Australian mineral drilling technology and consumables company Imdex is on track to blitz its previous record annual sales and earnings results of a decade ago – at the height of mining’s China-fuelled investment surge – after posting a 55% year-on-year rise in EBITDA to A$51.5 million on 35% higher revenues of $167.8m for the first half of FY22.
NPAT for the period came in at $24.4m, up 81% yoy.
Imdex reported NPAT of $45.8m and EBITDA of $75.2m on revenue of nearly $279m back in FY2012 when global mineral exploration expenditure budgets passed US$20.5 billion. S&P Global says calendar 2022 budgets might top $12.5 billion after strong exploration equity-capital raising in the sector in 2021.
A significantly reshaped Imdex is now deriving more than half its revenues and profits from mineral drilling sensing and software technologies which are expected to grow in importance as explorers and producers seek better returns from costly drilling.
Imdex was building a technology arm and brand 10 years ago, seeking to gain leverage from a vast international drilling fluid and chemical supply footprint as conversations around technology adoption in mining were changing. Imdex CEO Paul House said on the company’s latest results webcast that “global reach to some 70% of global mine sites [was still] unmatched”.
Nevertheless, reach and access can be two separate things today as ongoing COVID-19 restrictions continue to hamper the mobility of people and physical access to sites. This has slowed new product testing for Imdex as it has a number of mining equipment and tech companies. While many drilling contractors are expanding their fleets and pipelines, tight labour markets are also presenting manning constraints and supply chain disruptions are delaying equipment and parts deliveries.
The flipside for Imdex, and again some other mining tech companies, is that responses to the pandemic have also fanned market tailwinds driving increased demand for secure, remote exploration and production data management technologies and services.
House has told InvestMETS demand for technologies and software that enabled remote access to data was rising. He said the pace of a significant shift in the industry towards digitisation of the mining value chain, “increasingly now extending into the use of data science to arm decision makers”, was only likely to increase.
“We believe that COVID and its ever-changing requirements will be with us for the next two years and we are setting our business up accordingly,” House said on the half-year results call.
“The most significant challenges remain supply chain bottlenecks for the industry at large together with labour availability and labour mobility.”
Imdex is maintaining a prolific rate of research and development investment, by mining equipment, technology and services (METS) sector standards, after outlaying $19.1m in FY21. House said the company also had “a number of initiatives underway to attract the additional talent we need”.
Imdex grew its workforce by more than 10% (to 558 people globally) in the first six months of FY22.
House said constraints on companies deploying exploration funds on actual drilling at rates required to accelerate discovery levels, and even brownfield orebody definition rates, to meet forecast demand for the commodities aligned with decarbonisation and energy transition goals, could help drive a “longer industry upcycle”.
S&P and other research suggested while overall exploration and orebody definition expenditure was growing strongly, “total metres drilled is only 20-25% [of the spend] depending on the region”.
“This disparity can be attributed to increased spend on non-drilling activities such as targeting, permitting, increased health and safety compliance for all drilling operations, the challenges of drilling at depth, and the gradual impact of increased input costs.
“Demand for technologies that originate and enrich orebody data is increasing,” House said.
Imdex has defied a broader technology-stock selldown that has dragged the few genuine mining technology stocks in Australia, Canada and the US lower this year.
The company’s share price is narrowly in the black this year, capitalising Imdex at A$1.16 billion.
