Mineral Resources (ASX:MIN) share price falls 5% following brokerage downgrade

A leading broker has given its opinion on the Mineral Resources share price.

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Key points

  • The Mineral Resources share price is coming under more pressure after JPMorgan downgraded it to underweight or sell
  • The ASX iron ore and lithium miner has lost more than 12% since its disappointing December quarterly report on 25 January
  • All the miner’s divisions posted mixed results although management is sticking with its FY22 guidance

The Mineral Resources Limited (ASX: MIN) share price is coming under further pressure after getting hit by a broker downgrade today.

Shares in the iron ore and lithium miner are tumbling 5.48% to $53.99 in morning trade where the S&P/ASX 200 Index (ASX: XJO) is also down 0.59%.

The ASX iron ore and lithium miner has lost more than 12% since Monday’s close after it released a disappointing December quarterly report on Tuesday.

Why JPMorgan downgraded the Mineral Resources share price

That update was the driver behind JPMorgan’s decision to cut its recommendation on the shares to underweight. Its previous rating was neutral.

“Iron ore shipments were 3% ahead of JPMe,” said the broker. “However, the achieved price of $63/t ($69/t excluding provisional pricing) was a miss vs JPMe at $81/t and represented a 43% discount.”

That’s a big discount. Even Fortescue Metals Group Limited (ASX: FMG) got better prices as its discount was 32% to the average spot price.

The silver lining was that shipments of the steelmaking ingredient were in line with JPMorgan’s estimates. But that wasn’t enough to save the Mineral Resources share price from getting the chop.

Lithium operations failing to charge up

The miner’s lithium operations also produced mixed results despite surging demand for the mineral. Lithium is one of the hottest commodities due to the electric vehicle revolution with supply struggling to meet demand.

Sales from Mineral Resources’ Mt Marion lithium project were 8% below JPMorgan’s forecasts. The saving grace was that the miner’s achieved price of US$1,153 per tonne was 7% above the broker’s estimates.

Other factors dragging on sentiment

Shareholders won’t find relief from Mineral Resources’ mining services division either. Volumes from this business unit fell 5% from the previous quarter. At least management stuck to its 15% to 20% volume growth guidance for FY22.

There is also perhaps some disappointment about the lack of material updates for its Wodgina project. Wodgina is expected to produce its first spodumene in 1QFY23.

What is the Mineral Resources share price worth?

“Overall, negative revisions to our realized price, and higher costs leads us to lower FY22E earnings by 36%,” said JPMorgan.

The broker lowered its 12-month price target on the Mineral Resources share price to $45 from $46 a share.

Despite the recent sell-off, the miner is still sitting on gains of around 50% over the past 12-months.

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Motley Fool contributor Brendon Lau owns Fortescue Metals Group Limited. 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.

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