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Capital raises full-year revenue guidance on strong first-half performance

19th August 2022

By: Darren Parker

Creamer Media Contributing Editor Online

     

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London-listed mining services company Capital has increased its full-year revenue guidance on the back of strong growth in the first half of this year.

The company reported a 39.9% year-on-year increase in revenue to $138.1-million and a 47.3% year-on-year increase in net profit after tax to $18.4-million for the six months ended June 30.

As such, revenue guidance for the full year has been raised to between $280-million and $290-million, compared with the previously stated guidance of between $270-million and $280-million.

Non-drilling revenue contributed 28% of the total revenue for the six-month period under review, compared with 17% last year, which the company said was driven by year-on-year growth in mining services and in its majority-owned analytical services subsidiary MSALabs.

MSALabs has an improved growth outlook owing to the expanded global partnership with mining technology company Chrysos that is expected to bolster its number of PhotonAssay units for improved gold analysis.

The partnership with MSALabs is aimed at deploying 21 Chrysos PhotonAssay units globally by 2025. The rollout of the initial six units by year-end is on track, in addition to four units that were already announced for installation at the Bulyanhulu gold mine, in Tanzania; the Morila gold mine, in Mali; the Kibali gold mine, in the Democratic Republic of Congo; and Val d'Or in Quebec, Canada.

A fifth unit will arrive soon at Yamoussoukro, in Côte d'Ivoire, with facility preparations well advanced. A sixth unit is due to begin installation in Timmins, Canada, by the end of the year.

MSALabs was also awarded a two-year extension to the existing three-year on site laboratory services contract with gold miner Kinross at the Tasiast mine, in Mauritania.

“MSALabs has now secured a multiyear growth trajectory driven primarily by the rollout of the revolutionary Chrysos PhotonAssay units. In addition to growth in its existing geochemistry business, this should drive annual revenues in excess of $80-million by 2025, an impressive outlook for a business that generated just $3-million at the time of the controlling interest acquisition in 2019,” Capital executive chairperson Jamie Boyton said on August 18.

Meanwhile, during the period under review, Capital started drilling operations at two additional African gold mines, Kibali and Fekola, in Mali, which Boyton said were well-positioned to operate consistently throughout the cycle.

“In terms of drilling, we have taken advantage of the strength we have seen in underlying demand to focus on contract selection and rotate our portfolio,” he said.

In addition, Capital increased operations at Tier-1 gold and nongold deposits with significant growth potential, including at Predictive Discovery's Bankan project, the Goulamina lithium project and the Kabanga nickel project.

“This focus on growing long-term contracts and partnerships with blue-chip customers remains core to the business model at Capital, irrespective of levels of activity across the market, delivering lower volatility in earnings and sustainability of the business through the cycles,” Boyton said.

The underlying demand in the market remained promising, the company reported, evidenced by the high usage rates reported for the period.

“While there will be some seasonal slowdown through the third quarter, the tender pipeline remains buoyant across drilling, mining and laboratories,” Boyton said.

Aside from raising the company’s revenue guidance for the year, Capital has also lifted its capital expenditure (capex) guidance to between $50-million and $55-million, which includes higher sustaining capex on an expanded fleet, and additional rigs to replace expedited rig replacements.

“In the strong demand environment we are currently experiencing, we have decided to further replenish our fleet to ensure both high reliability [and] safety performance which remains core to our operations,” Boyton said.

In addition to funding further growth, Capital announced a buyback at the beginning of the year along with an interim dividend to shareholders of $0.013 a share.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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