NRW Holdings (NWH) provides a diverse range of specialist services to Australia’s mining and resources organisations.

NWH’s business units are split into four divisions: Civil, Mining, Action Mining Services and Action Drill & Blast.

The group’s head office is located in Perth, with branch offices spanning Australia and West Africa.

NWH’s clients are sector blue chip stocks, including BHP Billiton, Rio Tinto and Fortescue Metals. The group’s lucrative contracts over FY10 offset resource sector shakiness, and FY11 is looking to be a stronger year on increased resource sector activity.

Recently released first half results have already reflected inherent strength with profit jumping over 30%.

Resources return to strength

NWH may not be a famous industry name, but its clients are amongst the resource sector’s biggest names.

In its civil division, NWH’s RGP5 South project, primarily a rail contract, is in alliance with BHP Billiton Iron Ore.

NWH is also carrying out port infrastructure and mine site earthworks for CITIC Pacific Mining at Cape Preston, working on the Christmas Creek Rail project for Fortescue metals, and assisting Rio Tinto with Hope Downs, the Western Turner Syncline project, Simandou and Tom Price Mining.

NRW Holding’s long-term alliance with these big names ensures the group is never short of work, even during a resource sector downturn.

The resource sector has returned to boom times owing to the global economic recovery, and NWH has been one of the shares to buy since June last year.

Furthermore, NWH stands to pick up more lucrative projects with industry leaders in FY11.

First half results

Last month, NWH confirmed 1H11 revenue of $358.3 million, up 30% on a year ago.

Net profit grew 31% to $20.4 million whilst the group declared a half dividend of 4 cents per share, up from 3 cents last year.

NWH said the result was driven by an improved performance in the civil, mining and the drill and blast divisions.

The group’s balance sheet is in a strong position with a cash balance of $40.9 million and net debt of $14.9 million at 31 December 2010.

The company says it is well placed to achieve its minimum revenue target of $700 million, representing 15% growth on FY10.

However NWH’s previous guidance outlined expectations of a 15% – 20% growth in revenue for the full year.

Looking ahead

NWH has a significantly improved cash position in 1H11. Combined with its improved gearing position, NWH has plenty of capacity for future growth.

NWH’s balance sheet is thus in good shape to underpin expansion opportunities and growth.

The value of secured revenue for FY11 is currently $643 million which is 92% of its minimum FY11 target of $700 million.

NWH will be looking to diversify its revenue base as it aims to create a $1+ billion plus order book.

The group has a balance of order book value of $226 million for FY12 and $194 million post-FY12, and is now focused on benefitting on a resource sector recovery with a wide range of civil, mining and oil and gas clients demanding NWH’s services.

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BHP Billiton (ASX:BHP) is the world’s largest diversified resources company, with a global portfolio of high quality assets and more than 100 operations in 25 countries.  BHP is the largest company (by market cap) in the Australian share market and is widely considered among the blue chip stocks.

It is an industry leader in most of the major commodities markets, including aluminium, coking and thermal coal, copper, manganese, iron ore, uranium, nickel, silver and titanium. On top of this, BHP has sizeable interests in oil, gas, natural gas and diamonds.

On 16 February, BHP reported a 72% surge in 1H11 net profit to US$10.5 billion, beating some analyst estimates.

Underlying EBITDA surged 60% on-year as an improving economy and supply side constraints saw BHP benefit from major increases in the prices of its core commodities.

Core earnings at BHP’s iron ore division grew 178% on-year amid record production in WA, rising prices and persistent tightness in iron ore markets.

BHP reported strong results in its other major commodities, with coal and base metals both seeing a big increase in underlying EBIT.

BHP was also reported a 123% surge in net operating cash flows.  As a result, BHP boosted its existing share buyback plan to US$10 billion, which will be completed by the end of 2011.

The group declared an interim dividend of US46 cents a share, up from US42 cents a year ago.

BHP was bullish about its outlook, noting that growth in emerging markets was expected to remain strong despite further monetary tightening in countries such as China and India.

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Northern Iron (NFE) is an Australian iron ore company which was formed to acquire the Sydvaranger Iron Project in northern Norway. NFE has redeveloped Sydvaranger to commence production of magnetite iron concentrate for supply into the European market.

