It may be time to sell your Mineral Resources Ltd (ASX: MIN) shares.
That's according to Catapult Wealth's Dylan Evans.
And no, the fund manager's sell recommendation has nothing to do with the alleged tax evasion bombshell unleashed by Mineral Resources managing director Chris Ellison.
We'll get to those tax issues below.
But first…
Why it may be time to sell Mineral Resources shares
The S&P/ASX 200 Index (ASX: XJO) lithium miner and diversified resources producer is racking up debt.
And that could pose a problem for Mineral Resources shares in the year ahead.
"This mining services company also operates several iron ore and lithium mines in Western Australia. Lithium prices have plunged since 2023, and iron ore prices remain under pressure," Evans explained (courtesy of The Bull).
Evans continued:
MIN recently sold a 49% interest in its Onslow iron haul road to Morgan Stanley Infrastructure Partners for $1.1 billion. MIN will receive an additional $200 million as a deferred cash settlement if tonnage conditions are met.
However, we remain concerned about elevated debt levels. The company reported net debt of $4.4 billion at its full year 2024 results.
Evans noted that Mineral Resources stock slid from $79.49 on 20 May to $49.11 on 17 October.
"There's upside if commodity prices rebound, but potential cash flow issues if the opposite transpires," he said.
What's happening with Chris Ellison and tax fraud allegations?
It may have been prudent to sell your Mineral Resources shares on Friday.
Shares in the ASX 200 miner are down 12.6% in late morning trade on Monday, trading for $40.09 apiece.
Today's selling pressure looks to be driven by revelations that Ellison did not properly report revenues for a number of companies registered in the British Virgin Islands, which were employed to buy mining equipment.
According to The Australian, Ellison's and the other unnamed executives' undeclared revenue may have totalled some $13 million.
Responding to the bombshell tax news, Ellison said (quoted by The Australian):
More than 20 years ago, and prior to MinRes's listing, we also operated entities overseas for acquiring mining equipment and parts to import into Australia and on sell. Some equipment, prior to MinRes's listing, was sold to our then-privately owned Australian businesses," he said.
Regrettably, revenue generated by the overseas entities that we were beneficiaries of was not disclosed to the ATO at that time. This was a poor decision and a serious lapse of judgment.
I have since voluntarily disclosed these matters to the ATO in full. All outstanding tax, penalties and interest that should otherwise have been paid by me has been fully repaid, and the matter has been settled with the ATO. These circumstances have also been disclosed to the MinRes board.
I deeply regret and apologise for these actions and have since ensured that I have put the matter right with the ATO.
With today's intraday losses factored in, Mineral Resources shares are now down 32.6% since this time last year.
