Tag Archives: Mitchell Services

Mitchell Services bolsters drilling fleet as it senses market opportunities

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).”

Mitchell Services ups pureplay drilling ante with Deepcore Drilling acquisition

Mitchell Services has agreed to acquire Deepcore Drilling for A$32 million ($22 million) in cash and shares, turning the ASX-listed company into, it says, one of the largest and most diversified pureplay drilling services companies in Australia.

The acquisition is expected to be 38.5% earnings per share accretive based on pro-forma financials and the agreed A$15 million cash and A$17 million shares deal.

Deepcore is a privately-owned company providing services to the mining and infrastructure sectors. It specialises in highly technical underground mobile drilling, including specialty acoustic drilling that Mitchell does not currently provide and deep hole directional diamond core drilling, the company said.

Mitchell has increasingly been expanding into new segments of the drilling market in order to capture market share and, in July, entered the drill and blast production drilling market with the award of a new contract at Adaman Resources’ Kirklalocka gold project in Western Australia.

Mitchell said Deepcore, which also carries out surface drilling, is primarily gold and copper focused, balancing the company’s existing commodity mix. It has 32 drill rigs and is involved with work primarily in Victoria and New South Wales, where Mitchell already has a small presence.

Deepcore is majority owned by founder Scott Tumbridge, who will be invited to join the Mitchell board as an Executive Director after the transaction is completed; expected to be by end-2019. Deepcore had 2019 financial revenues of A$46.5 million and EBITDA of $6.3 million.

Mitchell Services enters new drill and blast territory at Kirkalocka

Australia-listed Mitchell Services has entered the drill and blast production drilling market with the award of a new contract at Adaman Resources’ Kirklalocka gold project in Western Australia.

The circa-A$33 million ($23 million), five-year contract, with mining services provider SMS Innovative Mining Pty, will see Mitchell initially deploy two rigs to service the drill and blast contract with a third rig to be provided in late 2019.

Mitchell Services CEO, Andrew Elf, said: “The multi-year, multi-rig contract award further strengthens the quality of our revenue base and will result in the company now playing a direct role in the production of the mine. This is a service offering that we are strategically focused on growing and the award of this contract provides an ideal platform to do so. It also continues to expand our footprint within Western Australia adding both service and geographic diversification.”

Mitchell Group Holdings, an entity associated with Mitchell Services Executive Chairman, Nathan Mitchell, owns a 33% stake in the Kirklalocka gold project, with SMS Mining Services owning another 33%.

Back in October, SMS Mining Services secured preferred contractor status for Kirkalocka, with the four-year contract consisting of open-pit mining services including load and haul, drill and blast, and mine development. SMS said at the time drilling was underway to extend the mine life beyond the current six years.

Since then, MACA has won a contract to install a new SAG mill and refurbish an existing mineral processing plant at Kirkalocka.

Mitchell’s UIS drilling contract extended by Anglo American

Mitchell Services has won a contract extension from Anglo American that will see it continue underground coal drilling and gas drainage services at the miner’s Grosvenor and Moranbah North coal mines, in Queensland, Australia.

The variation to the ASX-listed company’s Underground In-Seam (UIS) drilling contract with Anglo American will see Mitchell provide up to six UIS rigs and provide specialist underground services at the sites.

It also resulted in the extension of the contract expiry date to December 31, 2021 with a further two-year extension option available.

Mitchell said: “Whilst the company anticipates a significant long term revenue and EBITDA benefit as a result of this extension and scope increase, the company notes that, given the timing of the variation, the expected start date of the additional rigs and the anticipated level of associated ramp up, the variation is not likely to have a material impact on the recently provided financial year 2019 revenue and EBITDA guidance numbers of A$110-$120 million ($77-84 million) and A$21-$23 million, respectively.”

Mitchell to keep drilling south at BHP’s Olympic Dam copper-gold-uranium mine

Mitchell Services has been awarded a contract extension at BHP’s Olympic Dam copper-gold-uranium mine in South Australia, which means it will continue with its underground drilling work until April 2020.

Under the varied terms of the deal, which comes on the back of a sustained period of strong drilling performance, the company will provide up to eight underground rigs and will continue to play “an integral part in BHP’s plans to expand into the high-grade southern area of the mine as part of a broader growth strategy at Olympic Dam”, it said.

Mitchell previously announced a material contract extension and scope increase in relation to its underground drilling contract back on September 5. This highlighted that the company would provide up to seven underground rigs and that the contract would be extended to April 2019.

In its latest results, BHP reported that underground operations continue to progress into the Southern Mine Area of Olympic Dam, with record development kilometres achieved and the mine’s third decline becoming fully operational in the December quarter of 2018.