Mineral Resources Limited (ASX: MIN) shares could be in the buy zone right now.
That's the view of analysts at Goldman Sachs, which remain very bullish on the mining and mining services company.
Image source: Getty Images
What is Goldman saying about the Mineral Resources share price?
According to the note, the broker has retained its buy rating with a $76.10 price target.
Based on the current Mineral Resources share price, this implies potential upside of almost 8% for investors over the next 12 months.
In addition, the broker is expecting a ~3% dividend yield in FY 2023, which lifts the total potential return to approximately 11%.
Why is the broker bullish?
Goldman Sachs notes that it has been attending a lithium investor tour, which included a site visit to the Wodgina mine in Western Australia.
There were two key takeaways from the tour, that could be of interest to investors. Goldman explained:
MIN expects the revised JV with partner Albemarle (ALB) to be finalised within the next 4-6 weeks with MIN likely to send spodumene to ALB's 50ktpa hydroxide facility in Chengdu in China along with an expansion of ALB's 28ktpa facility near Shanghai. MIN will enter China temporarily though and plan to build a 50ktpa hydroxide facility at Wodgina. MIN think they can build a 50ktpa Chinese designed and fabricated plant at Wodgina for around US$650mn (no hydroxide in GS base case).
The ramp-up of Wodgina is going extremely well and MIN believes processing trains 1-3 may be able to operate ~25% above nameplate therefore producing ~900-950ktpa of 5.5-6% Li2O (vs. GSe modeled 750ktpa). Study work is advanced on train 4 (not in GS base case) which will likely be larger than the existing trains, producing potentially up to 500ktpa of spodumene, with approval likely in 1H CY23 and ramp-up sometime mid to late CY24.
In light of the above, Goldman continues to "forecast a more than doubling of group EBITDA to over A$2.4bn in FY23 driven by higher lithium and low grade iron ore prices."
