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Why Did Major Drilling Stock Soar 10% on Wednesday?

Why Did Major Drilling Stock Soar 10% on Wednesday?
Written by publisher team

miner down a mine

Written by Vineet Kulkarni at The Motley Fool Canada

What happened?

Shares of a specialized drilling company Major Drilling International Shares (TSX:MDI) jumped 10% on Wednesday. Investor sentiment has been particularly strong around commodities this year. Strong economic growth may continue to drive commodity prices higher in 2022, and major drilling could be one of the beneficiaries of this super-cycle.

so what?

High demand and relatively limited supplies pushed copper prices higher on January 12th. Copper broke above vital psychological resistance at $10,000 a ton, while nickel also hit record levels since 2011 on Wednesday. Industrial minerals have been remarkably strong lately, boosting mining stocks as well.

Big Drilling generates a significant portion of its revenue from drilling copper and gold mines. Therefore, as miners increase their production, driven by higher prices, a major drilling company may see increased job opportunities in the future.

Major Drilling is a $760 million specialty drilling company. It focuses on unconventional drilling such as directional drilling, deep drilling, and high altitude drilling. It focuses on mines that are difficult to access but have more rewarding mineral deposits.

Analysts claim that commodities like copper could see decades of bullishness, driven by increased demand due to the energy transition. In addition, according to Major Drilling’s quarterly presentation, global gold reserves are rapidly declining, and the copper supply has been in short supply. Therefore, these goods can experience an increase in demand, causing their prices to rise in the future.

In the past 12 months, Major Drilling has reported net income of $26.2 million and total revenue of $550 million. The company has recorded explosive financial growth after receiving a significant decline during the pandemic.

What now?

MDI stock has been very volatile lately. It’s up 22% in the past 12 months, which is in line with TSX shares overall. The mining sector as a whole has been reeling under pressure for years. MDI stock fell below $3 during the epic pandemic crash of 2020. However, the recovery was strong and has returned 260% since then. The investment cycle of mining companies is likely to accelerate in the post-pandemic world, which increases the focus on MDIs.

The publication Why did major drilling stocks rise 10% on Wednesday? He debuted in The Motley Fool Canada.

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The Motley Fool owns and recommends the MAJOR DRILLING GRP. The fraudulent shareholder Vineet Kulkarni has no position in any of the shares mentioned.


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