Stock Pick

Are Mineral Resources shares a buy in May?

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Mineral Resources Ltd (ASX: MIN) shares are storming higher on Friday.

In morning trade, the mining and mining services company’s shares are up 5% to $66.90.

Why are Mineral Resources shares rising?

Today’s gain appears to have been driven by a positive reaction to its quarterly update from brokers.

One of those is Bell Potter, which highlights that Mineral Resources delivered a strong quarterly performance despite weather challenges. It said:

MIN reported a strong quarter as the Onslow haul road withstood extreme weather conditions arising from two tropical cyclones. Quarterly attributable sales were: Onslow iron ore 4.2Mt (BP est. 4.4Mt); Pilbara Hub iron ore 2.1Mt (BP est. 2.1Mt); Wodgina SC6e 62kt (BP est. 64kt); and Mt Marion SC6e 53kt (BP est. 41kt). Mining Services volumes were 80Mt (BP est. 79Mt). Group average realised pricing was strong: Iron ore US$93/t (89% realisation to Platts 61% Fe index) and SC6e US$2,105/t (in line with the Fastmarkets SC6 index).

Bell Potter was also pleased to see that management has upgraded its guidance for FY 2026. And while higher diesel prices are impacting its costs, it is not enough for a change in its guidance. It said:

MIN upgraded FY26 volume guidance across Mining Services, Onslow and lithium. While higher fuel prices will impact costs in the current quarter, unit cost guidance was reiterated. Diesel supply has been uninterrupted to date. Onslow transhippers six and seven will be commissioned by 1Q FY27, expanding nameplate capacity to 38Mtpa (100% basis; currently 35Mtpa). With net debt/EBITDA expected to fall within its target range of <2.0x by the end of FY27, capital management decisions are in focus. The company is assessing potential production expansions at Wodgina (i.e. train 4) and Mt Marion (float plant) along with a potential Bald Hill restart (+125ktpa SC6e).

Should you invest?

According to the note, the broker has retained its buy rating on Mineral Resources shares with an improved price target of $75.00 (from $70.00).

Based on its current share price of $66.90, this implies potential upside of 12% for investors over the next 12 months.

Commenting on its recommendation, Bell Potter concludes:

Completion of the $1.2b MIN-POSCO lithium transaction will accelerate balance sheet deleveraging paired with higher cash flows from the ramp-up of Onslow iron ore sales. MIN is positioned to benefit from current lithium market pricing strength, holding around 213ktpa (SC6 attributable, pre-POSCO deal completion) of offline spodumene production capacity. MIN’s mining services platform delivers a stable earnings stream that is expected to expand with internal and third-party volume growth.

The post Are Mineral Resources shares a buy in May? appeared first on The Motley Fool Australia.

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