Northam cancels Master Drilling’s innovative tunnel borer
Mining companies reel under the Covid-19 pandemic and opt to hold on to cash
One of two projects that will determine the future of Master Drilling has been derailed by Covid-19, with mining group Northam Platinum cancelling work on the innovative mobile tunnel boring machine that promises to revolutionise mining.
The tunnel borer allows mining companies to access ore bodies far more quickly than conventional hand-held drills and blasting, changing the economics of mining projects by bringing forward revenue and making previously unviable deposits a financially realistic proposition.
Master Drilling, which operates in 11 countries, is one of the world’s major operators of large drilling machines for the mining industry. It is based in Fochville, about 70km west of Johannesburg.
Northam was the first company to agree to an on-site trial of the machine designed and made in Italy under contract by Master Drilling. The two JSE-listed companies agreed to share the risk of the new technology, with the key benefit for Master Drilling that it would be able to prove to other potential clients that the machine operates to specification in a working mining environment.
However, Master Drilling received bad news shortly after its year-end presentation on March 24. “Just after our presentation we got a phone call from Northam informing us that the contract was cancelled. That was a really big disappointment. We need to bring the machine out from underground over the next three to four months. We can’t believe it,” Master Drilling CEO Danie Pretorius told Business Day.
“Northam is clamping down big time on their capex.”
Master Drilling is reopening discussions with large international mining companies who have expressed an interest in the machine to see if it could place it in one of their projects, Pretorius said.
The tunnel borer had met certain criteria in tough operating conditions and was to dig a 1.5km long development tunnel at Eland, a mine Northam bought for R175m from diversified miner and commodities trader Glencore. The mothballed mine was being slowly brought back into production at a cost of R2.5bn, reaching steady state output of 150,000oz of platinum, palladium, rhodium and gold during 2027.
Northam confirmed that it had cancelled the tunnel boring machine, which was sinking a decline shaft at its recently reopened Eland mine as global demand for platinum group metals slowed, prices fell and the SA government forced the industry into a broad 21-day shutdown.
“Cash preservation is critical for us in these uncertain times,” said Northam spokesperson Leon van Schalkwyk, adding that there is no spare cash for research and development work such as the newly designed tunnel borer. Northam has warned its customers that it may not be able to meet contracted supplies of metal because of the 21-day lockdown in SA.
“There’s no point at this stage for high-speed development at Eland, so we’ve asked Master Drilling to withdraw the tunnel borer,” he said.
Northam management just a few weeks ago was talking excitedly about the tunnel borer, suggesting it could be deployed to its mechanised Booysendal mines to quickly excavate access tunnels to reef in the southern part of the mine.
The second innovative machine is one that can sink shafts in hard rock from the surface, unlike raise bore drills that need underground access to attach the reamer. Success in this venture would open a host of new business opportunities. But with the slowdown in global mining because of the economic consequences of the Covid-19 pandemic, uptake on this technology could be delayed.
Master Drilling has a four-phase approach to realising the shaft sinking machine, having completed the first phase near its Fochville headquarters in Gauteng. A 10m deep shaft was successfully sunk at 1m per hour in rock as hard as mild steel and the chippings efficiently collected and removed.
Master Drilling is in a ring-fenced joint venture with SA’s Industrial Development Corporation to fund and bring the machine to market.