JSE-listed Master Drilling had one of the best interim periods in its 36-year history in the six months ended June 30, with all business units having contributed positively to earnings, while healthy demand for drilling services continued globally.

CEO Danie Pretorius tells Mining Weekly that the only persistent challenge experienced in the six months ended June 30 was that of shipping cost hikes, particularly in sea freight, coupled with shipping delays.  

Master Drilling posted a 47.9% year-on-year increase in attributable profit to $13.4-million for the six months under review, compared with $9.1-million in the prior corresponding six months.

Headline earnings a share were up from $0.06 in the prior comparable period to $0.088, while net cash from operating activities increased by 19% year-on-year from $11.2-million in the prior half-year to $13.4-million in the reporting period.

The company has a committed order book of $242-millon and a revenue pipeline of $540-million.

In line with the company’s past practice, Master Drilling has decided it best to consider an appropriate dividend only at year-end.

OPERATIONS

Africa remains the company’s largest contributor to revenue and profits, with several drilling rigs deployed across key projects.

Master Drilling expects a stable revenue stream to come from Mali, but cautions that a shipping embargo is making it difficult to get equipment in and out of the country.

Projects in the Democratic Republic of Congo performed satisfactorily in the reporting period, with additional opportunities for work in the copper and cobalt mines.

In Tanzania, Master Drilling expects further growth in the next few years, with the country eventually becoming a hub for the company in East Africa.

The company’s operations in Zimbabwe and Zambia are performing up to expectation, as are those in Botswana and Sierra Leone.

The South African operations had a steady start to the year but had subsequently been impacted heavily by the wage negotiation strike at Sibanye-Stillwater’s gold mines, which started in March and was resolved in June.

Northam Platinum remains Master Drilling’s anchor client in the country, particularly with its shaft extension project under way.

Meanwhile, Master Drilling is growing its presence in Australia and Central Asia, with a focus on raise boring. The company is also looking to expand its footprint in North America, on top of existing contracts in Canada and incoming work in the US and Mexico.

The company has witnessed an uptick in mining activity in South America since the start of 2020, on the back of higher commodity prices, and there are various drilling projects and prospects in the region, including in Peru, Brazil and Chile.

DIVERSIFYING FROM DRILLING

In the company’s drive to diversify across regions, commodities, currencies and industries, it has identified three technology areas of focus to develop a growth strategy and diversity the business – shaft sinking, tunnelling and non-explosive mining.

“To spread our risk and lighten funding requirements, we entered into a venture with the Industrial Development Corporation with a view to pursuing a promising business case.

“We now have a signed letter of intent with a client to blind bore a ventilation shaft, and we are conducting investigative work on scoping and have started on the detailed design and procurement of resources for the shafts,” Pretorius explains.

The project is progressing well and, by the second half of the year, Master Drilling hopes to commission the service and start executing the project.

“We are positioning ourselves as a specialised mining contractor, as opposed to offering more general mainstream services,” Pretorius notes.

Master Drilling also secured a contract for an underground exploration decline project in South Africa. The company started tunnelling in the first quarter of the year, with production and construction having progressed well.

The company has also initiated a study on additional applications and projects.

The study is associated with technologies and various value propositions which are substantially diversified, including underground mining access and non-explosive mining methods to address the needs of clients.

Pretorius says non-explosive mining is still an uncharted area, and the company is looking to provide clients with solutions that are not bound by the requirement of explosives approvals, while simultaneously shielding personnel against hazards – by offering the flexibility to operate remotely.

“We have engaged with four different clients where we are able to develop these technologies and provide bespoke solutions that cater to their specific needs.

“By doing so, we hope to build relationships with these clients in a phased approach, thereby ensuring gradual progress and minimising large exposure or risk.

“All these projects are progressing well. These technologies all relate to providing a safer, higher productivity, cost-competitive and efficient solution,” Pretorius states.

He confirms that the company will be using a combination of in-house capacity and acquiring subsidiaries to execute these three new offerings, once the trials prove fruitful.

Pretorius adds that some of the offerings may only realise commercially over the medium term.