Mineral Resources Ltd (ASX: MIN) shares are on course to end the week on a positive note.
At the time of writing, the mining and mining services company's shares are up over 3% to $29.54.
Should you be buying its shares as well? Let's see what analysts at Macquarie Group Ltd (ASX: MQG) are saying about the company.
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What does Macquarie think about Mineral Resources?
Macquarie has been busy running the rule over Mineral Resources' quarterly update.
One positive from the update that caught the broker's eye was its costs. It said:
Lithium costs: The company reported significant beats in its lithium costs which aided it meeting the midpoint of its guidance ranges for both Mt Marion (MM) and Wodgina (WDG). While we do not take these unit costs forward, the commentary around productivity and recoveries provided confidence MIN could manage a lower cost base in the future.
However, it wasn't all sunshine and rainbows. Macquarie has concerns with the Pilbara Hub cost base. It explains:
We see the Pilbara Hub as under threat should iron ore prices fall below US$90/t (which we expect in over the course of FY26-27). Capex spent at the Pilbara hub may become regret should prices fall below these levels. Pathways forward may involve selling down a share of the hub to finance capital requirements (whilst retaining CSI revenue) given the recent rally.
One item that it found "interesting" relates to the company's actions to simplify the business and improve capital allocation. Macquarie adds:
The increased disclosure and actions taken to simplify MIN and improve capital allocation have certainly improved MIN's investment proposition. While this is a key positive, MIN's balance sheet provides leveraged exposure to Fe and Li commodity prices which have recently rallied. We take the view the iron ore market looks increasingly difficult over FY26-28 as new growth (Simandou) meets a flat demand environment.
Are Mineral Resources shares a buy or a sell?
According to the note, the broker has downgraded its shares to an underperform rating but with an improved price target of $29.00 (from $22.00).
This is largely in line with where Mineral Resources shares are trading at the time of writing.
Commenting on its recommendation, the broker said:
Underperform: MIN's 4Q was strong with operational and cost beats, but with operational risk being managed, market risk emerges with MIN's valuation pushing through our new TP. We downgrade to Underperform on valuation and potential FY26-27 iron ore weakness.
