Key points
We provide an overview of our thoughts on Mining Services heading into the reporting season.
This group has generally had a good year, despite challenges:
- Of twenty companies reviewed ~2/3 have upgraded, provided positive updates, or at least reiterated guidance
- The share prices of the companies on our list have climbed on average nearly 40% from the start of FY23 to date
- We anticipate largely positive full year reporting, which will be a commendable outcome given cost pressures and labour constraints
Environment suggests short-term headwinds, but feeds into a stronger longer-term outlook:
- Metal and mining capital raised by junior and intermediate miners has trended down since mid-2021
- The lagged effect could keep a lid on exploration spend and make it more difficult for developers to get timely funding in the short-term
- This will quicken resource depletion and impact the new production needed to meet growth and decarbonisation goals
- With demand growing faster than supply we assume a strong commodity price led supply side response in the medium to longer term
- This will benefit miners and those businesses that “sell the shovels”; we are therefore upbeat on the medium-term outlook for mining services
Key picks and opportunities:
- Dominant player: Perenti (link to research)
- Dependable achievers: GR Engineering (link), SRG Global (link), and SCEE (link)
- Micro-cap opportunities: MLG Oz (link), Dynamic (link)
Presentation link above provides more commentary and detail by sub-sector (drilling, engineering, construction, contract mining, and other production), as well as a summary of guidance/outlook updates, and current trading comps.
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