Africa-focused mining services company Capital Drilling on April 16 reported a 20.4% year-on-year and a 5.9% quarter-on-quarter increase in revenue to $32.5-million for the first quarter of this year.
The company also reported that it had, thus far, not been materially impacted on by the Covid-19 pandemic, with mining and production activity continuing uninterrupted at all the group's operations and with no recorded cases of the virus on these sites, to date.
The West African region contributed 32% to group revenues in the first quarter, representing a 61% increase compared with the first quarter of 2019.
The gold price plays a big role in Capital Drilling’s revenue pool, with as much as 90% of its revenue being derived from this sector.
Capital Drilling executive chairperson Jamie Boyton notes that Capital Drilling’s long-term contracts at operating mine sites provide revenue stability during this time, with operations having continued uninterrupted to this point.
“Despite the current levels of uncertainty, we remain well positioned to pursue new opportunities and the rising gold price continues to underpin the strength of Capital Drilling's operations,” he adds.
Based on these results, Capital Drilling declared a second interim dividend of $0.7c apiece for the 2019 financial year, thereby bringing the final dividend payout to $1.4c piece for financial year 2019.
Mine site services remain the core of the revenue streams, contributing 93% of group revenue. Meanwhile, there is also strong growth in non-drilling revenue contribution, up to 12% of total revenue, compared with the first quarter of 2019.
This was driven by MSALABS, Well Force and Capital Mining Services.
Boyton says revenue from the company’s non-drilling businesses has grown strongly over the last 12 months, as it further strengthened its services portfolio. “Our strong safety performance continued with a number of lost time injury (LTI) milestones across our operations.”
The group's supply chain movement is primarily land- and sea-based, thereby remaining mostly unaffected as the majority of restrictions have been attributed to air-freight movements.
However, Capital Drilling noted that greenfield exploration activity is being temporarily put on hold as junior developers have difficulty in accessing capital markets, with exploration programmes being deferred pending stabilisation of the current situation.
In terms of any possible Covid-19 impact on operations, Capital Drilling noted that the company and its operations have been largely unaffected during the quarter. However, as it enters the second quarter, the company states that international travel restrictions will start impacting on expatriate (expats) employee roster rotations with those on site working extended rosters. In response to extended rosters for both expats and nationals, fatigue management policies have been implemented on-site in the form of shortened weekly rosters which will marginally reduce on-site activity in the current quarter.
In terms of operations, Capital Drilling was awarded a two-year extension of the surface exploration and delineation drilling contract at Hummingbird's Yanfolila gold mine in Mali, thereby extending it to March 2022.
The company also commenced new contracts and contract extensions in Tanzania, including Barrick Gold’s Bulyanhulu mine, where the group commenced drilling in February. This is Capital Drilling's third contract with Barrick, following commencement of its recent contract in Saudi Arabia, together with an ongoing long-term contract at Barrick’s North Mara mine.
In terms of the North Mara mine, a long-term production drilling contract was extended for this operation, with additional scope for underground drilling services.
Capital Drilling also received an extension of underground drilling services at AngloGold Ashanti’s Geita gold mine, to December.
In addition, MSALABS commenced a six-month contract with Endeavour Mining, in Côte d'Ivoire, in January and was awarded a further contract with Tudor Gold, due to commence in the second quarter of the year.
Capital Drilling also achieved 12 years of being LTI-free for its Tanzanian Mwanza facility, four years LTI-free at the North Mara mine, three years LTI-free at the Sukari gold mine, in Egypt, and three years LTI-free at the Tanzanian Geita mine.
The company also reported an increase in fleet utilisation, to 57%, thereby reflecting the group's ongoing success in securing contracts with new and existing clients and despite increased average fleet to 98 rigs.
In addition, four new rigs were commissioned during the first quarter to support new long-term contracts.