If there is any one company that has perfected the art of under-promising and over-delivering, it is undoubtedly Mineral Resources Limited (MIN). MIN saw its shares surge to all-time highs on Thursday, on the back of a half-year result that easily beat analyst expectations and which included an impressive full year 2017 earnings guidance increase of 25% (which will deliver an almost doubling of earnings year on year).
MIN has been around for decades, originally focused on supplying ore-crushing and screening services to the major iron ore mining companies in the Pilbara region (namely BHP, RIO and Fortescue). In recent years, MIN first expanded into the ownership and operation of its own iron ore mines, and most recently it executed a further timely expansion into lithium mining and processing.
This has positioned MIN exceptionally well, with exposure to two of the hottest commodities at the moment. The iron ore price has surged in recent weeks to close to US$100 per ton, driven mainly by the aggressive yet under-reported stimulus package that is driving demand for construction materials such as steel (of which iron ore is the key ingredient).
Lithium prices also continue to rally to new cyclical highs, with few signs of this price strength abating, driven by the emerging yet undeniable demand for electric vehicles (lithium is a key component of lithium ion batteries), which again claims China as the key demand driver.
MIN therefore appears ideally positioned to deliver one of the largest profit increases of any ASX 200 company this year, and we suspect its pattern of beating guidance will again be demonstrated come full year results time in August.
Julian is a Portfolio Manager in Regal’s Emerging Companies strategy, as well as marketing of Regal’s various equity long/short investment products. He is a CFA charter holder and holds a Graduate Diploma in Applied Finance.