Mitchell Services, noting the strongest demand for drilling services since 2008, is raising funds to take advantage of opportunities in its native Australian market.
The company is undertaking a fully underwritten accelerated non-renounceable entitlement offer to raise around A$10.5 million ($7.7 million) to support funding of a sizeable organic growth opportunity, it said.
The ASX-listed company expects to generate revenue of A$200-$220 million and EBITDA of A$40-44 million in its 2022 financial year to June 30, 2022.
Mitchell has a material capital investment program underway, which includes the purchase of nine Boart Longyear LF™ 160 drill rigs with a staggered delivery through until December 31, 2021, and includes an option for an additional three rigs.
Boart’s LF 160 coring rigs come with a depth capacity of 1,800 m (NRQ™ V-Wall), according to Boart (photo supplied by Boart).
Based on the anticipated size of the fleet, post-implementation of the growth strategy, the business would have the capacity to generate A$50-$60 million EBITDA and to deliver material earnings per share growth, it said.
These rigs were pre-ordered and will be delivered during a period of significant and increasing lead times for rig supply, Mitchell added.
“Other barriers to entry for mining services providers are high and growing, including challenging access to funding with limited lender appetite in the sector, a tightening labour market and a highly complex regulatory environment,” Mitchell Services said. “The company is expecting business conditions to continue improving in the near term with productivity increases (utilised rigs working more shifts), price increases due to the evolving supply and demand landscape, and improvements in general contract terms (for example, larger mobilisation and demobilisation charges, take or pay contracts and pricing flexibility).”