A lithium spin-off is off the cards: Mineral Resources

Mineral Resources (ASX: MIN) is set to remain as a diversified mining services, iron ore, lithium and gas business, according to Managing Director Chris Ellison.

“I’ve got no plans right now to go out there and to peel off any of those four business units,” he said after the company's annual general meeting, the Australian Financial Review reported.

The spin-off timeline

The speculation of a potential lithium divestment was first brought into light in early September. Mineral Resources shares rallied 5.8% the day before the company's official announcement in acknowledging these rumours.

On 9 September, the company said it "regularly evaluates various strategic options to maximise value creation for shareholders, including in relation to its lithium business", which prompted a 13.6% rally to $71.51.

Notwithstanding other factors that may have impacted the company's share price between 8-9 September, the company gained 20.2% in just two days on hopes that it'll split its lithium business.

Mineral Resources chart (Source: TradingView)

Goodbye frothy demerger

Mineral Resources has a truly massive lithium footprint, with its Mt Marion and Wodgina assets accounting for approximately 29% of global hard rock lithium supply, the company noted at its November annual general meeting.

For FY23, the company guided towards:

• Mt Marion (51% ownership): 300,000 to 330,000 tonnes of spodumene

• Wodgina (50% ownership): 190,000 to 210,000 tonnes of spodumene

Note: guidance volumes reflect MinRes share

That's a similar production profile as Pilbara Minerals (ASX: PLS), which guided to 540,000 to 580,000 tonnes for FY23.

The catch is, Mineral Resources has a market cap of approximately $15.7bn, inclusive of its mining services, iron ore,and emerging energy business. While Pilbara Minerals has a market cap just shy of $15bn, as a lithium pure play.

So what now

The speculation of a lithium spin off added 20% to Mineral Resources' market cap. Almost out of thin air.

Now that the demerger is off the table, do we see the stock go full circle? Or does a recovering iron ore market and still-high lithium prices see the stock retain its gains?