Profit up by 43.4%

Johannesburg, South Africa. 31 March 2014. Master Drilling Group Limited (Master Drilling; JSE: MDI), a specialised drilling services provider, which listed on the JSE Limited (JSE) on 20 December 2012, has announced a 43.4% increase in profit to R152.3 million (US$15.8 million) and a 28.4% increase in headline earnings per share (HEPS) to 99.2 South African cents (10.3 US cents) for the year ended 31 December 2013.

As at 31 December 2013, the Group has committed orders totalling more than R2.3 billion (U$225 million), which are mainly production-oriented as the minerals industry’s capital and exploration projects remain relatively subdued, reflecting the current phase of the commodities cycle.

The improvement in profitability and revenue, which rose from R869 million (US$99.7 million) in 2012 to R1.15 billion (US$119.6 million) in 2013, comes from sustained organic growth in Latin America and the contribution of new African contracts, both coupled with the Group’s focus on cost-optimisation strategies.

The Group’s jurisdictions remain dominated by Latin America and Africa – with increased mining activities in Africa in recent years. In Latin America, particularly in Guatemala, the Group established new projects during 2013. Operations in Brazil have stabilised after operating below par for the past two years. Operations in Africa have seen Mali and the Democratic Republic of the Congo being added to the Group’s portfolio.

“We benefit directly from training and our ‘one-stop shop/full automation’ concept,” said CEO Danie Pretorius. “It remains critical that our costs and productivity fit within the budgetary constraints and the cost curves of our clients. Increasing our margins is, therefore, dependent on improving our own efficiencies.”

Master Drilling has committed capital expenditure of approximately R210 million (US$20 million) to expand its current equipment fleet and to further progress its automation programme. This includes the addition of 14 new machines, thereby supporting organic growth prospects and the ability to service new markets.

Drilling services have been expanded with the inclusion of horizontal raiseboring. This service is an alternative to tunnel boring or conventional development using blasting cycles. Horizontal raiseboring not only creates a safe working environment but also allows for quicker development than conventional methods afford.

Master Drilling’s one-stop shop partnership with Kumba Iron Ore Ltd at the Kolomela mine is now in its second year. The five-year drilling contract includes percussion and exploration drilling as well as grade control. In recent months, the Group established a pilot project at Kolomela with the “OREalyser” whereby grade can be measured while drilling to enhance mine-planning processes. “We believe that sufficient knowledge and skills have been developed to date to extend this service to the rest of the South African market and abroad,” said Pretorius.

“The year ahead will be dominated by increasing safety awareness, specialised training, improving operating efficiencies and implementing systems globally to enhance operations management,” he added. “We will continue to be conservative and fiscally prudent but we will also be innovative and opportunistic where circumstances warrant this approach.”

Queries:

Edith Leeson
Russell and Associates
+27 11 880 3924
edith@rair.co.za