Master Drilling project orders in SA shrivel
SA makes up just 10% of Master Drilling’s list of potential orders as companies consider new projects
The persistent unsettled nature of SA’s mining environment and the hunt for fresh business has pushed Master Drilling’s exposure to its home base to a fraction of what it was.
SA makes up just 10% of Master Drilling’s list of potential orders as companies consider new projects. The country contributes 22% of group revenue, down from more than 30% a few years ago.
As SA’s leading drilling company offering services to the mining, hydro-electric and construction sectors both in SA and in key mining jurisdictions in Africa, South America and Europe, Master Drilling is a good barometer for the health of the mining industry.
In SA, the picture is bleak, particularly in the gold and platinum mines, but Master Drilling hopes a three-to five-year extension of a drilling programme it has run for six years at Kumba Iron Ore’s Kolomela mine will underpin its fortunes in SA where it started business in 1986.
The scenario in Africa, where Master Drilling makes the biggest gross profit, was no better, with exploration drilling and expenditure down by 30% to 40% from five years earlier with standoffs between governments in Tanzania and Democratic Republic of Congo (DRC) and mining companies making junior companies too nervous to invest in the highest risk part of the mineral extraction cycle, said CEO Danie Pretorius.
As Master Drilling’s big contract at Kibali, a gold mine in the DRC, nears completion, the company is sending drill rigs to India and other jurisdictions.
There are hopes that Master Drilling will secure a contract at AngloGold Ashanti’s Obuasi gold mine, which will be redeveloped as a profitable underground mine and executives are hopeful of securing the work, Pretorius said.
On its debtors’ book, the money owing which was one month past due shot up to $9m from $6m the year before, while funds two months late increased to $3.8m from $3m.
Master Drilling is testing a mobile tunnel boring machine in Italy in September, a project that has attracted the interest of Anglo American, Glencore, Vale and BHP, with 32 executives coming to visit the site. The machine excavates horizontal tunnels at speeds much faster than traditional drilling and blasting methods, bringing quicker access to ore and cash flows, something that could unlock marginal projects.
Pretorius was, however, cautious to say this could be a saviour of the SA gold mines, which are facing greater depths, falling grades, dropping productivity and soaring input costs for labour and electricity.