This strategy aims to provide investors in NFE with direct exposure to iron ore prices within the next two years.

Iron ore prices are skyrocketing of late, and it is believed that spot prices may surge through US$200 per tonne, returning to pre-GFC record levels.

Established operations

The Sydvaranger Iron Project (Norway) operated from 1910 to 1997, then was reopened in October 2009 with first shipment in November 2009.

Sydvaranger encompasses three magnetite deposits with JORC compliant resources and a further 20 prospects with known iron mineralisation, several of which have been mined previously.

NFE’s development plan for Sydvaranger is based on utilising the existing infrastructure on site in order to commence production of a magnetite concentrate product as quickly as possible for the lowest capital cost.

Current plans for the re-furbished mine are for the mining of 7 million tonnes per annum (Mtpa) of ore to produce approximately 2.9Mtpa of concentrate over a 19 year mine life.

Recent results

For the recent December quarter (4Q10), NFE noted a strong improvement in concentrate quality to meet target specifications owing to full commissioning of concentrate screens in mid-November.

Northern Iron clocked a significant improvement in milling performance for the quarter to a record 969kt, up 26% on the previous quarter.

The quarter also included an increase in concentrate production by 8% on the previous quarter to 375kt.

Due to improved maintenance performance, NFE expects to achieve its FY11 production target of 2,300kt – despite recently reduced concentrate volume as a result of optimisation work on the filtering system to achieve quality specifications.

Recovery in December and January has been as expected and thus NFE stands by its FY11 production target.

NFE noted a 20-30% average sales price increase over the December quarter is expected to be achieved in 1Q11 due to the improved product quality and strength of the iron ore market.

Iron ore

Today it was confirmed that a key iron ore price index (Platts’ 62% iron ore index) edged up to a record US$187.25 a tonne.

The index is used in conjunction with others, based on spot transactions in China by global miners including BHP Billiton and Rio Tinto.

Over the next 18 months, continued demand from emerging economies such as China and India is expected to drive growth in consumption of energy and minerals commodities.

NFE’s exposure to iron ore is lucrative. Restocking by Chinese steelmakers and tight supplies have driven a surge in spot prices to near US$200 per tonne, boosting price indexes by 10% so far this year.

If iron ore does reach US$200 per tonne, it would bring prices up to the all-time record levels of March 2008, during the commodities boom that occurred before the global economic downturn hit iron and steel markets.

Outlook

NFE is an emerging iron ore miner, explorer and producer, whose flagship Sydvaranger Iron Project will help contribute towards the company’s FY11 production target of 2,300kt.

Iron ore prices are skyrocketing of late, and it is believed that spot prices may surge through US$200 per tonne, returning to pre-GFC record levels.

NFE noted a 20-30% average sales price increase over the December quarter is expected to be achieved in 1Q11 due to the improved product quality and strength of the iron ore market.

Northern Iron has been one of the hot stocks in recent months due to the brightening outlook for iron ore.  Its stock has surged from around $1.50 in late November to just under $2.00, making it one of top performing small caps in the Australian share market recently.

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Industrea (IDL) is a Queensland-headquartered group of companies involved in the global provision of mining products and services.

IDL boasts a range of blue-chip clients across the globe, including BHP Billiton, Anglo Coal, Rio Tinto, Barrick Gold, Vale and Xstrata, as well as a selection of major Chinese bureaus, including Jincheng Mining Group.

The company’s stock has been in an uptrend since mid-2010 on a recovery for the resources sector – many companies within the sector have been among the hot stocks in recent months.

IDL also benefits from its exposure to big-name clients, which offer lucrative, steady, long-term contract support.

The group’s exposure to China is also a boon, with the region’s demand for our resources (especially coal) expected to remain a key driver for IDL going forward.

Operational diversity

IDL is constantly expanding its range of products and services, with its current range of mining products including collision avoidance systems, underground directional drilling, contractor management, mobile asset tracking and a Driver Safety performance index.

The company also distributes a select range of original equipment manufacturer (OEM) mining products for local and global companies.

A large focus is on outsourced contract mining services through its Huddy’s mining services subsidiary.

