Master Drilling buoyant on high risk-reward Africa prospects

MASTER Drilling cracked it in the year to end-December and…

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MASTER Drilling cracked it in the year to end-December and normally cautious and conservative CEO Danie Pretorius is actually sounding a bit more optimistic about what’s coming next despite on-going “global uncertainty”.

One of the reasons for that is the likelihood of further new business in Africa – which Pretorius views as a “stronghold” for Master Drilling’s technical support operations – as the mining majors look to increase their exposure to countries like Zambia, the Democratic Republic of Congo, and Angola.

“We’ve been involved in Africa for nearly 40 years. We realise operating there comes with high risk but with high risk comes high return. We are OK with Africa and the miners are being forced to invest more in Africa given the limited resources out there.

“You have major groups like BHP, Rio Tinto and other large mining companies moving into areas which five to ten years ago were no-go areas for them. We follow the miners. Angola is one of the candidates on the radar for us.”

There were a couple of hiccups during the past financial year caused by operational issues in South America and the unexpected high rates of inflation in some jurisdictions but Master Drilling still managed to report record revenues of $242.8m although earnings in US dollars dipped by 4.2% to 13.6c a share.

That was more than compensated for in rand terms by the weakness of the South African currency with Master Drilling reporting rand earnings 8% up at 251c a share. The annual dividend was increased to 52.5c (2022 financial year: 47.5c).

But Pretorius is still far from bullish on prospects pointing out that the mining business remains volatile.

“In the past two years we saw the zinc price plummet and then the platinum group metal prices nose dive. So nothing has really changed but, that said, to be in the game the strategy is still to invest in the mechanical cutting division which I believe is the future”.

The reason is that rolling out some of Master Drilling’s projects in mechanical cutting could be key for the mining industry in reducing the time taken to get new mines into production and so bring forward the receipt of first cash flows.

He said the key commodities that Master Drilling wanted to keep its operations close to were copper, gold and iron ore but stressed his group was still committed to support the platinum miners in South Africa and would “ride out” the current downturn in the business.

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