UPDATE: Caterpillar To Enter Mining-Shovel Market

(Updates with details about mining equipment and competitors throughout; adds closing stock price.) By Bob Tita Of DOW JONES NEWSWIRES CHICAGO (Dow Jones)--Caterpillar Inc. (CAT) will begin offering a line of mining shovels starting in 2011, as the construction-equipment manufacturer looks to increase its presence in an expanding global mining industry. The company's new shovel line will eventually feature up to five models ranging from a 125-ton shovel to an 800-ton model. The shovels will be produced at Caterpillar's Aurora, Ill., plant near Chicago. The company expects the 125-ton shovel to be available by late 2011, with the larger models following in 2013 and 2014. The Peoria, Ill., company also intends to boost production of its heavy-haul mining trucks at assembly plants in Decatur, Ill., and Chennai, India. "As we discussed solutions with our global mining customers, it's clear that they want a complete line of Caterpillar shovels to best match Caterpillar trucks operating at their mines," said Chris Curfman, president for the company's global mining business, in a written statement. Caterpillar, the world's largest construction-equipment company by sales, expects to invest nearly $700 million in the shovel line and its mining trucks by 2014. Of this amount, $500 million will be spent at the two Illinois plants. Mining equipment has been a robust market for equipment manufacturers in recent years, as production of iron ore, copper, coal and other mined commodities accelerates in response to increased consumption of raw materials in developing countries, particularly China. Just a handful of companies worldwide compete in the low-volume, high-margin market for mining machinery. Caterpillar is a major supplier of mining trucks along with Komatsu Ltd. (KMTUY) and Volvo AB (VOLVY). But the company has limited experience with building and selling shovels. It introduced a limited line of shovels about 10 years ago, but abandoned production after just a few years when the shovels failed to attract customers. Caterpillar's return to the shovel market is not entirely unexpected, particularly as demand for bulldozers, excavators and other general-construction machinery recovers slowly amid sluggish construction activity in the U.S. and Europe. As Caterpillar tries to win over shovel customers, however, it will face entrenched, well-regarded competitors in Bucyrus International Inc. (BUCY) and Joy Global Inc (JOYG). Bucyrus earlier this year completed the purchase of Terex Corp.'s (TEX) mining equipment business, which includes mining shovels. "It's an excellent move for Caterpillar long-term, but it's going to take time to get the products established," said Eli Lustgarten, an analyst for Longbow Research. "They're looking at it as a three-to-five-year investment." The company announced in March that it will relocate excavator assembly from the Aurora plant to a new factory at an unidentified site by 2014, freeing up production space at Aurora for other equipment. The company also builds wheel loaders at the plant. Caterpillar also is moving motor grader assembly from Decatur to a new plant in Arkansas. The move will allow Decatur's production capacity for mining trucks to increase by 30% beginning in 2011. The plant already assembles Caterpillar's largest mining trucks, including the 797F model, which has a 400-ton payload capacity. Big mining trucks are used extensively to haul oil-laden soil in the Canada's tar sands region, which has grown into a major supplier of crude oil to U.S. over the past decade. At the Chennai plant, Caterpillar will expand production of 100-ton and 60-ton mining trucks by 2012. The trucks will be directed at the growing base of customers for the haul trucks in Asia and Russia. Caterpillar also will begin rolling out diesel-electric versions of its mining trucks beginning next year. The diesel engines in the trucks generate electricity for motors that provide the turning-power for trucks' wheels. The combination generates tremendous power at low speeds without the use of a transmission. Caterpillar's stock ended Wednesday regular trading session up 0.87%, or 56 cents, at $64.95 a share. -By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com (END) Dow Jones Newswires June 17, 2010 17:44 ET (21:44 GMT)