Sell! Sell! Sell! This miner is way overvalued, one broker says

Jarden analysts say it's time to get out of this heavily-indebted miner's shares.

| More on:
Iron ore price Vale dam collapse ASX shares iron ore, iron ore australia, iron ore price, commodity price,

Image Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Mineral Resources recently announced strong quarterly production figures.
  • Despite this, Jarden analysts say it is very overvalued.
  • They currently have a sell rating on MinRes shares. 

Mineral Resources Ltd (ASX: MIN) shares have more than tripled over the past year, but according to the team at Jarden, it's time to get out while the going's good.

In a note to their clients this week, cheekily titled "Use your illusion", Jarden analysts have said that while the company's recent quarterly results were "strong", they did not back up the strength in the share price.

Hitting its targets

MinRes this week said it had achieved record quarterly iron ore production across its Onslow Iron and Pilbara Hub assets of 10.9 million wet metric tonnes (wmt), and record iron ore shipments of 11.4 million wmt.

The company stated that it was on track to meet its FY26 volume and cost guidance across all divisions, with Onslow Iron operating at its nameplate capacity of 35 million tonnes per annum between August and October.

The company said it had also been paid handsome prices for the lithium it produced, achieving a realised price of US$849 per tonne, up 31% from the prior quarter.

The company also recently said it would be paid a $200 million contingency payment for its Onslow haul road by Morgan Stanley Infrastructure Partners (MSIP) after hitting production targets.

Still overvalued

But all this has failed to impress the team at Jarden.

As they said:

Whilst we viewed the September quarter 205 production, pricing, and cost outcomes as a strong result, we were very surprised that the market added more than $1.1bn of market capitalisation. In contrast, our discounted cash flow-derived valuation, which continues to forensically hunt down the projected cash flow generation of the business, increased by about $120m ($0.60/share) to $15.60/share.

Compare this to the current share price of $47.45, and you can see why Jarden has a sell rating on MinRes shares.

With Minres trading more than 200% above our valuation … and no meaningful forecast free cash flow generation until FY29, we retain a sell rating. Key risks that may change our view include an accretive equity recapitalisation, and sustained strength in iron ore and lithium prices.  

The Jarden team said a key weak point for the company was that another quarter had passed with no debt paid down, with MinRes' debt remaining at $5.4 billion.

MinRes is scheduled to hold its annual general meeting on 20 November.

Elsewhere, with regard to lithium shares, Jarden has a neutral rating on Pilbara Minerals Ltd (ASX: PLS) and an overweight rating on IGO Ltd (ASX: IGO).

Motley Fool contributor Cameron England 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.

More on Resources Shares

Man raising both his arms in the air with a piggy bank on his lap, symbolising a record high.
Resources Shares

A fourth contract win in under a month has this ASX 200 company's shares at a new record high

The company has more than doubled in value over the past year.

Read more »

Machinery at a mine site.
Resources Shares

Why this ASX 200 resources stock is off to a flying start in 2026

Brokers are warming up to the WA miner's rare earths strategy.

Read more »

Arrows pointing upwards with a man pointing his finger at one.
Resources Shares

BHP share price tipped to rise to $56: expert

Amid rising commodity prices, 6 brokers have updated their ratings and 12-month share price targets for BHP.

Read more »

Iron ore price Vale dam collapse ASX shares iron ore, iron ore australia, iron ore price, commodity price,
Resources Shares

Up 55% since June, are Fortescue shares set for a big retrace?

A leading broker expects Fortescue shares to tumble 18%.

Read more »

group of traders cheering at stock market
Resources Shares

Why are commodity prices going crazy?

Certain commodities have a multitude of tailwinds. Here are 4 that are up 25% to 70% in just one month.

Read more »

A brightly coloured graphic with a silver square showing the abbreviation Li and the word Lithium to represent lithium ASX shares such as Core Lithium with small coloured battery graphics surrounding
Resources Shares

Lake Resources shares slide 15% today but are still up 175% in a year. What's going on?

Lake Resources shares dip as investors lock in gains after a strong run.

Read more »

A woman sprints with a trail of fire blazing from her body.
52-Week Highs

ASX mining shares on fire! New 52-week highs today

PLS Group, Liontown, IGO, Mineral Resources, Newmont, and South32 are among today's surging mining stocks.

Read more »

A female athlete in green spandex leaps from one cliff edge to another representing 3 ASX shares that are destined to rise and be great
Resources Shares

Up 240% since June, guess which ASX All Ords lithium share is jumping higher again on Tuesday

This surging ASX All Ords lithium share is catching investor interest again today. But why?

Read more »