Glasgow pumps specialist Weir Group (WEIR), which has shifted its strategy away from oil and gas to focus on the mining sector, gained 1.1% to £16.92 as it announced a £95 million order to provide aftermarket components and service to the Iron Bridge magnetite project in Western Australia.
This follows the award of a record £100 million order for original equipment for Iron Bridge in 2019.
The project is a $2.6 billion joint venture between Fortescue Metals and Formosa Steel, located in the Pilbara region, around 145 kilometres south of Port Hedland.
Both the aftermarket order and revenue will be recognised over the seven-year period of the agreement, which starts in 2022, in line with the project's initial production.
Aftermarket work offers the benefit of recurring revenue and is often higher margin. Shore Capital analyst Akhil Patel commented: ‘Population growth, the convergence of living standards in developing economies, urbanisation, ore grade decline and decarbonisation all point in Weir’s favour as demand for essential mining commodities is growing/required.
‘Becoming a pure-play mining-focused business reduces volatility, increases resilience and enhances its earning quality via its aftermarket earnings profile (i.e. less cyclicality).’