Mineral Resources Limited (MIN) - Scope for a Further Upgrade, BUY

Mineral Resources Limited has announced its first Mt Marion lithium shipment in early February 2017 and has its upcoming first half results on Thursday, 16 February. We are of the view the mining services business has further scope for upside from its intention to monetise its Mt Marion stake and Wodgina to be commissioned in the next few years. The company provided an early EBITDA upgrade in October 2016, pointing to positive operational momentum leading into the result. This is borne out by strong export volumes as well as improved Mining margins; and margins look set to keep improving given strength in iron ore prices. In a timely reminder that it is more than just a crushing business, MIN made its maiden lithium concentrate shipment of 15kt. The valuation appears cheap on a forward P/E of ~12x and ~5x EV/EBITDA. Current conditions suggest potential for a further upgrade in 2H17 if prices persist at recent levels. We recommend MIN as a Buy on its relative valuation and upside to the outlook.