Investors who are interested in gaining exposure to companies that service the growing mining industry can take a look at the relatively new PureFunds ISE Mining Services ETF (NYSEArca: MSXX). The ETF is the first to exclusively invest in the mining services sector. It reflects the performance of the ISE Mining Service Index, which holds 30 global companies that operate across 6 continents.
As world economies grow and expand, the people and industries will require more raw materials. Investors have looked at miner exploration and production exchange traded funds as a way to play the expansion, but the services side could provide more stable growth.
“Service and E&P (exploration & production) companies are similarly exposed to the supply and demand of natural resources, but service and E&P companies have different business models, and the service business model could offer more predictability,” Paul Zimnisky, co-founder and CEO of PureFunds, wrote in a research note. [A New ETF for Diamonds and Gems]
“Service companies tend to produce revenue at the time they are providing the service at a pre-agreed upon rate,” Zimnisky said. “In this way, a service company’s cash flow tends to be more upfront and predictable than that of an E&P.”
At a miners conference earlier in 2012, Boar Longyear (ASX: BLY), the world’s biggest mineral exploration drilling company, stated that demand for its services and products has been expanding and the order backlog for both is on the rise.
In a recent report, SNL Metals Economic Group (SNL MEG) estimated that worldwide non-ferrous, or non-magnetic, metals exploration budget for 2012 hit an all-time high of $21.5 billion in 2012, or up 19% over 2011.