Short-selling pressure on Mineral Resources spikes to fresh record despite recent share price reprieve

The portion of Mineral Resources shares in the hands of short sellers has surged more than 40 per cent so far this month, as detractors bet the embattled company will need to raise capital or conduct a fire sale. Fresh data provided by the corporate regulator shows 11.1 per cent of MinRes’ stock is now controlled by short sellers, compared to 7.7 per cent on September 2 — far outstripping shorting increases at any other major ASX-listed company. Shorters effectively aim to profit from a company’s share price falling, and MinRes is now only behind fellow lithium miner Pilbara Minerals as the most shorted stock among the ASX’s 100 biggest companies. Pilbara has long been a target for lithium bears — its short-selling interest continues to hover above 20 per cent. The latest MinRes shorting spike came last week, intriguingly while the company’s share price rebounded more than 25 per cent amid a flurry of good news. That included a Chinese lithium mine closure easing global supply glut concerns, MinRes announcing a cost-cutting drive at its own lithium operations, plus the company getting a regulatory green light to bank $1.1 billion of much-needed cash from selling down a 49 per cent stake in its Onslow haul road. But MinRes’ stock has still lost more than half of its value since May. Weaker lithium and iron ore prices have cast clouds over the company’s ability to pay back $4.4b of net borrowings without having to raise capital or offload assets on the cheap. Raising capital would drag down MinRes’ share price and selling lithium or iron ore assets in the current market would likely crystallise big losses on the company’s balance sheet. The company’s apparent preference, however, is to shop around its gas discoveries. MinRes declined to comment. Wilson Asset Management lead portfolio manager John Ayoub said the rapid-fire interest in shorting the stock shows concern about MinRes’ debt levels in some quarters has not receded, despite recent developments. “The main focus (of recent shorting) would be around the debt position and how the ramp up of, in particular, its Onslow Iron project and how that takes shape,” Mr Ayoub told The West Australian. MinRes has allocated nearly $800 million this financial year for more work on the Onslow project, including finishing off the 150km haul road by the end of next month. The private road will link MinRes’ iron ore mining operation to the Onslow Port and could be used by other miners in the West Pilbara region. “But for us, we’re comfortable that where we are in the commodity cycle and their (MinRes’) track record of executing means that they’ll be able to navigate their current debt issues, and solidify their position over the next year or two,” Mr Ayoub said. The identities of the shorters circling MinRes and others on the ASX are largely unknown, even to the companies being targeted. The shorting interest figures published by the Australian Securities and Investments Commission are only based on voluntary disclosures by shorters, meaning the full scale of shorting is also unknown. ASIC also keeps the names of shorters that disclose their positions to it a closely guarded secret. Industry sources say US hedge funds like Millennium Management Global Investment and Point72 are prolific shorters of ASX stocks. Australian-based Regal Funds Management is also known for being quite active on the shorting front. Short sellers borrow shares and then sell them with a buyback obligation at a later date. If the repurchase price is lower than what the shares were sold for the short seller pockets the difference after paying the lender any interest owed.