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S&P throws out mining related stocks

Standard & Poors has made wholesale changes to its ASX Indices, with the ASX 300 Index (Index:^XKO) (ASX:XKO) seeing more than 50 changes.

Some of the additions include Cedar Woods Properties (ASX:CWP) and Greencross (ASX:GXL). Of the 24 companies chucked out of the ASX 300 index, all but two are resource or energy companies, and one of those supplies products for deep sea oil and gas drilling.

With commodity prices falling over the year, many smaller miners have been faced with rising costs for those already in production. Explorers and those at early stages of development have either had to raise more capital, or put their projects on hold. With capital extremely hard to come by, it’s been hard for these resources companies to attract any investment.

Here’s why the two non-mining related stocks lost out.

Matrix Composites & Engineering (ASX:MCE) had a very promising start, supplying buoyancy and other products essential for deep sea drilling operations. In early 2011, the company’s shares went close to hitting $10, before delayed effects from the global financial crisis finally caught up with the company. Orders dried up at the same time as the company spent up big on a new, much large factory, and the company’s shares are now languishing at just 81 cents, having dropped 64% over the past year.

Pharmaxis (ASX:PXS) is the other non-mining stock that has been chucked out of the ASX 300 index. A pharmaceutical company researching and developing treatments for lung diseases such as cystic fibrosis, Pharmaxis has seen its shares drop, after its phase III clinical trial of Bronchitol had not shown a significant improvement in patients treated over a 12-month period. That’s about as devastating as it can get for a company engaged in delivering medicines.

Foolish takeaway

For many of the resource-related companies, that may be the last time they appear in the ASX 300 index, and they will virtually need a miracle to get back in.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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