Managing the headwinds in the mining sector
Master Drilling results saw revenue down while profits were up as the company mostly charges in dollars, but pays costs in local currencies, and in dollar terms profits rose by 16%. It offers drilling services to mining companies and it is not surprising that utilisation of small rigs dropped from 54% to 35%. This is certainly a risk for the business but also an opportunity if it can get utilisation back up.
The issue is that mining remains under pressure globally but, on the flip side, a lot of mining is being outsourced and the industry has also become very cost aware. Master Drilling fits in perfectly as it offers cheaper, more effective outsourced mining and enjoys a great niche position as a major global player.
It reports in dollars, with just over half of revenue earned in this currency. This adds some further risk if the rand were to strengthen.
Overall the company is experiencing headwinds, but it’s managing them and it remains a leader in the space with its own technology. (Also see page 22.)