The Mineral Resources share price has soared 111% higher so far in 2020. But this fund manager sees more growth ahead.
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Mineral Resources Limited (ASX: MIN) shares have soared 111% higher so far in 2020. And this is no mining minnow we’re talking about. Based on the current Mineral Resources share price, the company has a market capitalisation of $6.6 billion.
Though slipping today, down 1% in afternoon trading, Mineral Resources shares hit a new all-time high yesterday, closing at $35.07. That’s a remarkable 176% higher than the $12.71 per share the stock was trading at on 23 March following the COVID-19 market panic.
Yet despite that meteoric rise, Montgomery Lucent Investment Management’s Dominic Rose sees strong growth potential ahead.
We’ll look at why below. But first…
What does Mineral Resources do?
Mineral Resources is a mining services company with a portfolio of mining operations across lithium and iron ore. The business consists of three core pillars: mining services, commodities, and innovation and infrastructure.
Mineral Resources’ subsidiary businesses offer a range of general mine services, contract crushing, infrastructure provision and recovery of base metals concentrate for export. Mineral Resources is part of the S&P/ASX 200 Index (ASX: XJO).
Why this fundie sees upside to the Mineral Resources share price
Dominic Rose is portfolio manager of the Montgomery Small Companies Fund.
Writing in Livewire, Dominic notes Mineral Resources is a “highly entrepreneurial company with strong growth potential from its iron ore and lithium operations and a proven track record of value creation”.
One of the company’s two pillars is iron ore. And it’s no secret that iron ore prices have gone through the roof. With Brazilian supply issues hitting just as Chinese demand for the metal rockets, iron ore is trading at multi-year highs, above US$140 per tonne. And, as Dominic writes, Mineral Resources is planning major expansions of its iron ore production.
MIN [Mineral Resources] plans to grow its iron ore business significantly over the next three to five years, targeting production expansion from c.20 million tonnes per annum to 90 million tonnes per annum via a multi-stage hub strategy.
Lithium, Mineral Resources’ second pillar, also looks to have a strong growth demand ahead. According to Dominic:
After a tough few years, the outlook for lithium also appears to be improving on the back of favourable ‘green’ stimulus support in Europe and a potentially more climate friendly regime in the US. We view battery materials as an attractive long-term theme (green energy, decarbonisation) and MIN is particularly well positioned to benefit from a market recovery.
With both iron ore and lithium in the spotlight, it will be interesting to see how the Mineral Resources share price performs moving forward.
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Motley Fool contributor Bernd Struben 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 Bruce Jackson.