Bucyrus International: A Mixed Bag

Tag : Used Mining Equipment

Bucyrus International, Inc. ( BUCY ), incorporated in 1927, designs and manufactures mining equipmentfor the extraction of coal, copper, oil sands, iron ore and otherminerals in mining centers throughout the world
BUCY is a mixed sector company with presence in coal, copper, oil.It’s not a company directly engaged in any production, butprovides equipment instead. Therefore, it’s not a simpleanalysis.
Let’ take a quick look at the world coal production andconsumption profiles to understand if BUCY has presence there.Looking at the chart below, it does seem to be the case (read thedetails on BUCY’s business later in the post for BUCY’sinternational presence):

From Wikinvest : Increase in commodities impacts the demand for mining equipment: Since 2002, copper prices more than quadrupled. However, oil,which traded at $18 per barrel in 2002, is now trading at $140. Coal is key to BUCY’s revenues: BUCY generates roughly 73% of its annual revenue from coal miningcustomers. Production of coal shifts with economic and politicalfactors. As oil prices rise, alternative energy forms become moreattractive. Coal power substitutes natural gas and oil consumptionin some instances, and therefore, the coal price tends to movehigher also. However, the 2007 World Energy Outlook expectsincreasing coal infrastructure and high oil prices to boost coaldemand from 4.1 billion tons in 2005 to 5.8 billion tons in 2015.The world-wide use of coal to generate power is indicated in thechart below— using coal for power is not going to stopovernight, people. And in burgeoning new economies such as Indiaand China, the increase in oil prices is going to further thedependence on coal. Given that 53% of BUCY’s revenues comefrom outside of US, this business is shielded by any green lawsthat may be put in place in the US ( click to enlarge images) .