Lanyon Asset Management (Adelaide Based) have given permission to reproduce their views on the investment opportunity in Mineral Resources Limited (ASX: MIN). Here is their update on this investment.
With the stock now trading above $70 we thought it would be an appropriate time to provide an update on our positioning and where we think the business is heading.
First, it’s worth touching on some of the key highlights over the past year relative to the comments we made a year ago:
- In May 2025, spodumene prices had fallen below US$700/t and MIN’s lithium assets were loss-making. Prices have since staged an incredibly strong recovery to US$2,500/t due to rapidly rising demand (EVs, battery storage) against supply disruptions in China (permitting issues), Zimbabwe (export controls), and Australia (production idled or reduced). This has been transformational for MIN’s earnings; we estimate the Lithium segment will generate ~$600m of EBITDA (earnings before interest, depreciation and amorisation) in 2H FY26 alone, with significant upside into FY27 and beyond as the company increases capacity at each of the three assets.
- Following the operational issues at the Onslow Iron project in the early stages of the ramp up, MIN successfully reached 35Mt nameplate capacity in August 2025 and is on track to generate over $1.3b of EBITDA in FY26 ($0.9b MineCo, $0.4b Mining Services). Whilst there was extreme pessimism in the market a year ago over the state of the 150km haul road, we have clear evidence that the subsequent repairs and upgrades were more than adequate given it recently sustained no damage from two major cyclones in the March quarter. With iron ore prices holding steady above US$100/t and the asset consistently exceeding nameplate, cash flow generation will be immense for decades to come – a fact we think the market is only just beginning to understand.
- The recovery in both lithium prices and operating performance across each of MIN’s segments is enabling rapid de-leveraging. This time last year, the market viewed a highly dilutive equity raise as inevitable, whereas we now believe MIN will finish FY26 with ~$3.4b of net debt (pro-forma for $1b of lithium sale proceeds) or 1x EBITDA generation at spot commodity prices. As these fears have subsided, short interest has fallen from over 15% in June 2025 to 4% today, resulting in significant losses for the hedge funds that manipulated the price lower in the first place. Additionally, MIN partially refinanced its debt in April with US$1.3b of unsecured notes at 6-6.25% interest, not maturing until 2032-2034 – an outstanding achievement with risk free rates currently nearing 5%. With the business now flush with cash and a growing earnings profile, we think management are positioning to pursue multiple growth opportunities with return profiles well in excess of 50%.
- Finally, we have been thoroughly impressed with the transformation in corporate governance at the business. We have had numerous interactions with Chairman Malcolm Bundey who joined MIN in May 2025 and it is clear that he is dedicating far more of his time to the role than is typical, whilst doing an outstanding job ensuring all aspects of operations are best in class. We eagerly await the official Chairman’s update Malcolm is planning to release to the market before the end of June, which we believe will highlight the significant progress that has been made regarding corporate governance, the balance sheet, and asset performance. We view this as a very important catalyst that will enable some key institutional shareholders to re-establish positions in MIN after selling at the worst possible time through last year’s governance crisis.
Business outlook:
- We have been monitoring publicly available data to track every ship movement at each of MIN’s iron ore and lithium assets to provide a live daily view of how the operations are progressing. We think there is a strong chance MIN will exceed 34Mt at Onslow for FY26 (guidance currently 31-34Mt, upgraded from 30-33Mt at the Q3 result) based on transhipping rates through Q4 that have averaged over 40Mt on an annualised basis. Additionally, MIN’s sixth transhipper commenced operations on May 26th, more than a month ahead of schedule, which has seen this rate improve to over 44Mt in that time. With a seventh transhipper set to arrive late June (and assuming one is constantly rotated out for maintenance), we think MIN has the potential to produce at over 42Mt in FY27 compared to consensus expectations of 37Mt, which at spot iron ore would mean an incremental $200m+ of EBITDA inclusive of the uplift to Mining Services. MIN’s Pilbara Hub iron ore operations are also on track to marginally exceed the 9-10Mt guidance based on shipping data we have observed.
