Loss of key contract will hit Master Drilling earnings
Company plans to redeploy machines from the Kumba mine as quickly as possible after termination of the Kolomela deal
The loss of the Kolomela iron ore mine drilling contract will cost Master Drilling up to 15% of its revenue, executives said on Tuesday.
Anglo American subsidiary and JSE-listed Kumba Iron Ore terminated Master Drillings’ contract at Kolomela unexpectedly a few weeks ago despite the company complying on safety, BEE, local procurement and technology aspects, CEO Danie Pretorius said.
“It’s significant but it’s not the end of the world,” Pretorius said in an interview after presenting the Fochville-based company’s interim results to end-June.
Master Drilling CEO Danie Pretorius spoke to Business Day TV about the group's expansion plans and the firm's interim results.
“The sad part was we were doing an excellent job, and safely, getting a pat on the back, and then getting the boot. That’s tough to take on the chin.
“I like to think we’d be back in a year or two,” he said.
The financial consequences will be felt, with the loss of the contract accounting for 7%-15% of group revenue, CFO André van Deventer said.
Revenue for the six months to end-June was $70m, about half the nearly $140m for the full year in 2018.
Anglo has awarded drilling contracts at its SA coal division to Master Drilling, which retains a drilling contract at Kumba’s Sishen mine dumps, some of which will be processed to extract iron ore.
Master Drilling has a fleet of 150 raise-bore drills, the world’s largest.
There is a 62% utilisation rate of this set of machines, but with a contract to develop a raise-bored shaft at Northam’s Zondereinde mine and another at AngloGold Ashanti’s Obuasi mine in Ghana, Van Deventer said there are hopes these contracts will be expanded into other work at the two mines, giving four or five years’ drilling work for big drills.
One of the most closely watched projects in Master Drilling is its deployment of a smallish mobile tunnel-boring machine, which is tracked and comprises segments to drill rock, power the drill, and pass rock chippings backwards.
The machine is forecast to drill up to 200m a month, four times the conventional rate in SA.
Two other companies — a colliery in SA and another in a neighbouring country — want the technology on their mines, Pretorius said, adding that Master Drilling will not sign contracts for these operations until the machine has proved itself in test work at Northam Platinum’s Eland mine.