Overall, mining services accounted for 41% of IDL’s revenue in FY10. The group’s diesel equipment division provided 36% of revenue and IDL’s technology business represented 23% of overall revenues.

In terms of geographical exposure, Australia represented 57% of FY10 revenue whilst China accounted for 41%. The remainder of revenue was split between South America and other global regions.

Fighting figures

For FY10, IDL reported revenue of $313.2 million, up 21% on FY09.

Underlying earnings came in at $112.1 million, an 11% on-year increase, whilst IDL’s EBITDA margin sat at 36%.

Net profit after tax (NPAT) totalled $61.9 million, including significant non-recurring items, whilst adjusted NPAT was up 8% to $49.1 million.

Adjusted EPS was down 2% on FY09 to 5.29 cents per share whilst IDL declared a total dividend of 1.3 cents per share.

Of its FY10 results, IDL noted that improved efficiencies in its Australian operations lifted revenue and productivity through better capacity utilisation.

The company noted that 2H10 was particularly strong, with positive momentum going ahead for FY11.

Over the year, IDL acquired a manufacturing business in China and continued its expansion into the Hunter Valley, which remains an ongoing priority.

Chinese connection

The last year has seen IDL exporting in excess of $10 million per month in export sales to China, which has continued to display high demand for IDL’s services.

Going ahead, Industrea will be focused on the underground coal mining sector as the largest market for its products.

China is the largest coal producer in the world, producing 2.8 billion tonnes of coal in 2008 –12.5% of the world’s coal production.

China is expected to produce over 3 billion metric tonnes of coal in 2010 with over 95% of output sourced from underground mines.

As such, IDL is looking towards institutionalising key relationships with the major mining Chinese bureaus and establishing a Chinese manufacturing facility specifically tailored for the Chinese market.

Outlook

IDL, which recently reported strong FY10 results, notes business conditions are improving in the global and domestic mining sector, with the outlook for commodities remaining strong.

The group has a strong competitive position in China, and its Chinese manufacturing facility is expected to grow its China business further.

IDL issued in its AGM a positive long-term outlook and expects to report an increase in revenue and operating profit for FY11.

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Monadelphous Group (MND) is a leading engineering group providing extensive engineering construction, maintenance and industrial services to the mining, energy and infrastructure sectors.

The group boasts a simple company structure, with well-defined business groups, and has one of the market’s cleanest and appealing balance sheets.

MND’s stock fell hard over the second half of 2008 as the mining sector in general was punished. However, the mining services industry is seeing the pressure lifting, and MND boasts a strong order book.

MND reported excellent FY10 results, including a record profit after tax of $83.2 million and record sales revenue of $1.28 billion.

Blue chip clients

MND works with core markets in the resource industry, specifically iron ore, coal and mineral processing. However the company has also smartly diversified into oil and gas, water and power, where it continues to build a strong reputation for engineering excellence.

The iron ore sector has been booming of late on the commodities recovery and Australia boasts a sizeable chunk of the global ore market.

MND has delivered some of the iron ore industry’s largest engineering construction projects for BHP Billiton Iron Ore and Rio Tinto Iron Ore, resulting in repeat business.

MND’s structural, mechanical and piping contract for BHP Billiton’s Rapid Growth Project 4 at Newman Hub, valued at approximately $290 million, represents the group’s largest single contract awarded to date.

The company’s excellent track record has resulted in recurring business and preferred supplier status with blue chip customers in the coal sector including Rio Tinto Coal and Allied, Anglo Coal and BHP Billiton.

The company is also a major force in Australian projects in the oil and gas sector, with recent or current projects including the BP Kwinana Refinery Turnarounds and Capital Projects (Western Australia), the Darwin LNG Maintenance Services Contract and Oil Search’s (OSH) Field Facilities Construction Services Contract in PNG.

Another year of growth

In August, MND reported its FY10 results – including a record profit after tax of $83.2 million, up 12.1% on the prior year.

Strong revenue growth was achieved across the company’s operations and in all key markets − resources, energy and infrastructure − with total sales revenue for the year increasing by 13.6% to a record $1.28 billion.

Underlying earnings for the year were $129.4 million, up 11.5% on FY09. Earnings per share (EPS) rose 10.7% to 96.9 cents.

