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Market for mining services operators remains volatile

World Coal,

The ongoing decline in major resources projects, as well as delays in beginning committed projects, continues to effect mining services operators, with cost reduction and efficiency programmes increasingly critical for long-term viability.

Releasing the Q2 2014 Deloitte Mining Services Index, Deloitte financial advisory services partner, Nicholas Harwood, said: “Changes in the market capitalisation values of many operators from Q1 to Q2 highlight continuing volatility in the industry.”

Compared to Q1 2014:

  • The Index declined by 4.71 points to 84.23 points (US$ 1.89 billion market capitalisation).
  • The benchmark ASX200 increased by 1.37 points to 132.98 points.

Harwood said: “Many of the market capitalisation swings are double digit in percentage terms – and as much as 50% – 75%. Of the top 10 participants – those with market cap over US$ 1 billion – eight experienced decreases. Only Worley Parsons, up 12%, and ALS, up 18%, experienced increases.

“Common themes across the sector include participants reporting the continued decline in major projects and delays in commencing committed projects,” he added.

“Many are implementing cost reduction and efficiency programmes and are advising progress is in line with expectations,” Harwood continued. “It is clear that service providers and contractors need to continue to adapt to current and emerging market circumstances, as it appears these will predominate for some time.”

The Index includes a Deloitte Access Economics overview of factors disrupting the sector.

Deloitte Access Economics’ partner, Stephen Smith, said: “The Deloitte Access Economics Investment Monitor tracks major investment projects around Australia, including in the resources sector.”

“Data from the June quarter 2014 issue shows that the total value of major projects is currently in a holding pattern – it’s barely budged since June 2013, mainly due to the relatively static value of resources projects under construction,” Smith added.

“Notwithstanding this, there have been some recent project approvals, but the short to medium-term outlook for infrastructure spending remains one of declining investment levels amid softer commodity prices,” Smith concluded.

Adapted from press release by Sam Dodson

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