Australia | Sep 13 2022
Mineral Resources is considering a spin-off of its lithium business to a US listing, which brokers agree would unlock significant trapped value.
-Mineral Resources looking to spin off lithium business
-Significant value trapped in group structure
-Only under consideration for now
By Greg Peel
The Australian Financial Review has reported Mineral Resources ((MIN)) is considering a spin-off of its lithium division to a listing on the New York Stock Exchange. The company had not yet disclosed this information to the market as potential strategic initiatives being considered are not sufficiently advanced or certain to warrant disclosure.
But now that the cat’s out of the bag, brokers agree the true value of Mineral Resources’ lithium operation is being lost in the company’s conglomerate of iron ore, mineral services and gas businesses at a time standalone lithium miners are enjoying the full benefits of growing lithium demand.
Indeed, on Credit Suisse’ valuation the four businesses as a whole are currently trading at the price of just the lithium business alone.
Mineral Resources sees its lithium operation as a longer term growth driver, and hence would retain a controlling shareholding in any spin-off. Let’s call it LiCo for now.
But as Morgan Stanley points out, in the near term the company has a significant capex program underway in the iron ore division, including a recently flagged $3bn for Ashburton and an estimated $640m for South West Creek.
The intention was to fund this spending from cash flows generated in its lithium business, and to a lesser extent its other businesses, thus any spin-off plan could be delayed by these capital needs, unless they are met through capital raises (either debt or equity).