In the early days of mining in Australia, it was common for those who sold shovels to fare much better than those who dug for minerals.
Mineral Resources (ASX: MIN) is a Perth-based diversified mining services, contracting, processing and commodities producer. It is an ASX100 company with a market capitalisation of over $2 billion. Management and board ownership is approximately 22%. It could be said that Mineral Resources is a quiet achiever.
It provides a range of contract crushing and specialised mine services across many metalifereous mining sectors (gold, copper, iron ore and manganese). The company provides mining, crushing and screening services, pipeline and water solutions, haulage and ship loading and equipment hire in the rapidly growing mining and resource sector in Australia.
Since 1995, the company has established a strong reputation as a provider of unique, quality products and services tailored specifically to meet the needs of each individual client. For example, the company determines the crushing requirements for a client, designs a job-specific plant, manufactures the plant and provides on-site operation and maintenance. This approach sets it apart from its competitors. Its clients include BHP Billiton (ASX: BHP), Rio Tinto (ASX:RIO) and Fortescue Metals Group (ASX: FMG).
An excellent result for the half year ending 31 December, 2013 has just been announced. It is hard to fault the performance. Several of many favourable statistics include the following. Revenue was $928 million in the half year, up 86.4% compared with the corresponding half year. EBITDA of $305.1 million was 110% up on the corresponding period last year. Likewise annualised return on equity was 23.9%, up from 17.7% previously. Earnings per share were 70.2 cents compared with 34.1 cents, a 106% change.
Maintaining a 50% dividend policy, the latest interim dividend is 30 cents compared with 16 cents for the previous interim. Return on equity was 23.9% compared with 12.2%. Both a reduction in capital expenditure to $61.4 million from $271.9 million and net debt lowered to $59 million from $310.3 million were pleasing indeed.
With record volumes of iron being crushed and exported to China and other countries, Mineral Resources is sitting pretty. Note that India, once a net exporter of iron, is moving towards being a net importer as it, like China, is rapidly industrialising its economy.
Foolish takeaway
Generally mining services companies have been shunned by the market in the last couple of years but Mineral Resources is the exception. Unlike most other mining services companies, this one is strongly focused on production not exploration. Under $12 per share it offers sound investment quality, at a price to earnings ratio of just 8.6, assuming earnings in the second half are at least as good as the first.
