The Mineral Resources Ltd (ASX: MIN) share price has gone up more than 100% in the past six months. It may not be finished rising and an expert has outlined why investors can still be very attracted to the ASX mining share.
Mineral Resources is one Australia's larger iron ore, lithium and mining services businesses.
It recently announced it was selling a portion of its ownership of lithium projects, but this isn't the main reason to like the business, as much as the market appreciated the unlocked value of the deal and how it will improve the health of the balance sheet.
The fund manager L1 Capital has identified the prospects of the iron ore division as a key reason to still like the business. Let's dig into why.
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Why iron ore could be a driving force
L1 points out that Mineral Resources announced in October that the Onslow iron project achieved its nameplate production of an annualised run rate of 35mt over the prior three months.
By achieving that target, it satisfied conditions necessary to receive an additional $200 million contingent payment related to the sale to MSIP of a 49% interest in the haul road.
With the haul road upgrades now complete and the project running consistently at its nameplate capacity, this marks a "significant de-risking milestone" for the company.
At a full run-rate and the iron ore price being US$100 per tonne, the company expects Onslow to generate around $1.3 billion in annual operating profit (EBITDA), which will help further support balance sheet de-leveraging. This could also support the Mineral Resources share price.
L1 also noted that during October, owners of Mineral Resources shares saw the company's quarterly report, which showed the company was "tracking either to, or ahead of, full-year guidance across all segments."
Is the Mineral Resources share price appealing?
Earlier this week, the fund manager wrote about the ASX mining share:
We continue to believe that each of Mineral Resources' core segments should see meaningful improvement from current levels over the medium term and we believe the risk-reward at the current share price remains compelling.
The Mineral Resources share price has risen 9% since those comments were published, but I think it's likely that L1 thought the business had more upside than 9% from that level.
According to the latest forecast on Commsec, the business is trading at less than 14x FY27's estimated earnings. Time will tell how good value the current share price is.
