Mineral Resources shares hit two-year high on big lithium news

Mineral Resources Ltd (ASX: MIN) shares are on form again on Tuesday and are pushing higher.

At the time of writing, the mining and mining services company’s shares are up 2% to a two-year high of $72.94.

Why are Mineral Resources shares hitting a new two-year high?

Investors have been bidding the company’s shares higher today after it made a big announcement relating to its lithium operations.

According to the release, the company and its joint venture partner, Jiangxi Ganfeng Lithium, have made a final investment decision (FID) to construct a flotation plant and develop underground mining at the Mt Marion lithium operation.

The release notes that the total capital investment is estimated to be $490 million on a 100% basis, invested across FY 2027 and FY 2028.

This comprises a flotation plant costing $240 million, underground pre-production development costs of $220 million, and non-processing infrastructure costs of $30 million.

Strong return on investment

The good news is that Mineral Resources expects a very quick return on investment.

It highlights that the payback period at the current spot spodumene price of approximately US$2,700 per tonne SC6 is less than one year.

The company believes the combination of a flotation plant with underground mining will support mine life by providing access to additional mineral resources below the existing open pit.

It also expects to improve plant recovery towards 70%, increase installed capacity from approximately 500,000 tonnes per year of SC6 to 600,000 tonnes per year, and remove the lower-grade SC3.5 product to deliver a single SC5 product.

Tendering for an underground mining contractor is in progress, with the central underground development expected to commence in the first quarter of FY27.

From FY 2028, Mt Marion will operate as a combined open pit and underground operation, with underground ore from open stoping supplementing up to 40% of processing feed.

The flotation circuit is an addition to the existing dense media separation plant, recovering fine spodumene currently reporting to tailings. It will be constructed and operated by the company’s Mining Services division.

Construction is targeted to commence in the first quarter of FY 2027, with commissioning and ramp-up expected in the second half of FY 2028. Minimal disruption to existing operations is expected during construction and commissioning.

Commenting on the plans, Mineral Resources’ managing director, Chris Ellison, said:

This high-return brownfield investment sets up Mt Marion for decades to come. Underground mining and flotation will work together to access deeper high-grade ore, lift recoveries and produce a single 5% product. I thank our partner Ganfeng for their collaboration on the design and commitment to these projects, which will ensure we unlock the full potential of Mt Marion.

Mineral Resources shares are now up over 200% since this time last year.

The post Mineral Resources shares hit two-year high on big lithium news appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.