Mining services company Capital Drilling has entered into agreements to provide a full range of mining services at private gold mining and development company Allied Gold's Bonikro mine, in Côte d'Ivoire.
In addition to an existing exploration drilling contract between the companies, Capital Drilling will now also provide drill and blast, load and haul, grade control and dewatering services.
The agreements represent LSE-listed Capital Drilling's first comprehensive mining services contract win, with the company now able to provide load and haul services to its clients, in addition to its existing drilling, maintenance and mineral analytic capabilities.
"Load and haul operations are a natural extension to our existing world-class drilling and maintenance capabilities. It means we can now offer clients a completely integrated mining service from initial exploration drilling right through to extraction and delivery of ore to the mill.
"We will draw on the extensive experience of our team to successfully incorporate and deliver this new service. It is also pleasing to add another long-term contract to our existing portfolio of long-term, mine-site-based projects," says Capital Drilling chairperson Jamie Boynton.
The Bonikro mine, which was previously owned and operated by Australian miner Newcrest Mining, started production in 2008. Allied expects the mine to build up to producing about 120 000 oz/y of gold over the next 12 months.
Capital Drilling recently attained management control of mining operations at Bonikro and is working closely with Allied's management to refine the mine plan. Once the mine plan has been confirmed, the parties plan to enter into a comprehensive schedule of rates contract, primarily linked to tonnes mined and moved, during the first half of 2020.
The initial term of the contract is expected to be five years.
The contract will initially require five production rigs, two of which will be supplied from Capital Drilling's existing fleet.
Further, Capital Drilling will assume management control of Bonikro's heavy mining equipment (HME) fleet, which includes 16 mining dump trucks, four mining shovels and other associated mining equipment, providing the group with a unique opportunity to enter into a contract of this nature with modest immediate capital requirements.
Capital Drilling has committed to supplementing the existing HME fleet with additional equipment at its own cost, including one excavator, three bulldozers and auxiliary equipment to ensure that the contracted material movement is achieved.
Together with the three new blast hole rigs to be acquired, near-term capital commitments are expected to reach about $8-million.
Capital Drilling has also agreed to make a $3-million strategic investment in Allied in the form of a convertible loan that will give the mining services company a 3% shareholding in the gold miner on conversion of the loan to Allied shares.
"Our strategic investment into Allied represents a transformational opportunity for Capital Drilling. It expands our revenue sources into less cyclical mine-site-based activities, while being aligned to our growth strategy of building a superior portfolio of long-term contracts.
"Allied's pipeline also presents substantial growth opportunities and we look forward to working closely with the company to deliver incremental operational and productivity improvements at the Bonikro site. We anticipate this strategic investment, together with the addition of load and haul services, will provide further long-term growth opportunities with projects in the production phase and greater revenue and earnings sustainability in the future," says Boynton.