Ausdrill Traded Lower After The Final Completion Of Barminco Acquisition

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Ausdrill Limited (ASX: ASL) entered an acquisition process with the leading global underground mining service provider of the hard rock, Barminco holdings limited. The announcement for the acquisition was made on August, 2018. Barminco operates through mining of gold and base metals in Australia, India, Africa. Barminco has its portfolio comprising of the underground mining services from mine development to production and underground diamond drilling.

Company has completed all the processes and formalities for the completion of the acquisition of the global hard rock underground mining service provider on October 31, 2018 and has come up with the official announcement on November 1, 2018 i.e. today.

With the completion of the acquisition process, Ausdrill is now placed as the second largest mining service provider company in Australia, by revenue. The company is now the leading ASX listed pure play mining service provider. This acquisition will help the company to achieve lower capital intensity and higher returns which will provide strong growth avenues for the shareholders and the employees. 

Under this acquisition deal as announced on August, ASL in exchange of its 150.7 million fully paid ordinary ex-dividend shares has acquired all the equity and equity like instruments of Barminco and $25.4 million in cash which is equivalent to an enterprise value of $697 million and equity acquisition price of $271.5 million. Barminco vendors now have 22.1% of ASL, held by range of entities.

Just before the announcement on the final acquisition of Barminco by Ausdrill, Barminco has secured four-year contract extension at Agnew gold mine by gold fields on October 19. The contract worth of approximately A$335 million contract will include underground services at Agnew and diamond drilling contract. The contract provides with an option for further extension. With the development and production activities and all associated services and diamond drilling further extended for twelve months, will be provided at Waroonga and New Holland.

Prior to the acquisition completion and after the announcement on the acquisition on August 15, 2018 significant activities in respect of major contracts across the expanded group were reported.

The group also secured $240 million contract with four-year extension at the Independence group Nova nickel-copper cobalt operation. With this contract extension company will keep its focus on varied incremental operational and productivity improvement processes associated with stope mining activities. The four-year contract with its further extension of two years will help the company in achieving and unlocking the true project value. This association together is committed to map and implement the productivity improvement through new and enhanced technologies.

ASL maintained its guidance on FY19 with 20%-30% growth in the underlying profit on standalone basis before the acquisition of Barminco and including termination of the Edikan Contract under the guidance estimates. ASL has confirmed that it is well on target to meet the FY19 analyst consensus with $98 million underlying net profit after tax for the consolidated group, including the earnings of Barminco from the date of completion and allowing for the termination of the Edikan Contract.

ASL is trading at the lower side at $1.545 (down 9.9%) after making the day high at the levels of $1.725.


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