A final dividend of 48 cents per share was declared. This takes the total full year dividend payout to 83 cents per share, up 12.2% on year.

Whilst lower than the previous period, solid operating cash flow performance continued to be a feature of MND’s business in FY10, and the company reported a net cash position of $116.6 million at year-end.

Fantastic future

At its recent AGM, MND confirmed that, since June this year, tendering activity has continued to be healthy.

Late last month, MND announced to the ASX three new construction contracts and additional work with a combined value of approximately $130 million.

These agreements take new construction and services contracts so far this financial year to about $400 million.

Following the achievement of record sales and earnings in FY10, MND has entered FY11 with a healthy forward workload.

The company has continued to experience a high level of demand and growth from existing contracts and expects revenues in 1H11 to at least match those of the 1H10.

Given this potential, MND will be one of the stocks to watch in the coming year.

Outlook

Monadelphous Group is a heavily diversified resources company which stands to benefit from commodities growth across the board, in line with a global economic recovery.

The company’s FY10 results were strong and FY11 is looking healthy already, with new construction and services contracts so far totalling $400 million.

We also expect expansion opportunities in the water and solid waste management markets, along with the newly acquired transmission pipeline business, to provide MND with ongoing growth opportunities.

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Atlas Iron (AGO) is an emerging iron ore producer and explorer. With a growing number of high quality iron ore projects and one of the largest landholdings in the lucrative Pilbara region, AGO is now one of the area’s largest iron ore producers.

The company’s significant projects include the Pardoo operation, the Ridley project and the Mt Webber Direct Shipping Ore (DSO) project, in the Pilbara region.

Following the commencement of mining at Wodgina in June 2010, AGO is on target to ramp up iron ore exports from 1 million tonnes per annum (Mtpa) to 6Mtpa during the December 2010 quarter.

AGO is on target to achieve its growth target of exporting at a rate 12 Mtpa by the end of 2012.

Iron ore roar

As an iron ore explorer/producer, AGO is well placed to benefit from continued strength for the iron ore market.

Chinese demand has been driving up the price of iron ore over the past few years and prices have gone wild.

Spot iron ore prices in China have extended gains after domestic steel prices added strength this week and iron ore miners continued raising offers and tightening supply.

At the recent Steel Index conference, the global seaborne supply of iron ore is anticipated to rise 8.5% to 1.1 billion tonnes next year.

AGO boasts multiple iron ore port options at Anketell, SW Creek, Utah and Oakajee, and has six off-take agreements with more to come in FY11.

Recent developments

In June, AGO announced the commencement of its Wodgina DSO Iron Ore Project in WA.

With the commencement at Wodgina, AGO is expecting combined iron ore exports at its Pilbara operations to total 6 Mtpa by December 2010.

In September, AGO excited the market by confirming a 50% increase in reserves at its north Pilbara Projects.

In the same month AGO loaded the first iron ore from its Wodgina and Pardoo mines, onto the Bergen Max export vessel at the New Utah Point Port in WA.

AGO advised that the port is at the heart of its plans to ramp up production to 6Mtpa by Christmas, and then 12Mtpa by 2012.

AGO signed up with mining sector bigwig BHP Billiton on 18 November, entering a memorandum of understanding (MOU) on iron haulage and port access at Port Hedland.

The two miners said the talks involve hauling iron ore from AGO’s Pardoo mine via BHP’s Goldsworthy rail line.

AGO has been one of the hot stocks since these developments, and has continued to climb on rumours of receiving multiple approaches from Chinese parties interested in buying the company’s Balla Balla iron ore project in Pilbara.

Quarterly results

AGO’s most recent results are for the September quarter. It was a landmark quarter, with first ore-on-ship at the new Utah Point port facility, commenced mining at Wodgina and production ramp up at Pardoo.

Over the quarter, 313,719 ore tonnes were shipped; 612,649 ore tonnes were processed; and 774,653 ore tonnes were mined.

DSO Reserves increased by 50% and AGO completed a merger with Aurox Resources in August, allowing for a greater expansion of port facilities.

AGO finished the quarter with $108 million of cash on hand at 30 September – which has increased to $120 million at 25 October.

