Fallout from the deflating mining boom continues to claim more victims, with resources exports likely to be significantly lower and another downgrade likely on the way.
Resources exports in 2012/13 are expected to fall to around $190 billion, down from the previous forecast of $209 billion, according to the Resources Minister Martin Ferguson. The phase of high prices associated with the mining boom is over. Recent announcements of job losses by Xstrata Coal and BHP Billiton (ASX: BHP) in Queensland provide an indication of the impact of lower prices on profit margins for our miners.
A request for a trading halt by mining services company, MacMahon Holdings Limited (ASX: MAH) over the weekend, citing deteriorating financial performance, and increased uncertainty about the outlook for new construction work, provides another example. Only last week, NRW Holdings (ASX: NWH), a mining services company working on Fortescue Metals Group’s (ASX: FMG) iron ore projects in the Pilbara region, was forced to cut its revenue forecasts for the next financial year, after Fortescue announced plans to slow expansion of its iron ore mining.
The mining services sector is now pretty much unloved, and more companies are expected to report lower forecast revenues, due to decisions by the miners to pull back their capital expenditure and slow their projects down. However, not all mining services companies provide the same services to the same clients. As an example, Monadelphous Group (ASX: MND) provides much of its services to the oil and gas industries, which are less affected by the fall in commodity prices. In fact, companies servicing the LNG industry should do well, with several multi-billion projects under development around Australia. LNG projects can typically take several years to develop.
The Foolish bottom line
For those investors prepared to do their own research, several mining services stocks may have been marked down by the market by association, despite earning only a small percentage of total revenues from services to miners that are cutting back on capex. Likewise, some companies service gold and other mineral miners, which have not seen the falls in commodity prices like iron ore and coal, so work for them is unlikely to drop off.
If you’re in the market for some high yielding ASX shares, look no further than our “Secure Your Future with 3 Rock-Solid Dividend Stocks” report. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.
- Riding high: Dollar, gold hit new highs
- Surf sale: Now Rip Curl is on the block
- Managed funds letting us down
- iPhone 5 smashes records
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.
These 3 stocks could be the next big movers in 2020
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.
*Returns as of 6/8/2020
- Why PWR Holdings Ltd could see its share price rise from here – July 21, 2017 12:11pm
- Fortescue Metals Group Limited share price sinks on native title decision – July 20, 2017 4:23pm
- 5 overlooked finance shares to add to your watchlist – July 20, 2017 2:33pm