$100 share price, page-589

1		Mineral Resources (MIN) .17

1		MIN -8.45% was hit hard today as the Bears start flexing on this one. It comes down to a stretched balance sheet, at a time when underlying earnings are coming under pressure from lower commodity prices, forcing them to batten down the hatches in terms of growth, which impacts earnings from their mining services division – this is not a good combination and the slide in share price is now hurting our portfolio returns overall. It’s hard to know if this is the point of maximum pain, it’s certainly hurting at the moment, with the stock dividing opinion in the market, UBS has been bearish (& right) on MIN for a while now, while the bulls include RBC ( PT), Morgan Stanley ( PT), Evans ( PT) & Barrenjoey ( PT). Here is UBS’s take following MIN’s recent result…. MINhas increased gearing to fund the transformational Onslow iron ore mine and related mining services. Similarly, MIN has deployed balance sheet and higher opex to expand its lithium business. With commodity prices having deteriorated, and likely to remain low for some time under our new price deck, this has left MIN with little choice but to cut costs. This prompted a reduction in their price target to from , and they remain sell rated, and are one of the most bearish in the market. On our numbers, MIN can de-gear their balance sheet reasonably quickly, however, that does assume we’re nearing a low in the prices of Iron Ore & Lithium. That being the case, sub we think is deep value, however, as we suggested when covering their result last week, we are being very conscious of position size given their balance sheet pressures.