This week, mining companies have dominated the news as commodity prices continue to fall and some of the big miners reported their quarterly production numbers. It is common knowledge that the industry has had a tough time of it recently, the S&P/ASX 300 Metals & Mining (Index: ^AXMM) (ASX: XMM), an indicator of share prices of Australian listed mining companies, has fallen 43.5% in the last five years.
Motley Fool contributor, Mitch Sonogan, is part way through a series of excellent articles, The Mining Investor's Handbook, which take a detailed look at the current state of mining. As a former industry insider with five years of operational work experience as an engineer on various mines in Australia, Mitch has a detailed knowledge of the industry. So far he has provided an overview of commodities and looked in depth at iron ore, gold, coal and aluminium.
Anyway, back to this week's news.
Fortescue Metals Group Limited (ASX: FMG) provides its quarterly production report
Fourth-largest iron ore miner in the world, Fortescue Metals Group, shipped 42.4 million tonnes of ore in the June quarter, up 10% from the same period last year. The company's latest estimated breakeven price is US$39 per dry metric tonne (/dmt), compared to current prices of just over US$50/dmt. Fortescue is heavily indebted presenting another reason, aside from falling prices, to avoid the company.
Newcrest Mining Limited (ASX: NCM) releases strong June quarterly report
Whilst the price of gold has fallen below US$1,100 per ounce this week, its lowest level for over five years, Australia's largest gold producer, Newcrest Mining, reported strong production and reduced costs for the June quarter. It produced 673,542 ounces in the period, up from 610,186 ounces in the March quarter. Perhaps more significantly, the company revealed that its All-in Sustaining Cost (AISC) fell from US$897 per ounce to US$789 per ounce between 2014 and 2015, a reduction of 12%. Some may see the operational improvements as reason to buy the stock, whilst others may be put off by the falling price of gold.
BHP Billiton Limited (ASX: BHP) presents its 2015 operational review
In what appears to be a trend in the sector, mining giant BHP Billiton announced that it has increased production in its key commodities whilst reducing costs. Unlike most of its ASX listed peers, BHP is a well-diversified resources company but pretty much all commodity prices are falling and so currently such diversification is of little value. Here are five key facts you should know about BHP's operations report.
South32 Ltd (ASX: S32) releases its maiden quarterly report
In its first production report since it was spun off from BHP Billiton, South32 announced it has broken four new production records at sites for aluminium, manganese and coal. BHP divested the South32 assets earlier this year to focus on its key commodities and if resource prices improve then South32 could represent good value for investors. Personally, I think that miners require too much capital investment and are less sustainable than other types of businesses, but every stock is a buy at a certain price.
Other large-cap stories
Engineering firm Cimic Group Ltd (ASX: CIM), formerly known as Leighton Holdings, flagged a strong half-year profit result. The engineering sector has struggled recently thanks to its exposure to mining and so the result is particularly impressive.
Macquarie Group Ltd (ASX: MQG) informed the market that it expects its financial year 2016 results to be up on 2015 at its annual general meeting. It stated that both its annuity-style and capital markets businesses contributed significantly more in the first quarter of 2016, compared to the same period last year.
Building materials company Boral Limited (ASX: BLD) guided $240 million to $250 million profit before significant items for the 2015 financial year up from $176 million last year.
Gaming and hospitality business Echo Entertainment Group Ltd (ASX: EGP) announced that it has been selected by the Queensland government as preferred bidder for the Queen's Wharf Brisbane project, beating rival Crown Resorts Ltd (ASX: CWN).
Stories from the smaller end of the market
On Thursday, software company Infomedia Limited (ASX: IFM) announced that it expects net profit after tax to be $13.2 million to June 2015, up from $12.3 million in 2014.
Caravan and temporary accommodation manufacturer Fleetwood Corporation Limited (ASX: FWD) announced that it has been awarded a contract to construct the Osprey Key Worker Village and will receive a government guaranteed income stream for 15 years.
Software developer Prophecy International Holding Limited (ASX: PRO) announced that normalised profit before tax will be $4.1 million this year, up more than 110% on last year.
IT consultancy Data#3 Limited (ASX: DTL) said on Wednesday that profit after tax will be $10 million to $11 million to June 2015, up more than 35% compared to 2014.
On Monday, branded dairy company A2 MILK FPO NZ (ASX: A2M) provided a market update showing that revenue is up 39% to NZ$154 million in 2015.
Training and education provider Academies Australasia Group Ltd (ASX: AKG) advised that although revenue was 43% higher in 2015 over 2014, earnings before interest, tax, depreciation and amortisation are expected to be sharply down from $5.6 million to $2.3 million.