Outlook

As the iron ore market returns to robust boom times, AGO is taking advantage of current conditions, ramping up some projects and making great sales of others.

AGO has a very healthy balance sheet, with $120 million cash on hand, and is free of net debt.

Going ahead, AGO will continue to explore Pilbara for further opportunities to add to its already-impressive project portfolio and will focus on mining at Wodgina and production ramp up at Pardoo.

As a result, AGO will be one of the stocks to watch in coming months.

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NRW Holdings (NWH) provides a diverse range of specialist services to Australia’s mining and resources organisations. NWH’s business units are split into four divisions: Civil, Mining, Action Mining Services and Action Drill & Blast.

The group’s head office is located in Perth, with branch offices spanning Australia and West Africa.

NWH’s clients are sector bigwigs, including BHP Billiton, Rio Tinto and Fortescue Metals. The group’s lucrative contracts over FY10 offset resource sector shakiness, and FY11 is looking to be a stronger year on increased resource sector activity.

This bullish resource sector outlook has resulted in NWH becoming one of the hot stocks in recent months.

Trumping trials

Owing to its ties to the resources sector, NWH suffered over the course of the global economic downturn, in line with its peers.

After gaining ground across 2009, the group faced some volatility earlier this year, brought about in the main by uncertainty over the Resources Super Profit Tax (RSPT).

This caused a delay to contract awards for NWH, which nonetheless reported a great annual result owing to the group’s inherent strength.

Another year of growth

In FY10, NWH managed yet another year of growth, managing to maintain its double digit underlying earnings margin despite a difficult economic environment.

Despite lingering market challenges, NWH managed to increase revenue in FY10 by 20% on FY09 to $609.7 million.

Underlying earnings of $62.3 million represented a 6% increase, whilst Net Profit after Tax (NPAT) was up 2% to $37.9 million.

NWH declared a dividend of 6 cents per share, up 200% on FY09.

Net debt/equity of 23% was down from 28% in FY09.

NWH’s balance sheet is thus in good shape to underpin expansion opportunities and growth. Funding has also been implemented, giving a total facility of some $270 million.

Resources return to strength

NWH may not be a famous industry name, but its clients are amongst the resource sector’s biggest names.

In its civil division, NWH’s RGP5 South project, primarily a rail contract, is in alliance with BHP Billiton Iron Ore.

NWH is also carrying out port infrastructure and mine site earthworks for CITIC Pacific Mining at Cape Preston, working on the Christmas Creek Rail project for Fortescue metals, and assisting Rio Tinto with Hope Downs, the Western Turner Syncline project, Simandou and Tom Price Mining.

NWH’s long-term alliance with these big names ensures the group is never short of work, even during a resource sector downturn.

With the resource sector returning to boom times on a global economic recovery, NWH stands to pick up more lucrative projects with industry leaders in FY11, and will potentially be one of the stocks to watch in coming months.

Conclusion

NWH stands to benefit from a strong FY11, with the value of the secured revenue for FY11 currently at $620 million (89% of the minimum FY11 target).

The group has a balance of order book value of $221 million for FY12 and $180 million post-FY12, and is now focused on benefitting from a resource sector recovery with a wide range of civil, mining and oil and gas clients demanding its services.

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BHP Billiton (BHP) the world’s largest diversified resources company, with a global portfolio of high quality assets and more than 100 operations in 25 countries.

It is an industry leader in most of the major commodities markets, including aluminium, coking and thermal coal, copper, manganese, iron ore, uranium, nickel, silver and titanium.  On top of this, BHP has sizeable interests in oil, gas, natural gas and diamonds.

BHP is also the largest company (by market cap) in the Australian share market, and is widely considered among the blue chip stocks.

On 15 November, BHP formally withdrew its US$39 billion offer for Potash Corp.  The offer’s withdrawal followed Canada’s recent decision to block the bid on grounds it did not provide a net benefit to the country.

BHP maintained that its bid would have resulted in a significant net benefit to Canada, with its concessions ranging from foregoing tax benefits in which was entitled to as well committing large sums on exploration and development.

However, BHP’s undertakings appeared to be too little too late, with Canadian authorities believed to have been unhappy with the extent of BHP’s concessions.