- At the Wodgina lithium mine, we estimate MIN has already shipped ~578kt on a 100% basis vs current guidance of 540-580kt. With one bulk carrier currently being loaded at Port Hedland and two more anchored, we think it is possible MIN could ship between 630-660kt for FY26. This would be 13-18% ahead of the midpoint of guidance, which has already been upgraded twice in FY26. Mt Marion is also performing strongly, having already shipped 448kt on a 100% basis by our estimates vs current guidance of 420-460kt. With one more bulk carrier set to depart by June 24, we think it is likely they will finish FY26 at ~480kt or 9% ahead of the midpoint.
- Lastly, as a result of internal operations performing ahead of expectations, plus one month of work at the recently restarted Bald Hill lithium mine, we think it is highly likely MIN will exceed the top end of guidance for Mining Services volumes which currently stands at 320-330Mt. This could potentially exceed 340Mt in our view depending on the performance of external contracts which we have less visibility over.
- Putting together better than expected operating performance alongside up to date commodity price averages, we estimate MIN will generate $2.7b of EBITDA in FY26 vs consensus of $2.4b, but more importantly, $3.4b in FY27 at spot prices vs $2.5b consensus. We think it is highly likely that MIN shares will continue to appreciate strongly if this plays out, as market estimates are revised sharply higher.
- Finally, the rapid balance sheet de-leveraging is now enabling management to consider numerous highly accretive growth opportunities that could add billions of dollars of equity value in time. These include potential capacity expansions of Onslow Iron by 50% to 60Mt and Wodgina by over 40% to 1.1Mt, together with the pursuit of large-scale Mining Services contracts with a Tier 1 producer in South America and/or a copper development project either in Australia or offshore. We have not included any of these growth options in our base case valuation but note that announcements in relation to the above could come before the end of this calendar year and would likely be received very favourably by the market.
Valuation:
- We continue to believe the $1b of EBITDA generated by MIN’s Mining Services business should be valued at a multiple of 10x given its long duration, annuity-like cash flow stream, and numerous avenues for future growth. Likewise, a 5x multiple on the Iron Ore and Lithium assets’ spot EBITDA generation of $2.3b adds a further $11.5b to value. Absent any major unsanctioned growth capital, we expect MIN’s net debt position to reduce to less than $2b by June 2027 which would result in an equity valuation of $19.5b, meaning the stock should feasibly trade at ~$100 a year from now.
Catalysts:
- Malcolm Bundey’s Chairman’s update and investor presentation in late June.
- Potential guidance upgrades at each of MIN’s assets prior to the release of quarterly results at the end of July.
- Recommencement of dividends at the full year result in August.
- Announcement of final investment decisions on growth projects prior to the end of this calendar year.
MIN remains our largest position, our highest conviction idea and we continue to actively manage our holding and position sizing. If the next twelve months play out as we expect, our investment will continue to contribute very significantly to portfolio returns.
The Lanyon Investment Fund has delivered a return of +28.6% over the last 12 months and a return of +18.1% p.a since inception. Our returns compare favourably to broader market returns. The fund is currently open to additional investment, and we welcome new investors
The material is for general information only and does not take into account your personal objectives, financial situation or needs. You should consider, and consult with your professional adviser, whether the information is suitable for your circumstances.Statements of opinion are those of Lanyon unless otherwise attributed. Except where specifically attributed to another source, all figures are based on Lanyon research and analysis. Any investment metrics such as prospective P/E ratios and earnings forecasts referred to in this presentation constitute estimates which have been calculated by Lanyon's investment team based on Lanyon's investment processes and research. The fact that shares in a particular company may have been mentioned should not be interpreted as a recommendation to either buy, sell or hold that stock. Any commentary about specific securities is within the context of the investment strategy for the given portfolio. Any reference to a ranking, a rating or an award provides no guarantee for future performance results and is not constant over time.