By David Sandell, The Complete Investor

Metals and other resources are getting harder to mine as the more accessible deposits become depleted. This is leading producers to mine in ever more challenging places, including deep underground.

Investors can benefit by buying shares in the suppliers of mining equipment. One superb example is Joy Global (JOY).

With a market value of $9 billion, Joy Global makes products used in mining everything from coal and oil sands to copper and iron ore to gold and other minerals. It represents half of what is essentially an industry duopoly.

However, since the other half is equipment producer Bucyrus, acquired by Caterpillar (CAT) in 2011, Joy Global is the only pure play on spending growth in the mining equipment industry.

Demand for Joy Global’s products has been strong, and the company has taken full advantage.

Revenues have grown from just over $2.5 billion in fiscal 2007 (ended October) to $4.4 billion for the year ended October 2011. Net income has grown even faster, from $280 million in fiscal 2007 to $610 million last year. 

These positive trends are continuing. In late January, Joy’s CEO Michael Sutherlin upped his expectation for growth in capital spending by the mining industry this year to 15 percent.

Only a month earlier he’d been looking for just 10 percent, but the recovering U.S. economy, China’s commitment to growth, and India’s shrinking coal inventories all pointed to the higher level, reinforced as more of the company’s customers confirmed their spending plans.

Around half of Joy Global’s revenues come from abroad, and not surprisingly the company is particularly focused on China.

In December the company purchased a majority stake in China’s International Mining Machinery Holdings, which manufactures equipment for underground coal mining; in early January, Joy began a tender offer for the remaining shares.

It plans to operate the subsidiary as a separate unit that will focus on mid-tier Chinese mines, a group that includes 100 customers and several hundred mines.

Despite Joy Global’s franchise-like position in a thriving industry, shares are surprisingly cheap, trading at only 12 times current-year earnings and 11 times estimated 2013 earnings.

With earnings growth projected to be in the high teens for at least the next few years, the price to earnings growth (PEG) of 0.6 makes Joy Global a compelling buy.

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