The Major Miners

The mining sector is the third largest on the UK market.

Mining companies make up the third largest sector in the FTSE, accounting for around 11% of the total value by market capitalisation, rating below only the Oil & Gas and Banking sectors, on 18% and 13% respectively.

With there being so many other industries that fuel the economy, like telecommunications, engineering, etc, that might sound a little surprising. But all of those industries are dependent on raw materials, and (with the exceptions of air and water, and stuff that grows), they're pretty much all dug out of the ground -- be it coal, iron, gold, or diamonds, digging it up is very big business.

Bigger than £100m

The table below lists all of the mining companies listed in the FTSE All-Share index and the AIM-100 index, with a cut-off point of £100m. There are a lot more smaller ones, especially on AIM, but it would be a very long table if we included them all.

The turnover figures shown are from each company's most recent full-year reports, and those vary from December 2008 to December 2009, with some in between. For simplicity, we've ignored P/Es and yields and just listed turnover.

Giants...

As we can see, the companies in the sector range from global giants like Rio Tinto, which mines for aluminium, iron, copper, diamonds, gold, uranium, and a whole range of other minerals, to small exploration companies digging for one specific resource, like diamond explorers.

The large companies are actual producers, extracting their various kinds of dirt and selling them on the world's commodities market. As such, they turnover billions of pounds a year. They have all risen substantially in the value over the last decade, with increasing demand from emerging economies like China boosting the price of most raw materials.

...and tiddlers

At the other extreme, just like the Oil & Gas sector, a lot of the small exploration companies don't actually dig up anything and sell it, but take a mining prospect just to the point of commercial viability and then sell all or part of it to one of the big players.

How is the sector doing today? I recently reported on results from giants Rio Tinto, BHP Billiton and Xstrata, and middle-of-the-table Randgold, and all three were looking pretty healthy. But more recently, Anglo American has disappointed investors who were hoping to see some dividends.

Is it a good sector to invest in? Well, it certainly has its ups and downs and, like oil and gas, you need to understand a bit more about how the industry operates than you do with more mainstream sectors like, say, publishing or engineering. There plenty of Fools on our mining sector board who specialise in this area, so it's a good place to start your research.

Smaller mining companies can be especially risky as they often rely on a single project, operate in politically volatile countries and need to raise fresh funding on a regular basis to continue their development. When the credit crunch struck, many of them saw their share prices totally crushed. 

In the long term though, everything we do depends on digging up dirt of some kind or other. And who knows, if one of those tiddlers should uncover a rich mithril seam, their shareholders will be laughing all the way back to the Shire.

Previous sector analyses

• Five Big Banks
• Oil & Gas Sector
• Dissecting The UK Market