Boart ready to zero in on looming exploration mother lode

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Boart Longyear CEO Jeff Olsen
Mineral drilling services and products major exits deep debt hole

Surging global mineral drilling expenditure has been reflected in major industry contractor Boart Longyear’s 40% revenue lift in the 2021 year to US$921 million, which was also up 24% on its last pre-COVID year in 2019. The company, which laboured under up to $910m of debt until halfway through last year, is finally in a position to seriously invest in its drilling business and maybe lead further consolidation of a fragmented international market.

Boart, which completed a A$1.1 billion debt for equity swap that saw it slash its debt from US$855m to US$164m by the end of 2021, posted a net loss of $57m versus $99m in FY20 but increased EBITDA 81% year-on-year to $112m in FY21.

The latest year also saw an 81% yoy lift in business capital spending to $58m.

Boart’s rig count at the end of 2021 was at 654 units versus 664 at the end of 2020 (and an average 690 rigs through 2019). The company’s fleet utilisation metric registered 45-50% with an average 311 rigs turning through 2021 compared with 35-40% through 2020 (average 252 operating) and 40-42% in 2019.

It said mining and exploration companies were now not keeping up with demand based on forecast increases in certain mineral and metal consumption levels over the next decade or so, diminished stocks (reserves and resources) of key commodities, and inadequate discovery and reserve replacement rates over the past decade or more.

Boart cited S&P Global Market Intelligence data showing 2021 global mineral exploration budgets rose 35% yoy to US$11 billion, “the highest level since 2013”. Aggregate metals and mining fundraising during 2021 increased 78% over 2020 to more than $21 billion.

Boart derives 83% of its sales from gold and copper drilling activity.

“Looking to 2022, all indications point to the mining sector continuing to invest in exploration and development and we expect our business to continue to benefit and grow,” CEO Jeff Olsen said this week.

“As a result, we see opportunities for significant revenue and EBITDA expansion during 2022. Volume growth, price changes, and an accelerated GDS [Geological Data Services] roll-out are part of our operational plan to build on the successes of 2021 and deliver more strong results.”

Boart’s product division also lifted revenue 53% yoy to $307m in FY21 while the average backlog doubled in the latest year to $66m.

ASX-listed since 2007, Boart’s shares are up about 2% so far this year and the company is capitalised at circa-A$781m.

It recently re-domiciled to Canada with a view to dual-listing and positioning for better access to North America’s “broader investment pool” and “possibly even M&A”, Olsen said during last year’s company reboot.

 

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