Goldman Sachs says ASX 200 mining share Mineral Resources Ltd (ASX: MIN) is going to take a dive.
A big one.
The Mineral Resources share price closed at $72.03 on Friday, down 0.22% for the day.
Over the past 12 months, the diversified miner and services provider has fallen by 7.68%.
This compares unfavourably to its mega-miner counterparts.
For example, BHP Group Ltd (ASX: BHP) shares have fallen 1.9% over the same period. Meantime, Fortescue Ltd (ASX: FMG) shares have risen 16.31% and Rio Tinto Ltd (ASX: RIO) has risen 5.82%.
And the pain won't end for a while.
In a note released last week, the broker maintained its sell rating on Mineral Resources shares.
It tipped a 12-month share price target of $48 on the ASX 200 mining share.
That indicates a potential tumble of 33.36% ahead.
Goldman estimates Mineral Resources shares have a net asset value (NAV) of $55.20. The NAV measures the value of a company's assets minus its liabilities, divided by the number of shares on issue.
Why is this ASX 200 mining share about to get whacked?
According to Goldman, Mineral Resources is "fully valued" compared to other ASX iron ore shares and ASX lithium shares.
The broker also expects lithium prices to fall further over 2024.
As a result, it forecasts a more than 40% fall in the company's earnings before interest, taxes, depreciation, and amortisation (EBITDA) in 2H FY24 to about $400 million.
Underlying EBITDA fell about 28% to $674.9 million in 1H FY24.
The broker said it saw "positive medium term volume growth" ahead for Mineral Resources but low or negative free cash flow (FCF) across FY24 and FY25.
It noted that the ASX 200 mining share's balance sheet is highly geared but debt is covenant light.
Goldman estimates the company's net debt will peak above $5 billion by the end of this year.
The company reported net debt of $3,546.7 million as of 31 December 2023.
Goldman predicts that Mineral Resources will pay dividends of 20 cents per share (cps) in 2024 and 23 cps in 2025.
But 2026 will bring a step-change, with the ASX 200 mining share tipped to deliver 245 cps. This will coincide with a predicted lift in lithium prices.
The broker noted there were upside risks to its assessment, including higher lithium prices and low grade iron ore price realisations, and lower operating costs.
There may also be a faster ramp-up at the Wodgina, Kemerton, and Mt Marion lithium projects and the Onslow and Port Hedland iron ore projects.
