Mining shares are back in vogue. With companies like Whitehaven Coal Ltd (ASX: WHC) up 313% in the past 12 months, how could investors not love the mining industry?
Here are 3 more businesses that could be shaping up for an interesting year in 2017:
BHP Billiton Limited (ASX: BHP)
In recent times, the spot prices for oil, iron ore, and copper have risen significantly above the average received prices quoted in BHP's most recent report. Although analysts estimate the company will earn around A$1.80 per share this year, if current resource prices are maintained, BHP's earnings could rise even further in the 2017-2018 financial year. BHP has also announced a further cut to its capital expenditure plans, reducing planned expenditure by $1.7 billion.
Together, these two factors could result in a cash bonanza which could lead to higher dividends and/or buybacks for shareholders.
Fortescue Metals Group Limited (ASX: FMG)
Up 160% in the past 12 months, it's hard to believe that Fortescue Metals could be a bargain. Yet if the company's first-half results are replicated in the second half, the company is priced at just 8 times its full year profits – pretty cheap, even for a miner, and production costs are expected to move lower yet. Fortescue has also established a $500 million loan facility to buy its own VLOCs, mega-transports for shipping iron ore to China.
After recent efforts, Fortescue now boasts the lowest iron ore production costs in the world (including shipping and royalty expenses). The company is now effectively printing cash, and shareholders are seeing the benefits with lower debt, higher profits, and bigger dividends.
Worleyparsons Limited (ASX: WOR)
A mining services company, not a miner, Worleyparsons looks interesting because management rejected a takeover offer at $11.80 per share in November last year. With shares currently trading at $10.20 apiece, investors could be confident that those 'in the know' – competitors – believe the company is worth more. What's more, management rejected the takeover offer (which has now been withdrawn) because they stated that it substantially undervalued the company.
With resource prices having recovered somewhat and a number of projects moving forwards – increasing the pool of work, Worleyparsons could be an opportunity for those who believe that management are able to unlock this greater value for shareholders.
Foolish Takeaway
Of course, the unspoken caveat to all of these investment ideas is the assumption that resource prices will stay the same. They won't. That's one of the main reasons you won't see any of the above companies reported in my disclosure statement (see below) any time soon.
