MASTER Drilling CEO Danie Pretorius is sounding uncharacteristically cheerful for once and there are two reasons for that – he has got his own back on the company’s auditors and the commodity markets are going well.
Master Drilling has just reported a 474% jump in basic earnings a share to 215.3c for the six months to end-June (previous comparable period – 37.5c) which results mainly from the write back of an impairment loss charge the auditors insisted Master Drilling had to take last year
That concerned the mobile tunnel boring machine for which there was no formal agreement in place at that time to project future cash flows.
“We had a hell of a debate over that, but the auditors forced us to take an impairment loss of US$7.8m because we did not have a committed order” Pretorius commented.
Master Drilling management’s contention was that it was just a matter of time before more contract work was obtained and that has now proved to be the case. The company has finalised a contract to get the tunnel borer back into action and that has triggered a “partial impairment reversal” of $4.7m.
Pretorius reckons that “even in the face of global uncertainty, Master Drilling is confident in its ability to perform well.”
That is a marked change from his assessment back in March when he stressed a cautious approach was needed and commented, “the instability of this world and this industry is beyond me.”
The difference, it seems, has all to do with the state of the commodity markets.
Pretorius commented, “my attitude depends on when you ask me this question. Back in January you would have got a different answer. But, if you look at what has happened to commodities over the past year – gold is up some 40%; platinum group metals are up some 43% and copper seems to be hanging in there.
“So, if you ask me today, the commodity markets are not bad and – with our order book sitting at $305.6m with a project pipeline worth $515m – I reckon we are well positioned for the next one to three years.
“We also have a huge copper/gold project in Brazil which we have not included in the pipeline because it has been moved out a year.”
Reviewing Master Drilling’s regional operations Pretorius commented that the group’s operations in South America were “experiencing significant growth and strategic development” but he described the African operations as being “in a state of flux.”
A major project with Barrick Gold in Mali had been placed on hold because of the company’s on-going confrontation with the Malian government while a diamond client in Sierra Leone had ceased operations because of low diamond prices.
But Pretorius said a new contract had been added for AngloGold Ashanti’s Obuasi mine in Ghana and commented that, overall, “the group anticipates strong, continued growth with more machines being mobilised to key mines.”