With the bid now cancelled, BHP has promised to return US$4.2 billion to its shareholders through a share buy-back program.

In addition, BHP plans to invest US$15 billion in its global business in the coming financial year.

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Austin Engineering (ANG) provides an array of manufacturing, repair and support services to the mining, oil and gas, aluminium and industrial sectors.

The company has manufacturing facilities in Australia, the US and the Middle East. Its products and services include JEC mining and earthmoving products.

As such, ANG is a major beneficiary of a booming resources sector and has been one of the hot stocks in recent months on an extremely robust environment for mining in Australia.

In mid-August, ANG reported yet another year of record profit, with net profit after tax (NPAT) of $19.3 million for FY10, up 30% from the previous year’s result.

Mining boom

A recent major strategic acquisition for ANG was the Pilbara Hire Group in Western Australia for $13 million – an acquisition which presents compelling value to ANG.

Pilbara Hire carries out most of its work in the lucrative Pilbara region where blue-chip stocks, Rio Tinto and BHP Billiton, have established a strong presence.

The timing is right for ANG to pick up more customers, with Treasurer Wayne Swan revealing earlier this week that Australia is about to embark on its biggest mining investment boom since the 1850s Gold Rush.

Mining investment plans this year have been up almost 50%, whilst mining companies are planning to invest five times more this FY than they were six years ago.

The current pipeline of resource projects in Australia is nearly $360 billion, with $110 billion being in advanced projects.

Australia’s engagement with Asian countries has enabled trade and investment to grow, particularly in the mining sector, which is good news for ANG.

Another record year

In mid-August, ANG reported yet another year of record profit, with net profit after tax (NPAT) of $19.3 million for FY10, up 30% from the previous year’s result.

Core earnings increased by 23% to $26.5 million, at an average annual margin of 18.4%, confirming the improvement in operating performance achieved during the year.

The company declared a final dividend of 7.5 cents per share, bringing the full-year dividend to 9.5 cents, an increase of 19% over the FY09 dividend.

The group finished the year with available free cash resources of $21.1 million, up from $14.9 million in the previous year.

The company raised $31 million in fresh capital in July 2009 to facilitate its expansion into South America.

Behind the numbers

ANG attributed the stellar FY10 result to improved efficiencies across the Australian operations during the year due to larger orders and higher capacity utilisation.

The result also reflected eleven months of revenue and profit contribution from the group’s new operation in Chile, which performed well during the year.

Solid operational performance by the group’s JV operations in Oman also provided enhanced levels of profit contribution.

ANG’s expansion into South America (initiated in August 2009) upon the acquisition of the steel dump truck body business of Conymet Limitada in northern Chile was also key in solidifying ANG’s position in the global mining equipment market.

Outlook

ANG’s stock has been in a strong uptrend since 2009, making it one of the better performers in the Australian share market, and it is easy to see why.

Aside from the company’s inherent strength and ability to expand into growth regions, the group has benefitted from a massive pick-up in global mining sector activity.

Australia is looking to benefit from this boom, with a rush of mining investment to support ANG’s order book in the coming years.

ANG’s FY10 results revealed yet another strong year of record earnings and FY11 should be similarly impressive, thanks to ANG’s recent expansion into the Pilbara and Chile and on increased demand for mining services.

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Macmahon (MAH) is a leading contractor providing services to customers in both the mining and civil construction sectors.

The company employs more than 3,000 people throughout Australia, New Zealand and South East Asia.

MAH consists of two key business units – mining and construction – and its clients and JV partners are typically big names, including BHP Billiton and Leighton Holdings.

A continuation of the current mining boom is likely to benefit mining services providers such as MAH, so it would be considered one of the stocks to watch over the longer term.

However, on 19 October, MAH warned that its construction business has experienced issues that will impact the division’s earnings in the shorter term.

In WA, a rail contract will not deliver its forecast profit due to cost issues, and a lower number of contract wins will result in weaker-than-forecast revenue for the division.

MAH is now forecasting a breakeven result for the December half, whilst second half profit will grow $20 million more than forecast due to strength in the mining business.

MAH shares plummeted 21% on the day of the profit warning, making it the worst performer in the Australian stock market.

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