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2 Companies Fueling the Asia-Pacific Mining Boom

Dan Carroll
July 26, 2012

Dominant Dow staples General Electric (NYSE: GE  ) and Caterpillar (NYSE: CAT  ) have made the right moves to capitalize on the booming Australian and Chinese mining sectors. These two American icons aren't looking to reap the benefits there, however: It's Southeast Asia's rise that's the prize.

The region's growing economies, led by the core six countries of Indonesia, Malaysia, Singapore, Vietnam, the Philippines, and Thailand, have sailed through the recession with flying colors. The region boasts a population of nearly 600 million and a gross domestic product larger than India's. This has sparked an infrastructure boom to meet the demands of growing societies. Such investment requires raw materials, and GE and Caterpillar have gone to great lengths to win their pieces of the action.

Let's take a look at how these two companies' overseas strategies can turn a profit for investor portfolios.

GE invades the Pacific
GE has recently made key moves to strengthen its position in the $61 billion mining equipment industry. The company purchased Australian mining equipment provider Industrea Limited for just under $720 million, boosting its profile in a nation poised to reign as one of the 21st century's top mining centers.

GE furthermore signed a joint venture with Chinese state-owned coal producer Shenhua Group. The move increases its investment in the lucrative coal mining sector, which fuels 70% of China's burgeoning energy demands.

The company expects 8% growth year over year through 2020 for the mining equipment industry. GE's two main equipment customers, miners BHP Billiton (NYSE: BHP  ) and Rio Tinto (NYSE: RIO  ) , have suffered through a disappointing year so far. However, the pair should bounce back with rebounding commodity prices and continued Southeast Asian growth. With material suppliers from Australia and China in the geographic neighborhood, GE shareholders can feel confident about strong returns from the region's gains.

Caterpillar's rebuttal
Not to be outdone, Caterpillar increased its own investment in Australian and Chinese mining equipment sectors. The company's $886 million purchase of Chinese equipment manufacturer ERA Mining Machinery expands its presence in the high-growth nation. The move puts Caterpillar in direct competition with Joy Global (NYSE: JOY  ) and GE for a piece of the Chinese coal market and China's five-year, $840 billion pledge to future energy investment.

Caterpillar has also kept pace with GE in Australia. The company expanded focus on its dealers in the mineral-rich nation, increasing its position significantly after last year's $8.8 billion purchase of major mining equipment