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Monsters of Rock: Mining services stocks continue their good reporting season, Grange puts numbers on underground iron ore expansion
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- Another mining services stock shows why it’s been a good earnings season for the sector
- Grange Resources released study on underground iron ore
- Lithium stocks lead gains on flat day for materials
Dynamic Drill and Blast (ASX:DDB) has a market cap of just $29m, but the supplier of exploration and mining services to such miners as Gold Fields, BHP and Pilbara Minerals has become the latest mining services stock to post a strong half-year result, boosting profits by 214% to $2.85m for the first half of the financial year.
It comes after strong performances from a swag bag of larger mining services stocks, including Perenti (ASX:PRN), Monadelphous (ASX:MND), MacMahon Holdings (ASX:MAH), Lycopodium (ASX:LYL) and MLG Oz (ASX:MLG).
DDB was up 5% today, with EBITDA rising 54% YoY to $7.7m and operating cashflow up 191% to $6.4m.
It came a day after Austin Engineering (ASX:ANG), a steel fabricator that supplies dump truck trays for Rio Tinto (ASX:RIO) among other things, reported a 26% revenue lift tom $143.6m.
ANG’s EBITDA rose 70% to $30.8m, with NPAT 2.8x up to $15m, beating guidance by 36%.
ANG says NPAT will now be 75% higher than FY23 at $31-33m for FY24, restating a 0.4c per share interim dividend.
Boss David Singleton said Austin, up almost 23% YTD, was using automation and process improvements to bypass labour issues which have plagued mining services and engineering contractors.
“We’ve overcome labour scarcity issues in Australia and the USA through upgrading manufacturing systems, automation, and capacity in all of our facilities globally. We’ve also positioned Indonesia as a major central hub, and grown that workforce, allowing us to build market share in truck trays and buckets,” he said.
“With bigger and more efficient facilities around the world, we are designing and manufacturing a wider range of bespoke products that are delivering value to our customers and their operations.
“This formula has driven high levels of recurring revenue, and an order book value at multi-year highs.”
Dynamic Drill and Blast (ASX:DDB) and Austin Engineering (ASX:ANG) share prices today
Grange extends mine life
Quiet achiever Grange Resources (ASX:GRR) says its high grade Savage River iron ore operation could be running for another 15 years with the addition of a new underground development.
It also see operating costs falling by 30% through the development, with an underground block cave and sub level cave to replace the company’s North Pit incrementally over the next five years.
GRR believes existing cash reserves and future cash flows could fund its $891m capital bill, with a final decision on the development — due to start in 2025 and be paid back in 6.4 years — due later this year.
It expects to produce 28Mt of magnetite concentrate at a grade of over 66% Fe over a 15 year life, with sales ramping up to a maximum of 2.9Mt from 2029, while carbon emissions will be reduced by some 80%.
The project generates a rate of return of 34% and over $2b in cash flows at average prices of $177/t (US$115/t), with Grange expecting to sell the material at a premium to the 62% Fe benchmark.
Grange has trimmed its final dividend by 80% to 2c or $23.147m, after generating a profit after tax of $150.1m
While realised prices of $212.83/t (up from $203.18/t) led to a lift in revenue from $594.6m t $614.7m, Grange also saw C1 costs rise from $120.64/t in 2022 to $136.65/t in 2023. Iron ore sales rose from 2.57Mt to 2.64Mt, but pellet production was down from 2.52Mt to 2.34Mt in 2023.
Grange shares have fallen 58% over the past year with payments to shareholders curbed after the one-time cash machine cancelled its interim dividend.
The materials sector ended the day flat, with battery metals stocks the surprise winners.
Lithium miners Pilbara Minerals (ASX:PLS) and IGO (ASX:IGO) rose more than 7%, with PLS eclipsing $4 for the first time since October.
Rob has the lowdown on the lithium sector below.
READ: Eye on Lithium: Morgan Stanley gives market a boost as lithium futures ‘go crazy’
