MinRes jumps as lithium spin-off talks gather traction: Re-rating on cards

Mineral Resources (ASX: MIN) was up 11% at noon to a record high of $72.75 after the S&P/ASX50 company responded to speculation that it's preparing to list its lithium arm in the US which stands to create billions of dollars of value for investors.

It’s what MinRes didn’t say this morning that seems to have resonated loudest with the market: Namely that a US listing is by no means out of the question.

Within a succinct note to the market this morning, MinRes acknowledged pondering strategic options for its lithium business but noted that “any such considerations aren't advanced or certain or certain to warrant disclosure.”

Value play

It’s understood investment bank JPMorgan has been doing preparatory work on an eventual float of MinRes’s lithium mining and processing operations in a separate entity on the New York Stock Exchange (NYSE).

The board is clearly mindful that a possible split would help to close the significant gulf between the value of its shares and specialist lithium companies, such as US-listed Albemarle which made around US$4.3bn revenue in the last year.

Growing speculation of a pending lithium spin-off follows recent restructuring of the company into four separate business - mining services, iron ore, lithium and energy – within one centralised group.

Rough diamond

MinRes currently has direct interests in two lithium mines, Mount Marion and Wodgina, and a lithium hydroxide processing plant, Kermerton, both in WA. 

As small as it is, MinRes’s lithium operation has long been regarded as the unrealised jewel, which is expected to grow exponentially on the back of a large processing facility to convert spodumene to lithium hydroxide.

While MinRes is the largest spodumene concentrate producer, lithium hydroxide is understood to earn ten times the revenue of spodumene production.

Mineral Resources share price over 12 months.