“Caterpillar Bets $7.6 Billion on Mining” announced the Wall Street Journal headline above a story November 16 trumpeting Caterpillar’s agreement to buy Bucyrus International, a maker of mining equipment, for $92 a share, a 32 percent premium of Bucyrus’ Friday closing price. Caterpillar is already the world’s largest construction and mining equipment maker and this deal, expected to close in mid-2011, will “significantly expand Caterpillar’s line of mining equipment and double its mining revenue,” according to the Associated Press.
The details of the deal should be eye-opening for smallcap investors following the mining equipment sector. Caterpillar just reporterd a 100 percent increase in profit for its third quarter, much of it due to growth in emerging markets like China, India and Brazil. Adding Bucyrus will allow Caterpillar to expand its footprint in countries that are “improving infrastructure, rapidly developing urban areas and industrializing their economies,” according to the Caterpillar press release.
Some of the smallcaps in the overall mining and mining equipment sector include:
Cleveland, OH-based Nacco Industries (NYSE: NC, http://www.nacco.com) engages in a variety of small appliances and specialized retail as well as mining businesses in the Americas, Europe and Asia-Pacific. It designs and sells a line of lift trucks and aftermarket parts under the Hyster, Yale, UNISOURCE, MULTIQUIP and PREMIER brand names. Additionally, it mines and markets lignite and sub-bituminous coal to electric utilities, independent power providers and a synfuels plant, as well as provides dragline mining services for limerock quarries in Florida. It has a market cap of $766 million and is trading for about $92, at the upper end of its 52 week range of $45-$114. However, it trades very lightly, averaging about 13,000 shares a day with a three-month average of 25,000 shares.
Chattanooga, TN-based Astec Industries (Nasdaq: ASTE, http://www.astecindustries.com/) designs and sells equipment and components used in road building, utility and related construction activities. Its Aggregate and Mining Group segment provides a host of mining-related equipment including jaw, cone and impact crushers, as well as vibrating feeders, inclined and horizontal screens; aggregate processing equipment, ore processing equipment and mobile screening plants, just to name a few products. The company’s market cap is $660 million and its stock is trading at about $30 with a 52-week range of $22-$37. It trades about 110,000 shares a day with a three-month average of about 153,000 shares daily.
From “down under,” with a market cap of $467 million (AUD), Queensland-based Industrea Limited (OTCQX: IULTY, http://www.industrea.com.au) is a strong play on the China coal mining sector, which represents 40 percent of the company’s revenue. Industrea comprises a group of companies involved in the global mining products and services business and their products and services are sold in the U.S., South Africa, Russia, Indonesia and Papua New Guinea. Customers include BHP Billiton, Rio Tinto Coal, Anglo American, BMA, Barrick Gold, Vale, Xstrata and several of China’s leading mining groups. To enlarge its global shareholder base, the company has established an ADR listing. In addition, the company recently announced a 3 for 1 reverse split in Australian shares. The 52-week range is $0.68-$1.47 and traes about 2.8 million shares a day.
Santa Fe Gold (OTCBB: SFEG, http://www.santafegoldcorp.com/) is an Albuquerque-based $87 million market cap mining and exploration company focused on acquiring and developing gold, silver, copper and industrial mineral properties. It currently has properties in New Mexico and Arizona. The company recently announced plans to acquire all the outstanding shares of common stock of Columbus Silver Corporation (TSXV: CSC) and estimates the combination will double its controlled gold and silver resources available for processing at its New Mexico facility. The combination will also allow them to be a player in the North American market. The stock trades at about $0.94, at the lower end of its 52-week range of $0.90-$1.74. Average daily volume is 19,000 shares.