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South Africa’s instability still curbing mining capex – Master Drilling

Master Drilling project.

Danie Pretorius

Roelof Swanepoel

27th August 2020

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – Drilling company Master Drilling, which is operating in 23 countries, does not foresee significant fixed capital being spent in South Africa, even though the company is finding strong demand pull in other main mining jurisdictions and earned most of its half-year revenue and highest profit margin in African countries outside of South Africa.

“The instability in South Africa is still an issue. I don’t foresee a lot of fixed capital being spent in the current environment in South Africa. We do, however, believe that some of the miners will spend a bit of capital on existing operations, and hopefully we’ll pick up from the local miners on existing projects. I do not foresee new capital projects, new mines, being sunk in South Africa,” Master Drilling CEO Danie Pretorius told Mining Weekly.

However, good progress is being made to secure projects in various other geographies. New work has been secured in West Africa, Australia, Russia, Europe and North America and the company also has increasing exposure to commodities experiencing significant upswings and driving mining activity. Opportunities in the civil construction industry are also being pursued and a contract starting in mid-2021 has been secured in France. As at June 30, Master Drilling’s sales pipeline totalled $281.4-million with a committed order book of $144.6-million.

The contract in France is for a civil project. The job will start in June next year and will involve two machines raiseboring for 18 months. A huge contract is also opening up in Europe and Master Drilling will be partnering in undertaking civil jobs on the tunnel project.

AFRICA TOP REVENUE CONTRIBUTOR

Master Drilling COO operations Roelof Swanepoel said at this week’s presentation of results that Africa was the top revenue contributor for the group, up from 34% to 37% for the first half of the year with a strong margin of 28.7% that was well above the operating profit margins of the company in other regions.

“Operations in Africa were not that severely affected during the pandemic period. We were very fortunate for a number of our operations to continue during this time and that really contributed to successful project delivery on some of the key projects at very specific clients in Africa,” Swanepoel said.

Master Drilling has been awarded the Khoemacau copper and silver project in north-west Botswana.

“This is flagship project in the region and we’re really privileged to be part of that project. It’s also a long-term contract where we can utilise some big machines within the fleet,” he said.

Swanepoel expressed the belief that the setting of a world record by drilling a 1 382 m raiseboring pilot hole at Northam Platinum’s Zondereinde mine, in Limpopo, would generate a lot of value for the mining industry as a whole going forward.

RUSSIAN CONTRACT

It has a number of inquiries from Norilsk Nickel in Russia and has just been awarded one contract at this stage. The company’s Russian business partner agreement is in place and a project has been secured with equipment currently being mobilised.

Opportunities in Kazakhstan and neighbouring states are also being actively worked on. Operations in Australia have started under a contract and we are actively building a pipeline of new projects.

“Key in our business is to make sure that we drive utilisation and utilisation is a function of geographic expansion. From a business development point of view, the specific focus for us in the next short-medium term is to organically grow those areas where we’ve just entered,” Pretorius said, singling out Canada, where the company has three machines, Australia, where it has one machine, and Russia, where it has just been awarded its first contract. “The machine is on the water as we speak,” he added.

“We’ve just been awarded, earlier this year, our first real contract in Australia and we foresee that in the short-medium term we’ll be sending more machines to that part of the world. It’s a sustainable first-world country and I really believe a company of this size should be in Australia,” Pretorius said.

There is a lot of interest worldwide in the company’s mobile tunnel borer and Master Drilling is actively looking to deploy the machine on a new project after the phase 2 capital project at Eland Platinum mine was cancelled.

In the short term, there are expected to be a number of projects that take opencast mines underground and Master Drilling has aligned itself with this transition.

Edited by Creamer Media Reporter

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