Mineral Resources share price sinks despite strong Q3 update

Mineral Resources had a strong quarter…

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Key points

  • Mineral Resources has released its third quarter operational update
  • The company reported production growth across its iron ore and lithium prices
  • Mineral Resources revealed big increases in the prices it is commanding for these metals

The Mineral Resources Limited (ASX: MIN) share price is on the slide on Friday morning.

At the time of writing, the mining and mining services company’s shares are down 3.5% to $60.00

Why is the Mineral Resources share price dropping?

Investors have been selling down the Mineral Resources share price after broad market weakness offset the release of the company’s strong third quarter operational update.

According to the release, the company’s Mining Services achieved production volumes of 63.4Mt for the three months. This was 16% higher than the prior corresponding period and means that it remains on target to meet its FY 2022 production guidance of 275Mt to 290Mt.

Also on track to achieve guidance are its iron ore shipments. During the quarter, Mineral Resources reported a 22% increase in iron ore shipments to 4.7M wet metric tonnes (wmt).

Management also expects to deliver on its iron costs guidance of A$96 to A$104 per wmt for the Yilgarn Hub and A$80 to A$88 per wmt for the Utah Point Hub.

This compares to the average realised iron ore price for the quarter of US$101.31 per dry metric tonne (dmt), which was 60% higher quarter on quarter and represents a realisation of 72% against the Platts 62% Iron Ore Index.

What about lithium?

Mineral Resources’ Mt Marion Lithium Project produced 104k dmt and shipped 94k dmt of spodumene concentrate during the quarter.

This means that Mt Marion remains on target to meet its FY 2022 guidance of 450kt to 475kt with costs of A$570 to A$615 per dmt (CFR ex-royalties). And with Mt Marion averaging a realised spodumene concentrate price of US$1,952 per dmt, which was up 69% quarter on quarter, the operation is generating significant free cash flow at present.

Over at Wodgina, the company shipped 22k dmt of spodumene concentrate from existing stockpiles at an average price of US$2,200 per dmt. The first new spodumene concentrate from the Wodgina Train 1 is expected in May, with production from Train 2 expected in July.

Despite this decline, the Mineral Resources share price is still up just 23% since this time last month.

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.

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