MASTER DRILLING ON A HIGH
Specialised mining outfit plans R4bn market capitalisation by next year
SPECIALISED mining drilling service group Master Drilling plans to have a market capitalisation of R4 billion next year and a footprint in North America.
The company has been buoyed by the maiden dividend it declared for the year to March after first listing on the JSE in 2012.
Hennie van der Merwe, chairperson of Master Drilling, said in the company’s annual report that geographic and currency diversification would enable it to progress towards achieving its goals of creating further value.
“Master Drilling is well positioned to take advantage not only of a cyclical upswing in the mining sector but also of our committed strategic move to expand our service/product offering into other industries as well as into additional geographical areas,” Van der Merwe said.
The company, which was established in 1986, provides drilling services to blue-chip, major and mid-tier companies in the mining, civil engineering and hydroelectric energy sectors, across a number of commodities.
Two sub groups
The Gauteng-headquartered group comprises two main operational sub groups – South African operations and international.
In the year to March, the company received 18 percent of its revenue from its rest of Africa operations, while it got 24 percent in its home market and a whopping 57 percent in its Latin America operations.
The company reported that its revenue for the year to March decreased 1.5 percent to $118 million, while its dollar earnings a share increased by 5.9 percent to 14.3 cents, while its rand-denominated earnings a share went up 22 percent to 210c.
The group reported a 5.7 percent increase in profits to $22.3m in the period and declared a maiden dividend of 30c a share. It has a market capitalisation of about R2.5bn. Earlier this year it said that its horizontal raise boring (HRB) technology was ready for international roll-out after the successful pilot test at the Cullinan Mine.
HRB can replace conventional drill-and-blast mining and promises to increase mining productivity thanks to its continuous process of rock boring, and in addition, offers significant safety benefits. It was officially unveiled at the Investing in Africa Mining Indaba 2017, held in Cape Town.
Danie Pretorius, chief executive of Master Drilling, said that viewing the company’s revenue in terms of diversification enabled it to focus on the opportunities it sees globally for its technology. “In addition, our diversity in geographies gives us the flexibility of currency diversification, which provides a natural hedge against currency volatility, while at the same time, with 50 percent of our earnings US dollar-based, we can take advantage of the relative value of other currencies,” he said.
Following initial delays in commissioning the blind shaft boring system contract in the US, the company had noted significant progress and enquiries from other North American operators were encouraging. The company said at the end of December its committed order book amounted to $196m (R2.55bn), while its pipeline amounted to $300m.
Pretorius said a key focus for the group would be to change its dependency on mining activities in providing a bulk of its income. “During the year 94 percent of our work was in the mining sector. While we will continue to market ourselves in this sector – mainly to the copper, polymetallic and gold/zinc mines – we have long been aware that our dependence on a dominant single sector is a risk for our business.”
Master Drilling at Cullinan Diamond Mine. Dependence on a dominant single sector is a risk for the company’s business.