MinRes’s big US lithium spin-off worth $17b: UBSSep 16, 2022 – 1.09pmStreet TalkSell-side analysts at UBS reckon if Mineral Resources were to go ahead with spinning out its lithium business in the US, the listed entity would be worth about $17 billion but would trade at a discount to big US competitor Albemarle
Mineral Resources managing director and major shareholder Chris Ellison. In a note sent to clients on Thursday, UBS’s US-based analyst Joshua Spector said MinRes’s lithium was most comparable in assets and positioning to Gangfeng, which trades at 6-times on an enterprise value to EBITDA basis. (Both have hard rock upstream and toll/JV conversion downstream).
That’s nearly double the current estimated valuation for MinRes’s lithium.
“We model MIN’s lithium business trading on ~3.3x FY24E EV/EBITDA at A$9.1bn. Trading on 6x we estimate the value of the lithium business would lift 86% to ~A$17bn,” they said, adding there was potential for re-rating as the market became more familiar with the ListCo’s assets and strategy.
UBS’s $17 billion estimated valuation for MinRes’s lithium in US is a big, juicy number and one sure to get investors thinking. The company’s total market capitalisation is about $13.3 billion.AdvertisementThe 6-times multiple is middle of the line between SQM (trading at about 3-times) on the lower end and Livent (about 15-times) on the higher end.It’s also a discount to Albemarle at 10-times, which the analysts pegged to Ablemarle’s broader scale resource base, longer operational history, better margins, more control over its assets and clearer growth pipeline with optionality.Street Talk, on September 8, revealed MinRes had hired JPMorgan to look at structures to spin out its US lithium business. The board is yet to sign off on a split.MinRes owns direct interests in two lithium mines, Mount Marion and Wodgina, and a lithium hydroxide processing plant, Kermerton, all in WA and accumulated over the past decade.The UBS analysts said the market would be looking for more information on growth pipeline, asset quality and JV partners in gauging MinRes’s US lithium spin-off.
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