The company is focused on increasing its resource inventory.
The post Why the Mineral Resources (ASX:MIN) share price will be on watch today appeared first on The Motley Fool Australia. –
The Mineral Resources Limited (ASX: MIN) share price will be in the spotlight on Monday morning. This comes after the mining services company announced it will acquire Red Hill Iron Limited (ASX: RHI)’s Iron Ore Joint Venture (RHIOJV).
At Friday’s market close, Mineral Resources shares finished the day down 0.65% to $63.01.
Acquisition in motion
The Mineral Resources share price could be on the move today as investors took the weekend to digest the company’s latest news.
According to its release late Friday, Mineral Resources is set to take over Red Hill Iron’s 40% participating interest in the RHIOJV.
Located in the West Pilbara region of Western Australia, the RHIOJV tenements contain a mineral resource of 820 million tonnes (Mt) with a grade of 56.44% iron ore. The remaining 60% interest is controlled by the Australian Premium Iron Joint Venture (APIJV).
Mineral Resources stated that the proposed acquisition aligns with its strategy of expanding the resource inventory around the Ashburton Hub. It sees this as supporting a long-term, sustainable iron ore export business.
The purchase of RHIOJV is subject to Red Hill Iron obtaining shareholder approval. If granted, Mineral Resources will pay $200 million in cash on completion of the transaction. A further $200 million will be released when the first commercial shipment of iron ore extracted from RHIOJV departs the port.
In addition, Mineral Resources will pay Red Hill Iron a royalty of 0.75% of free on board (FOB) revenue. This is on all iron ore that is mined and sold from the RHIOJV tenements and the Bungaroo South tenement. The latter is based on the condition that the Bungaroo South tenement is developed in association with the RHIOJV tenements.
Red Hill, this morning, recommended shareholders to vote in favour of the transaction. It noted the board believes that Mineral Resources can secure funding to develop RHIOJV and advance mining operations.
It is expected the acquisition will be completed sometime around early September 2021.
What did management say?
Mineral Resources managing director Chris Ellison welcomed the deal, saying:
We are pleased to have reached agreement with Red Hill Iron to acquire its participating interest in RHIOJV. The transaction is in line with our strategy to build own and operate infrastructure assets to unlock stranded iron ore deposits in the Pilbara and build a long-life, sustainable iron ore business exporting out of Onslow.
The RHIOJV holds a sizeable iron ore Mineral Resource in a strategically significant location in the West Pilbara. MRL’s proposed acquisition of RHI’s participating interest in the RHIOJV will enhance the Company’s iron ore footprint in the West Pilbara as we progress our Ashburton Hub development.
About the Mineral Resources share price
Since this time last year, the Mineral Resources share price has shot up by almost 140%. Year to date has also seen solid gains of close to 70%. It’s worth noting the company’s share price reached a new all-time high of $65.38 on Friday.
Mineral Resources presides a market capitalisation of roughly $11.8 billion, with more than 188.7 million shares on its books.
Should you invest $1,000 in Mineral Resources right now?
Before you consider Mineral Resources, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Mineral Resources wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of May 24th 2021
Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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.