Global drilling company Master Drilling says it’s encouraged by a record order book as the mining industry scrambles to take advantage of booming commodity prices, even as SA miners still seem reluctant to pursue new projects.
The company, based in Fochville west of Johannesburg, saw its order book rise more than 50% to $232m (R3.37bn) in the six months to end-June, while its sales pipeline more than doubled to $601.6m.
This sales pipeline is “really something”, CEO Danie Pretorius told Business Day, adding that while operating conditions remained difficult, there has been a marked improvement in areas such as the ability to travel and general logistics relative to 2020.
Master Drilling was established in 1986 and operates in 23 countries, currently generating about 15% of its revenue in SA, and 39% in Africa. The group provides services starting from the exploration phase, but it generated 88% of its revenue from the production phase in the six-month period.
Group revenue rose just over a quarter to $72m, while profit almost doubled to $9.1m, as clients increased capital spending.
The SA mining sector still provides isolated opportunities; it is shrinking in overall terms and new capital expenditure in the sector is not forthcoming, Master Drilling said, noting that cost pressures were rising, while labour conditions remained “inflexible.”
Even with booming commodity prices, SA’s platinum group metals miners were focusing more on optimising existing operations rather than considering new projects, said Pretorius. When Master Drilling was founded in the mid-1980s SA was producing 600 tonnes of gold annually, and this now down to about 90 tonnes.
“The environment is what it is,” he said, adding that SA did need to compete with the rest of Africa as mining companies consider where to invest.
Master Drilling is also looking for diversification, including East Africa, and is confident its marketing efforts should see a return by the end of 2021.
The group has also been growing its interest Australia, Russia, and central Asia, with a focus on raise boring, or drilling between two different levels of a mine without using explosives.
It said had it had executed its first such project in its first half, and is now mobilising for a second project in Russia. Opportunities in Kazakhstan and neighbouring states are also being worked on,and the group is building a pipeline of new projects in Australia.
In the short term, the improvement in commodity prices including gold, PGMs, iron ore, copper and polymetals, together with the weaker emerging market currencies, should further assist in the remainder of the year, the group said.
Master Drilling shares were unchanged at R7.50 in early afternoon trade on Tuesday, giving the group a market value of R1.44bn.
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