The pros and cons of investing in this $12 billion ASX lithium share right now

Let's dig into this opportunity.

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ASX lithium share Mineral Resources Ltd (ASX: MIN) has a market capitalisation of over $12 billion – could it be a very interesting investment opportunity?

For readers that don't know much about this business, it has four segments – lithium, iron ore, mining services and gas.

Is this an opportunity to invest?

Since January 2023, the Mineral Resources share price has fallen 36%, as we can see on the chart below.

I think it can be appealing to look at ASX mining shares when they're going through a weak period. A lot of commodity prices do go through cycles as supply and demand shifts.

It's understandable that share prices change when investors' thoughts about profit potential change.

The lithium price has sunk significantly over the past year, hurting how much lithium profit the company may be able to make. But, I think this lower Mineral Resources share price adequately/significantly reflects the likelihood of the ASX lithium share's reduced profitability.

Mineral Resources is building towards increasing its lithium and iron ore production in the coming years. This can significantly improve the earnings once those growth projects are completed – commodity prices don't need to rise for the company's earnings to rise.

But, the iron ore price has been rising, it has risen to more than US$130 per tonne, which should be helpful for that side of the business. Its mining services business is well-positioned to help the growth of its lithium and iron divisions.

The gas division is also a promising growth avenue, with production expected in FY26, though it's not a core part of the thesis.

Why it might make sense to wait on the ASX lithium share

It's very possible that the Mineral Resources share price could keep falling if the lithium keeps falling. Long-term demand for lithium looks promising with the potential rise of electric vehicles, though there is a lot more lithium supply coming online globally in the short-term.

I normally like to say that investors looking at ASX iron ore shares should wait for an iron ore price of under US$100 per tonne to buy at a (hopefully) good share price. The Mineral Resources share price may well go even lower if the iron ore price falls to around US$100 per tonne, though there's nothing to suggest that's about to imminently happen.

Some investors may not like the exposure to gas, or even mining services. There are other ASX mining shares.

Foolish takeaway

At the current Mineral Resources share price, I think it could be good value. While the lithium price is down, it could recover from here and this could make today a cyclical opportunity to buy this ASX lithium share.

However, it would be wise to give a timeframe of say three years for investor confidence to fully return.

Motley Fool contributor Tristan Harrison 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 Scott Phillips.

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