Mining services stocks hammered

Is the future as gloomy as the market thinks?

The S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) has closed down 40.7 points or 0.9%, to 4,315.7, after the iron ore price fell to US$90 a tonne overnight.

Our miners – with the big three, BHP, Rio Tinto (ASX: RIO) and Newcrest making up a large percentage of the index, were smashed. The materials sector was down 2.8%, while the gold sector was down 4.3%. The defensive healthcare and telecommunications sectors managed to swim against the tide, posting rises.

These three stocks, all with exposure to the mining industry, were hammered, each falling by more than 8%.

Imdex Limited (ASX: IMD) saw its shares slammed 18.8% to $1.34, the market shooting first and asking questions later. The company manufactures and sells a range of drilling fluids and chemicals to the mining, oil and gas industries. With big miners looking to cut their capital expenses, exploration drilling is one of the first casualties, and Imdex appears to be in the front line.

Ausdrill Limited (ASX: ASL) shares slid 11.2% to $3.10. The company was most likely hammered down by association with Imdex and Boart Longyear (down 37%). As a mining services and mining equipment supplier, that’s no surprise. The falls came despite Ausdrill posting a rise in revenues and profits for the 2012 financial year. The company also said it was targeting growth of 15% in the next financial year, and had a strong outlook for the years 2014 and after.

ALS Limited (ASX: ALQ) ex-Campbell Brothers, fell 8.7% to $8.63. After conducting a 5 for 1 stock split, ALS has sold off its chemicals division and become solely a testing and inspection business. With more than 49% of revenues generated by the company’s minerals division – which is involved in testing drilling samples amongst other activities – ALS could also feel the brunt of miners cutting their capex spends in the years ahead.

The Foolish bottom line

There was a hint of panic in the sharemarket today, with any company associated with the resources boom getting hammered. Many companies were likely chucked out with the bath water, on suspicion that their future earnings were at risk. It could be an opportunity to pick up some bargains.

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Motley Fool writer/analyst Mike King owns shares in BHP. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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