Why did the Mineral Resources share price fall 10% in the 2022 financial year?

The Mineral Resources Limited (ASX: MIN) share price endured some serious volatility in the 2022 financial year.

Shares in the S&P/ASX 200 Index (ASX: XJO) mining services company and resource producer dipped as low as $37.05 on 10 November, only to rocket to new all-time highs of $65.97 by 20 January.

As for the full 12-month period, the Mineral Resource share price ended FY21 at $53.73 and finished the last financial year at $48.27, down 10.2%. That compares to a 9% loss posted by the ASX 200.

Here’s what happened…

Iron ore and lithium

Mineral Resources is highly exposed to the prices of, and sentiment surrounding, iron ore and lithium.

The company’s Wodgina Project, located in Western Australia, is among the largest hard rock lithium deposits in the world, with a production life of more than 30 years. There’s also the Mt Marion Lithium Project along with producing iron ore mines, including its 50% interest in WA’s Marillana and Ophthalmia iron ore projects.

In its half-year report, released in February, the miner reported it exported 9.9 million wet metric tonnes (wmt) of iron ore and 207,000 dry metric tonnes (dmt) of spodumene over the six-month reporting period.

The half-year report also showed the Mineral Resources share price had come under pressure from plummeting iron ore prices. The industrial metal traded above US$219 per tonne in July then tumbled to US$92 by November. (Iron ore is currently trading for US$115 per tonne.)

Mineral Resources reported a 12% year-on-year decline in revenue, to $1.4 billion, and did not pay an interim dividend.

To give you some further idea of the big price swings impacting the ASX 200 resource producer, on 31 May, 11 months into the FY22 financial year, shares closed at $63.85, up 19%.

Then June rolled around.

The last month of FY22 not only saw another big dip in iron ore prices, it also saw investor sentiment turn skittish around ASX lithium shares. That came after analysts, including those at Goldman Sachs, reported that an overabundance of investment was likely to lead to an oversupply of the battery metal in the medium term.

Most lithium shares fell hard in June, though they’ve been rebounding strongly so far in FY23.

Mineral Resources share price snapshot

After hitting all-time highs in January, 2022 has been tough for the Mineral Resources share price, down 19% since the opening bell on 4 January. By comparison, the ASX 200 is down 12% year-to-date.

Longer-term, shares are up 293% over the past five years.

The post Why did the Mineral Resources share price fall 10% in the 2022 financial year? appeared first on The Motley Fool Australia.

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More reading

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• Is now the time to be buying beaten down ASX 200 mining shares?
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• Here’s what led the Mineral Resources share price to sink 25% in June?

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs. 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.

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