It's been said the shift toward electrification could propel Australia's next big mining boom. If so, what better place to try and capture life-changing wealth than investing in ASX mining shares, right?
Several established mining companies are already in on the action. However, the anticipated demand beckons increased supply, bringing fresh explorers to life across Australia and internationally. The conditions could present a modern opportunity to be an early investor in the next Fortescue Metals Group Limited (ASX: FMG).
The juice will be worth the squeeze for those lucky enough to strike figurative gold. However, as the Motley Investing team highlighted, 'less than 1% of exploration projects ultimately become a mine.' In other words, there are a lot of lemons with no juice.
Given this information, a 'picks and shovels' approach to investing in this new mining era might make more sense. Here's an ASX mining share that gets paid to squeeze the lemons, regardless of whether there's anything in them.
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ASX mining share providing picks and shovels
Mining companies are notoriously known as price-takers. Despite forecasts suggesting the world will need around 3.9 times more lithium production and roughly 1.3 times more copper production by 2030, the respective prices of these commodities are difficult to predict.
Furthermore, enormous capital is needed to bring new projects online. This is yet another risk, even after a deposit has been discovered.
Alternatively, the following ASX mining share enables miners to explore and expand — meaning a much more stable business model.
Imdex Limited (ASX: IMD)
Both mining giants and minnows must conduct drilling to establish resource estimates and inform investment decisions. One company that provides the tools to carry out this activity is Imdex.
Operating internationally, Imdex supplies miners with directional drilling equipment, sensors, analytics software — the works. Some of its key customers include Barrick, Glencore, Pan American Silver, and Agnico Eagle.
Imdex generated $43 million in net profits after tax (NPAT) on revenue of $372.85 million for the 12 months ending 31 December 2022. Since then, the company has acquired Devico, the number one supplier of directional drilling technologies globally.
It stands to reason that such an ASX share could benefit from increased mining exploration.
Moreover, Imdex's ability to provide data-driven insights to miners becomes more valuable if commodity prices fall. Such an environment would necessitate operating more cost-effectively by identifying the most economic deposits.
Who else is eyeing down Imdex?
This picks and shovels play has caught the team's attention at Ausbil. The Australian fund manager mentioned Imdex in its June research letter, labelling it one of its preferred stocks.
According to the team, the sustainability of the company's business model, dominant market share, and high return on invested capital are reasons for Ausbil's interest. In addition, the fund manager participated in the capital raising behind the previously mentioned Devico acquisition.
This ASX mining share trades at a price-to-earnings (P/E) ratio of approximately 18.53. Meanwhile, the share price is down 13.2% since the beginning of the year, as shown above.
