STANDOUT SHARES:

5 Mineral Resources

As a diversified mining infrastructure services and commodities production company, Mineral Resources provides leverage to commodities, though earnings are less volatile than those of a pure miner and more than a sole mining services business.

Mining services has an annuity income component from crushing, processing and handling. Income from the transaction side provides engineering, procurement and construction (EPC) services, and it can be lumpier.

The mining operations segment is involved in iron and lithium production through profit share partnerships. The company is looking at opportunities across other commodities. Revenue from this business is linked to commodity prices. However, these profit share agreements also allow Mineral Resources to leverage its mining services capabilities from mine development and construction through to operating and handling services.

Analysts expect strong earnings growth, with EPS forecast to increase 39.3%pa over the next three years. In late 2017 the company made a $530 million cash/ scrip bid for AWE to get exposure to the oil and gas space. While this diversifies Mineral Resources' commodities exposures, acquisitions of this size bring risk. The proposal has the backing of AWE’s board but requires shareholder approval.