The Mineral Resources Limited (ASX: MIN) share price is currently up by 11% as rumours increase about its lithium segment.
Mineral Resources is a large and growing business which offers mining services, it also has exposure to both iron ore mining and lithium mining.
Mineral Resources shares jump on potential lithium listing
The mining company acknowledged today that it saw speculation in the Australian Financial Review that Mineral Resources is considering a potential listing of its lithium business.
Mineral Resources said that it:
Wishes to advise that, in the normal course of business, it regularly evaluates various strategic options to maximise value creation for shareholders, including in relation to its lithium business. At this stage, any previously undisclosed potential strategic initiatives being considered by Mineral Resources are not sufficiently advanced or certain to warrant disclosure.
Some investors like to call Mineral Resources the most undervalued lithium business.
What was reported?
The AFR said that the miner is considering spinning off and listing its lithium business in the US.
Investment bank JPMorgan is reportedly working on the plan for Mineral Resources.
The newspaper’s sources said that the board haven’t yet “signed off” on the split, but one of the things factoring into the company’s thoughts is that the Mineral Resources share price is priced at a large discount to lithium-only businesses.
It’s possible that Mineral Resources may keep a sizeable stake of a divested business. Management reportedly have a goal of building Australia’s largest lithium player.
Mineral Resources is a major spodumene concentrate producer on the ASX. It has stakes in two lithium mines – Mount Marion and Wodgina, and a lithium hydroxide processing plant.
The AFR reported that brokers believe the lithium side of the business will make more than $2 billion of earnings in the coming financial year, growing to perhaps $4 billion by FY25. This could make it worth $10 billion or more.
Final thoughts on the Mineral Resources share price
Prior to today, I would have said that the ASX mining share is worth considering because it is cheaper in relative terms compared to other miners.
I’m not sure if it’s worth buying after its jump and how much upside there is now – I suppose it depends on how commodity prices go from here.
