Mineral Resources Ltd (ASX: MIN) shares have been on a rough ride lately. The company has faced several challenges, ranging from allegations against CEO Chris Ellison regarding offshore tax schemes to broader sectoral pressures.
The stock is down 47% this year to date, but it is not alone. The downside comes as investors unload the ASX iron ore majors.
The chief driver for this behaviour is the weaker economic data out of China, which signals a potential slowdown in the pace of iron ore exports to the country.
But has the market got it correct? Or is this where the opportunities lie – stocks trading at depressed levels, but with excellent fundamentals? Let's see what the experts think.
Mineral Resources shares ratings change
Several factors have weighed heavily on Mineral Resources shares. Most recently, the company's share price took a hit after investigative reports highlighted the CEO's alleged tax-related issues.
These revelations have dented investor confidence, adding to a broader rotation away from ASX mining stocks as interest rates and sector volatility rise.
Adding to this, Barrenjoey has downgraded Mineral Resources shares to 'neutral' from buy, citing concerns around governance and debt.
Analyst Glyn Lawcock cut the bank's 12-month price target on Mineral Resources to $42.20, bringing it down by 22%.
The downgrade reflects "overlapping concerns" about the iron ore miner's governance issues following the CEO's alleged tax issues.
Barrenjoey also sees risk in the company's elevated debt levels and potential challenges at key assets like Wodgina and Onslow. According to The Australian:
We have lifted our equity risk premium and in turn the weighted average cost of capital by 2% to 12%.
The downgrade coincides with a sharp sell-off in Mineral Resources shares during October. They are down 27% in the past week.
Zooming out, the downsides are largely due to the ongoing price weakness in iron ore, which has settled at US$105 per tonne at the time of writing, down from highs of US$144 per tonne this year.
What's behind the sharp decline? Steel. Iron ore is the primary ingredient used to make steel (along with nickel). And the world's largest producer and consumer of the forged metal – China – has slowed demand right back in 2024.
This comes amid a slump in the nation's housing market and a potential wind-down in gross domestic product (GDP) growth.
Is it all bad news?
Not everyone sees this volatility as a reason to stay away. Broadening the scope out to the consensus of analyst estimates, "MinRes", as it is often called, is rated a 'moderate buy' (mod-buy?) according to CommSec.
This is made up of 8 buys, 7 holds, and 3 sells. Overall, the investment debate seems fairly balanced.
Bell Potter remains optimistic about the company's long-term prospects.
Richard Coppleson, the firm's director of institutional sales and trading, has held Mineral Resources shares since 2020.
Following the sell-off, Coppleson said, "The market will look forward once the dust settles". We shall see in time.
Foolish takeaway
Mineral Resources shares are under pressure due to weaker iron ore prices and a series of internal battles for the company to deal with.
Barrenjoey sees these as risks that could plague the stock in the near term. The stock is down 36% in the past year.
