Mineral Resources' Turnaround: Lithium Recovery Meets Rapid Deleveraging

Mineral Resources has staged one of the ASX's strongest turnarounds of 2026, rallying from around $41 to a peak near $74 as a lithium price recovery, resilient iron ore, and rapid balance sheet deleveraging turned a heavily indebted miner into one of the year's best performers, even as at least one long-standing holder remains stubbornly underweight.

A rapid deleveraging story

Alphinity Investment Management described an extraordinary deleveraging path from six times enterprise value to EBITDA a year ago to close to two times now, crediting part of it to favourable luck, iron ore prices holding up and lithium prices surging further, and part of it to management actively pulling operational and balance sheet levers, including strong delivery at the Onslow iron ore operation and selling down 30 percent of its lithium assets to POSCO at a reasonable price. Pendal Group detailed a strong third-quarter result with FY26 production guidance upgraded again at both Wodgina and Mt Marion, volume guidance raised at Onslow and in the Services division, and net debt down to A$4.5 billion, a reduction of A$400 million since the end of December, with the A$1.2 billion POSCO transaction due to close in FY27. Infinity Asset Management, which did not hold the stock and saw it as its largest performance detractor in April, reported total production volume reaching 80 million wet metric tonnes, up from 62 million a year earlier, alongside the Wodgina volume guidance upgrade.

Lithium recovery and Onslow's resilience validate the turnaround

Katana Asset Management said the broader lithium market re-rating is supporting Mineral Resources' profitability, while the Onslow Iron haul road's resilience through a recent Pilbara cyclone further validated the project, with ongoing deleveraging slowly moving the company into growth mode. Ten Cap said the stock recovered from earlier weakness tied to the Iran conflict on the back of a strong operational result, with production beating expectations and improving lithium prices reinforcing confidence in the earnings outlook at Mt Marion and Wodgina. Yarra Capital Management confirmed the stock outperformed in April as spodumene prices rallied around 6 percent and the March quarter production report beat consensus with guidance upgrades across several assets, though the fund kept its underweight position, viewing both lithium and iron ore as unattractive at current levels.

Growth optionality returns

Pendal Group reported the restart of Mineral Resources' wholly owned Bald Hill lithium mine, previously placed on care and maintenance during the last price downturn, a low-cost restart at $20 million poised to benefit from the lithium price rebound and add to Services division volumes. A site visit to Wodgina also put two potential expansions of more than 30 percent back into consideration, a $540 million to $630 million investment on a 100 percent basis that Pendal said makes sense if spodumene prices hold up. L1 Capital said a lithium investor tour highlighted similar accretive growth options at both Wodgina and Mt Marion, alongside the Bald Hill restart.

Not everyone is convinced the re-rating is safe

Yarra Capital Management's underweight position became a source of underperformance in May, and the fund said as much, noting that even though both lithium and iron ore prices eased during the month, both commodities remain at what it considers elevated levels, while balance sheet gearing, despite the progress made, remains high relative to peers.

What fund managers say they are watching next is whether the POSCO lithium stake sale closes on schedule in FY27, how quickly Bald Hill's restart and the potential Wodgina expansions add to volumes, whether Onslow Iron's production keeps tracking ahead of plan, and whether gearing falls far enough to satisfy skeptics like Yarra who still see both of the company's core commodities as expensively priced.