Mitchell Services Extends The BHP Underground Drilling Contract To April 2020

Mitchell Services extends the BHP underground drilling contract to April 2020 Exploration and drilling services provider Mitchell Services Limited (ASX: MSV) further extends its underground drilling contract with BHP Olympic Dam Corporation for 12 months. In the announcement dated 25 March 2019, Mitchell Services Limited announced the agreed contract variation in relation to the underground drilling contract with BHP Olympic Dam Corporation, at the Olympic Dam mine in South Australia. This comes in line with the previous material contract extension which highlighted the extension of the contract to April 2019 for the provision of up to seven underground rigs. Now, at this time, Mitchell has agreed with BHP Olympic to extend the contract by a further twelve months to April 2020. Under the varied terms, the company will provide up to eight underground rigs and will continue to play an integral part in BHP’s plans to expand into the high-grade southern area of the mine as part of a broader growth strategy at Olympic Dam. The increase in the scope of work and the contract tenure underscores the favourable outcome of the company’s services that includes a sustained period of strong drilling performance. Further, Mitchell has recently declared a special dividend of 0.1 cents per share, fully franked, as part of the company’s ongoing capital management strategy. The board has come to the decision of declaring this special dividend after the company achieved a strong operational performance in the existing fiscal year and is expected to generate EBITDA within the range of $21 million and $23 million for the year ended 30 June 2019. The shareholders present on the company’s registry as on the record date of 28 June 2019 will be entitled to receive the special dividend of 0.1 cents per share on 30 July 2019. The ex-dividend date has been set to 27 June 2019. Headquartered in Queensland, Mitchell Services Limited provides exploration and drilling solutions at all stages of the mining lifecycle to energy, mining and resources sector companies, primarily in Australia. The Group generates revenue from a diversified stream of operations including the mix between the surface and underground drilling and the mix between different commodity types like Coal, Gold, Copper, Lead, Zinc, Silver and others. During the 1HFY19, the Group reported 431% improvement in earnings before interest, depreciation and amortisation (EBITDA) to $14.2 million compared to the previous corresponding period’s EBITDA of $2.7 million. This primarily reflects the significant acceleration in projects with significant project wins in 1H19 in addition to increases in utilisation, productivity and pricing. 1H19 Revenue from underground drilling segment has risen by 127% compared to 1H18 and now accounts for 38% of Mitchell’s total revenue. The net profit after tax of the company reached $11.7 million in 1HFY19, representing a $12.9 million improvement compared to the 1H18 loss of $1.2 million. However, the Group did not declare or determine any interim dividend for the half year ended 31 December 2018. In today’s trading session, MSV stock price declined by 3.448% to last trade at $0.056 on 25 March 2019. The stock closed at a price to earnings multiple of 9.350 x with a market capitalisation of $100.83 million. Over the past 12 months, the stock has moved up by 48.72% including the positive momentum of 11.54% recorded over the past month.

Exploration and drilling services provider Mitchell Services Limited (ASX: MSV) further extends its underground drilling contract with BHP Olympic Dam Corporation for 12 months.

In the announcement dated 25 March 2019, Mitchell Services Limited announced the agreed contract variation in relation to the underground drilling contract with BHP Olympic Dam Corporation, at the Olympic Dam mine in South Australia. This comes in line with the previous material contract extension which highlighted the extension of the contract to April 2019 for the provision of up to seven underground rigs. 

Now, at this time, Mitchell has agreed with BHP Olympic to extend the contract by a further twelve months to April 2020. Under the varied terms, the company will provide up to eight underground rigs and will continue to play an integral part in BHP’s plans to expand into the high-grade southern area of the mine as part of a broader growth strategy at Olympic Dam.

The increase in the scope of work and the contract tenure underscores the favourable outcome of the company’s services that includes a sustained period of strong drilling performance.

Further, Mitchell has recently declared a special dividend of 0.1 cents per share, fully franked, as part of the company’s ongoing capital management strategy. The board has come to the decision of declaring this special dividend after the company achieved a strong operational performance in the existing fiscal year and is expected to generate EBITDA within the range of $21 million and $23 million for the year ended 30 June 2019.

The shareholders present on the company’s registry as on the record date of 28 June 2019 will be entitled to receive the special dividend of 0.1 cents per share on 30 July 2019. The ex-dividend date has been set to 27 June 2019.

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Headquartered in Queensland, Mitchell Services Limited provides exploration and drilling solutions at all stages of the mining lifecycle to energy, mining and resources sector companies, primarily in Australia. The Group generates revenue from a diversified stream of operations including the mix between the surface and underground drilling and the mix between different commodity types like Coal, Gold, Copper, Lead, Zinc, Silver and others.

During the 1HFY19, the Group reported 431% improvement in earnings before interest, depreciation and amortisation (EBITDA) to $14.2 million compared to the previous corresponding period’s EBITDA of  $2.7 million. This primarily reflects the significant acceleration in projects with significant project wins in 1H19 in addition to increases in utilisation, productivity and pricing.

1H19 Revenue from underground drilling segment has risen by 127% compared to 1H18 and now accounts for 38% of Mitchell’s total revenue. The net profit after tax of the company reached $11.7 million in 1HFY19, representing a $12.9 million improvement compared to the 1H18 loss of $1.2 million. However, the Group did not declare or determine any interim dividend for the half year ended 31 December 2018.

In today’s trading session, MSV stock price declined by 3.448% to last trade at $0.056 on 25 March 2019. The stock closed at a price to earnings multiple of 9.350 x with a market capitalisation of $100.83 million.

Over the past 12 months, the stock has moved up by 48.72% including the positive momentum of 11.54% recorded over the past month.


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