Basil Read pinpoints Aussie firm

Nicole Rego | Tue, 08 Dec 2009 15:55
[miningmx.com] -- BASIL Read is considering further extending its mining engineering footprint by considering an Australian business with contracts in west Africa.

The R1.24bn road construction firm is due to conclude a merger with TWP Holdings, a JSE-listed mining engineering firm, later this month.

In terms of that deal, Basil Read will distribute 31.16 shares and R119.96 in cash for each 100 TWP Holdings shares held. TWP Holdings will cease to trade on December 11.

However, Basil Read CEO Marius Heyns said on Tuesday that it was circling an mining engineer in Australia with significant west Africa business.

The push into west Africa and merger with TWP Holdings represents a major push by Basil Read to build market share in the world's mining sector.

Nigel Townshend, CEO of TWP Holding, who will take a seat on Basil Read's board, said many mining clients required both mining process engineering skills and road, harbour and other infrastructural work.

"In Africa, we're seeing that mining projects don't just involve mining alone," said Townshend. "They need power, roads and infrastructure without which a lot of those mining projects wouldn't get off the ground. It's a smart way of looking after our costs," he said.

Having felt the commodity downturn badly, and with Basil Read now as the holding company, the risk profile would be changed. "The two organisations are counter-cyclical," said Townsend.

Geographical diversity

Commenting on the push into west Africa, Townshend, said the combined company was interested into "... going further north into Africa, and west." "We're looking at an Australian acquisition that already has a position in west Africa."

The combined group also had plans to further build its geographical diversification. "We're looking beyond Africa. We're opening an office in Peru, Lima in January, and in conjunction with Basil Read, we're opening a branch office in Abu Dhabi and Libya," said Townsend.

Africa could not be ignored as there was a huge potential amount of projects to be won, said Townshend.

Both companies - TWP and Basil Read - had been in Africa before. "Basil Read has done projects in Tanzania, the Democratic Republic of Congo (DRC), Zambia, Botswana, Namibia, Nigeria and Uganda," said Townshend.

Merger benefits Although Basil Read and TWP's businesses would be merged, they would be run separately with TWP retaining its name for trading purposes.

One objective of the merger was to create a financial critical mass for Basil Read placing it in a stronger position for acquisitions.

In Africa, we're seeing that mining projects don't just involve mining alone

Including TWP, Basil Read's revenue was expected to climb above R7bn. "This year we made approximately R4.5bn turnover on our own, which we see growing to R5.5bn or R6bn next year, and we're hoping TWP will bring in R1.2bn," said Heyns.

TWP has a R100bn project pipeline while Basil Read is managing a R8bn, 18-month order book with the possibility of pricing in a pipeline of R40bn to R50bn additional work.

"I can tell you we have even been declining some work because we don't have enough estimators to keep up with the amount of projects out there," said Heyns.