West Africa-focused Capital continues to build regional platform

14th January 2021 By: Simone Liedtke - Writer

West Africa remains a growth area for LSE-listed Capital, which continues to build its platform in the region, with new rigs arriving during the first quarter of the year, as well as the long-term contract secured with Firefinch in Mali and an expansion of operations into Guinea.

As the new year has started with strong trading conditions and a number of other tendering opportunities in progress, executive chairperson Jamie Boyton says the company will continue executing the Sukari contract, in Egypt, and further build the company’s mining services business.

At fellow London-listed Centamin's Sukari gold mine, in Egypt, Capital secured a 120-million-tonne waste stripping contract, including the provision of load, haul and ancillary services and an expansion and extension of the existing drilling contract.

Together, the contracts are expected to deliver between $235-million and $260-million of incremental revenues over a four-year term, making it the company's largest award of new business since its inception.

The contract is a step-change in the scale of the business and its continued evolution into a full-service mining contractor and will start in the first quarter of this year. The contract is expected to be earnings accretive by the end of the year.

Additionally, Capital completed a successful £30-million (about $40-million) equity fundraising, the gross proceeds of which will be used to support the Sukari contracts together with key debt financing facilities, several of which have also been completed.

The funds have facilitated further payments on major capital equipment items required for the contracts, including 17 CAT 785 dump trucks, seven blast hole drill rigs, three excavators and all major ancillary support equipment including dozers, graders and water trucks.

Negotiations for further debt financing facilities are also under way and are progressing well, the company confirmed on January 14.

“Capital has had an outstanding year, especially given the unprecedented challenges presented by the global Covid-19 pandemic,” Boynton commented, noting that the recent contract wins at Sukari are “an exciting transformational opportunity” which will deliver significant revenue diversification and consolidating Capital as one of the leading mining services operators in Africa.

“We have made excellent progress through the successful completion of the equity fundraise and finalising further debt financing facilities, with payments now significantly progressed on all major capital equipment purchases required to support the contract.”

Meanwhile, in terms of financial highlights for the full-year period ended December 31, Capital’s revenue increased by 18% to $135-million in line with guidance.

The company also finalised debt documentation for two original-equipment manufacturing facilities ($8.5-million from Sandvik and $2.6-million from Epiroc) and a $10-million asset-backed facility from Macquarie, with a total of $12.6-million drawn down as at the end of the period.

The year-end net cash balance was $5-million as a result, and comprises cash of $35.7-million and drawn debt of $30.7-million.

In terms of operations, Capital’s rig use in the fourth quarter of the year stood at 59%, stable against the same period the year before, with an average fleet of 95 rigs. The company closed the year with 94 rigs, which includes the decommissioning of four rigs during the quarter as the company continues to focus on active fleet management “to maintain industry leading equipment standards”.

This year, Capital also started drilling on multiple short-term exploration contracts including at Altus Strategies' Diba project, in Mali; Arrow Minerals' assets, in Burkina Faso; and Awale Resources' assets, in Côte d'Ivoire.

The group's portfolio of ten long-term mine-site-based contracts continue to deliver solid performances, including: Tasiast (Kinross), in Mauritania; Syama (Resolute Mining), Morila (Firefinch) and Yanfolila (Hummingbird Resources), in Mali; Bonikro (Allied Gold), in Côte d'Ivoire; Sukari, in Egypt; North Mara (Barrick Gold), Bulyanhulu (Barrick) and Geita (AngloGold Ashanti) in Tanzania; and Jabal Sayid (Barrick) in Saudi Arabia.

Guidance for this year is expected to  be announced on March 18, alongside publication of the group's full-year results, together with any dividend declarations.