Scale and diversity of exposure to mineral value chains are goals driving ongoing consolidation of what was once a highly fragmented global contract mining and drilling field. There seems little doubt these drivers will be magnified over the coming decade, a period likely to see a deeper intersection of old and new energy service providers, their technologies and prowess.
For the world’s major drillers energy and water – and gold of course – are the most precious commodities. Electrification, renewables and energy security will continue to elevate the importance of copper and a host of other critical minerals. SLB, or Schlumberger, the world’s biggest oilfield services company, has lithium in its new energy portfolio. Baker Hughes CEO Lorenzo Simonelli said in January he wasn’t making a token appearance at the Riyadh Future Minerals Forum. “We see a lot of similarities between what we’ve done in oil and gas and … driving optimisation in mining and minerals,” he said. “We see it as an opportunity because we can actually bring today the technology that’s required, at a lower cost point, to make the industry more efficient. Being a large company in oil and gas [we see that] the skillset that we have there on large projects is easily transferable to the mining sector.”
While hard-rock miners and oil producers have generally stayed in their own lanes the geopolitical and economic forces pushing service providers together could prove irresistible.
The world’s leading mining contractors and mineral drillers have followed their oil and gas cousins in broadening their service bases, investing in technology and growing their international footprints over the past decade. Larger-scale M&A has sped this process, but there is a long way to go. Thiess has a nominal US$2 billion market value versus SLB’s $57 billion.
The contract mining and drilling space is ripe for consolidation with public company values treading water, large coal-focused contractors acquisitive and private equity active.
Fitch expects Indonesia’s BUMA to remain “opportunistic about acquisitions to achieve its target of at least 50% non-thermal coal revenue by 2028”.
Thiess, which acquired MACA and Pybar to increase its exposure to gold and metals, is owned 40% by Elliott Advisors and 60% by Spain’s Grupo ACS (through Hochtief and CIMIC).
Boart Longyear, the world’s largest mineral drilling contractor, is back in the hands of private equity after American Industrial Partners’ buyout. AIP has been an active buyer and seller of mining service and supply entities.
Americas-focused Stracon, controlled by UK-based Ashmore Group, has put a foot in the public market arena via a Lima Stock Exchange listing. Founding CEO Steve Dixon said the move “supports our long-term vision of creating value for all stakeholders”.
Germany’s Aton controls Redpath and Murray & Roberts. Byrnecut, a major Australian group that reported a A$200 million revenue jump to a record $2.8 billion in 2024, is still in the hands of management (30%) and Claudio Thyssen’s Thyssen Schachtbau. Its organic global expansion and investment in vertical integration over the past 20 years, without leaving any sort of debt trail, has made it an industry exemplar.
North American Construction Group, which sees Australia as a A$12 billion growth market after its C$395 million Mackellar Group acquisition, is already bridging the mining and oil divide through its long-term exposure to Canada’s oil sands industry. “We’ve operated every day in Fort McMurray since first barrels were produced in the 1970s.” Oil sands account for a quarter of its revenues. The sector reported record production levels in 2024 and NACG says, “all producers [are] planning production increases through 2026”.
Macquarie Capital is helping South Africa’s Aveng Group work out what to do with its contract mining arm.
The ongoing attractiveness of the contract mining and mineral drilling industry to investors is going to depend on its capacity to maintain improved capital discipline and boost skinny operating margins and through-cycle returns on capital. As noted above, increased scale will make key players more visible and relevant (and tradeable) at a time of unprecedented government and (rising) public interest in mining.
Despite favourable gold and copper prices the shares of publicly-traded contractors have been languishing this year and most of the past 12 months. Minnow Orbit Garant Drilling has been a rare exception. It notes its “exit from West Africa has positively impacted gross margins as the operations were largely unprofitable”.
Some companies have seen revenues shrink after their withdrawals from Russia and, more recently, Mali and other markets. But generally the sector trend has been about growth based on exposure to new markets and growth areas such as the Middle East, USA, Australia and parts of Asia.
Major Australian surface mining contractor NRW had the best year “in the group’s 30-year history”, according to CEO Jules Pemberton. In February this year its “robust” pipeline contained A$15.1 billion of projects, “including $7.5 billion of mining work, with $6.2 billion of active tenders”.
ASX-listed Macmahon’s CEO Mick Finnegan sounded even more bullish, touting a $24.8 billion tender pipeline. “We have made progress in reducing the capital intensity of the business by diversifying and expanding revenue to include more underground mining and civil infrastructure projects, which are typically less capital intensive than surface mining, and support higher ROACE [return on capital employed],” he said.
“Underground mining has grown to comprise around 26% of group revenue, compared to around 7% in FY19. Macmahon has further growth aspirations for the underground business, targeting a 50% increase in revenue over the next two to three years.”
While it, too, abandoned Mali in 2024 and Burkina Faso a year earlier, Geodrill isn’t giving up on its long-term African stronghold. Founder and CEO Dave Harper said: “The group believes secured contracts totalling US$150 million will add to revenue and profitability in West Africa over the next three-to-five years. Management’s plans for West Africa are to add more rigs for existing clients, add new clients and to consider new countries in West Africa to operate in.”
Geodrill is also “growing in Egypt [and] in Q4 2024 … incorporated a company in the Kingdom of Saudi Arabia in anticipation of tendering on drilling contracts in 2025”.
Diverse major Perenti sees markets such as North America and its Australian home market as counterweights to its large West African exposure. The company also reported record revenue in 2024 and expects that to rise again this year. Underground and gold-plated are two good descriptors for the future direction of its revenues and earnings. Gold (A$3.4 billion) and copper ($0.9b) dominated its $4.7b work in hand at the end of 2024, which was also mainly underground ($3b). It said underground work made up a whopping $14.8b of its $17b pipeline.
Australia ($6.6b) and North America ($4.1b) are where most of that work sits.
“Subsequent to the end of the [2024] reporting period the award of [Perenti unit] Barminco’s first USA development contract at the Goldrush project for Nevada Gold Mines was an exciting win for the team,” CEO Mark Norwell said.
“Nevada is the leading US state in gold production and Nevada Gold Mines is a joint venture between Barrick Gold Corporation (61.5%) and Newmont Corporation (38.5%). The Goldrush project is a new underground development within the largest gold-producing complex in the world. This win is an excellent achievement by our Barminco North America team and presents a tangible opportunity to demonstrate the industry leading rapid development methodology in a new jurisdiction.”
