Stock of the day: Mineral Resources

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This video was created on 11 September for IG audiences by ausbiz.

Stock of the day: Mineral Resources (ASX:MIN)

Mineral Resources has seen its share price surge after announcing significant cost-cutting initiatives, especially within its lithium division. The company reported $180 million in capital expenditure (CapEx) savings and $120 million in operational cost savings after the market close, sending positive signals to investors.

Key cost savings and operational updates

The cost reductions include changes to employee hours at its Mount Marion and Wodgina lithium operations, helping streamline costs without affecting production guidance. Additionally, the company secured approval from the Foreign Investment Review Board (FIRB) for the sale of its haul road, which will net $1.3 billion, boosting its financial position.

Investor response and share price jump

Following these announcements, Mineral Resources' shares rose by 17%, marking a strong rebound after months of declines due to weakness in the lithium market. This sharp rise reflects improved investor sentiment as the company focuses on cost management.

Strong liquidity but high debt

Mineral Resources' balance sheet shows liquidity reserves of $2.8 billion, which will be further strengthened by the $1.3 billion from the haul road sale. The company has been focused on cost control, as seen with a recent dividend cut. However, the company still carries significant net debt of around $3 billion, which raises concerns for some analysts.

Short squeeze and market dynamics

Mineral Resources also has a high short interest, with 8% of shares shorted—an unusually high figure for a company of its size. The 20% increase in morning trade, along with similar moves in other lithium stocks, is partly due to a short squeeze after news that a major Chinese lithium producer had halted production, which could lift prices.