Will ASIC make a dog's breakfast of Mineral Resources shares?

ASIC has now stuck the probe in to investigate.

| More on:
Miner looking at a tablet.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Mineral Resources Ltd (ASX: MIN) share price has been volatile in 2024 and is down nearly 45% this year.

Shares have slipped nearly 28% in the past month alone, with investor confidence shaken by revelations into co-founder Chris Ellison's tax history.

Now, corporate watchdog, the Australian Securities and Investments Commission (ASIC), has escalated its inquiries into Ellison's potential misconduct involving tax evasion and governance issues.

The news isn't price-sensitive, so Mineral Resources shares are largely unaffected today. But there's no telling what long-term implications this may have.

Mineral Resources shares in the headlines again

Mineral Resources shares have been under the pump after news of Ellison's conduct began to circle the headlines.

News reports initially focused on Ellison's involvement in a tax evasion scheme involving companies registered in the British Virgin Islands. These companies were reportedly used to buy and sell mining equipment. However, investigations uncovered more findings into the co-founder's conduct.

These included Ellison using company resources for personal benefit and directing employees to manage personal matters.

Mineral Resources, or "MinRes", as it's known in investor circles, also completed an internal investigation into the matter, which resulted in Ellison agreeing to gradually step away from the company.

ASIC has now teamed up with the Australian Taxation Office (ATO) to examine the details and uncover any breaches of corporate laws.

There's even a Senate hearing into the matter. According to The Australian, ASIC Deputy Chair Sarah Court confirmed to the hearing the body's intention to scrutinise any misconduct by Ellison or the company.

Board and governance questions loom

Mineral Resources' board is feeling the heat over governance standards.

Following the internal investigation, Ellison agreed to a phased exit over 12-18 months, with board-imposed penalties of $8.8 million and forfeited remuneration of nearly $10 million. Ouch.

Despite these measures, scrutiny around the board's handling of Ellison's actions persists, with investors questioning the long-term impact on the company's credibility and performance.

The Australian Future Fund, which holds a nearly $90 million stake in Mineral Resources shares, recently voiced concerns over governance issues.

It hinted at a potential review of its investment in the company.

In light of the turbulence, brokers are also fairly neutral on the stock. It is rated a hold by consensus, according to CommSec.

Bell Potter is one of the bullish crowd. The broker retained its buy rating on Mineral Resources shares, in a recent note.

It highlighted the company's core business strengths in mining and mining services in its appraisal.

The broker remains optimistic, with a 12-month price target of $61.50 on the mining stock.

However, it cautions that volatility could persist as the ASIC investigation unfolds. It could potentially implicate other executives or reveal further misconduct.

Time is said to heal all. But time will also tell what happens from here.

Foolish takeaway

Mineral Resources shares remain in the hot seat as ASIC now sticks the probe into the mining giant.

For investors, the question is whether to weather the storm or sit this one out. Brokers are fairly split, despite some support from the likes of Bell Potter.

In the last 12 months, the stock is down more than 35%.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Resources Shares

Middle age caucasian man smiling confident drinking coffee at home.
Resources Shares

Should you buy Rio Tinto stock or Woodside stock today?

Which of these giants is best? Here's what Goldman thinks.

Read more »

Miner looking at a tablet.
Resources Shares

What does Trump's win mean for iron ore shares like Fortescue?

The controversy on tariffs has already started.

Read more »

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Resources Shares

Own BHP shares? Directors of the mining giant have been busy with stock transactions

It can be worrying when directors sell.

Read more »

Buy, hold and sell ratings written on signs on a wooden pole.
Resources Shares

Are Lynas shares a buy, sell, or hold for 2025?

Much depends on the outlook for rare earths.

Read more »

a tired and sad looking bulldog sits at an office desk with a pen an paper on it and a cup of coffee with his head resting on the desk as he gives a mournful look to the camera.
Resources Shares

After crashing 50%, could this ASX All Ords stock rebound?

Such low starting valuations could help.

Read more »

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Resources Shares

Why did the Fortescue share price fall 7% in October?

Let's review what happened with the ASX 200 mining giant in October.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Resources Shares

Why did the BHP share price get hammered in October?

ASX 200 investors sent BHP shares sharply lower in October. But why?

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Resources Shares

Gina Rinehart's empire raked in another $5.6 billion. Here's how

Resources and mining continue to dominate the Australian market.

Read more »