources share price, this implies potential upside of 37% for investors over the next 12 months.

And that doesn’t include dividends. Citi also expects a fully franked dividend of $1.27 per share in FY 2022. If you include this, the total potential return increases to over 40%.

What did the broker say?

Citi was pleased with the company’s performance during the first quarter of FY 2021 and is positive on the future thanks to its lithium plans. The broker expects this to offset any weakness from its iron ore operations in the future.

It commented: “MIN achieved good production performance, announced commercial production from the Kemerton lithium hydroxide plant by mid-2022, and that mining would restart at the Wodgina lithium mine in Q1FY23. The price received for its Mount Marion lithium concentrate was double the average price received in FY21.”

“However, this was overshadowed by a large contraction in iron ore demand (MIN’s dominant revenue earning product over the last twelve months), the resulting iron ore price decrease, and increases in grade and quality discounts applied to MIN’s ~58% Fe product.”

Positively, though, the broker believes recent policies in China will put a floor on iron ore prices. It appears to believe that this should allow investors to start focusing more on its burgeoning lithium operations, rather than worrying about falling iron ore prices.

Should you invest $1,000 in Mineral Resources right now?

Before you consider Mineral Resources, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Mineral Resources wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

A group of people in suits watch as a man puts his hand up to take the opportunity.
Blue Chip Shares

2 ASX blue-chip shares this top fund manager thinks are good value

Wilson Asset Management offers its thoughts on a couple of blue-chip shares.

Read more »

Illustration of men and women pushing share price graph up
Share Market News

Why are ASX 200 shares rebounding on Friday?

China's COVID-zero policies have slowed its economic growth and impacted its trading partners.

Read more »

Boy looks quizzical standing in front of a graph.
Share Market News

Here are the 3 most traded ASX 200 shares on Friday

We take a look at the most traded ASX 200 shares by volume today.

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Bank Shares

What’s moving the CBA share price higher this week?

Australia's banks are expected to reap higher profits as the RBA increases the official cash rate.

Read more »

a woman in a wheelchair sits at her desk in her home with headphones on and looking at a computer screen of figures. monitoring the CBA share price
Share Market News

ASX 200 midday update: BHP, IGO, and Woolworths charge higher

The ASX 200 is ending the week strongly...

Read more »

A woman wearing a pink blouse and straw hat holds up a cannabis leaf with tall green cannabis plants in the background
Cannabis Shares

Remember when ASX cannabis shares were smoking hot? Where are they now?

Newly legalised recreational and medicinal marijuana markets aren't getting the media hype they once did.

Read more »

Broker looking at the share price on her laptop with green and red points in the background.
Share Market News

5 things to watch on the ASX 200 on Friday

The ASX 200 is expected to have a subdued finish to the week...

Read more »

Top 10 ASX shares today
Share Market News

Here are the top 10 ASX shares today

Here are your top 10 biggest gainers in the ASX 200 on Thursday.

Read more »