Mineral Resources share price rockets 11% as lithium spin-off rumours fly

The Mineral Resources Limited (ASX: MIN) share price has taken off this morning after the company addressed rumours it’s considering spinning out its lithium business.

In response to recent speculation, the S&P/ASX 200 Index (ASX: XJO) giant said it “regularly evaluates various strategic options … including in relation to its lithium business”, but any such initiatives “are not sufficiently advanced or certain to warrant disclosure”.

The Mineral Resources share price is trading at $69.98 right now, 11.15% higher than its previous close.

Let’s take a closer look at what’s going on with the mining services business.

Mineral Resources share price surges amid lithium rumours

The Mineral Resources share price is soaring as the company neither confirms nor denies that its considering floating its lithium business.

As The Motley Fool Australia shared earlier, reports the company has enlisted JP Morgan to list its recently separated lithium activities in the United States appeared yesterday evening, published by the Australian Financial Review.

The publication also claimed top brokers Goldman Sachs and Macquarie believe Mineral Resources’ lithium business is behind 50% to 57% of the company’s value.

The ASX 200 giant boasted a near-$12 billion market capitalisation at yesterday’s close.

The company is reportedly considering the move in response to the valuation gap between it and Wall Street-listed lithium companies, such as US$34 billion giant Albemarle Corporation (NYSE: ALB).

About the company structure

Mineral Resources recently restructured its business into four growth pillars: Mining services, iron ore, energy, and lithium.

It mines and produces lithium at its Mt Marion and Wodgina projects. It also holds an interest in the Kemeron Lithium Hydroxide plant.

The Mineral Resources share price is on the move despite bearish comments from Morgans.

The broker believes major increases in lithium carbonate contract prices might not eventuate, saying:

It’s possible that contract prices for carbonate continue to increase but we think substantial increases are less likely … Despite the ongoing acute shortage of lithium products amid high demand for [electric vehicles] we continue to expect that prices will moderate over the next [one to two] years.

In response to such forecasts and other happenings, the broker has downgraded its rating for lithium stock Allkem Ltd (ASX: AKE) to hold. It’s held its price target on the stock steady at $15.40.

The post Mineral Resources share price rockets 11% as lithium spin-off rumours fly appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper 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 recommended Macquarie Group Limited. 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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