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Mitchell Services Limited (ASX: MSV) wins 5-year term contract from Kalgoorlie Consolidated Gold Mines Pty Ltd for its distinctive drilling services. The award marks the material extension of Mitchell’s operations in the Western Australia market.

The contract will see Mitchell providing underground diamond drilling services at KCGM’s Mt Charlotte Underground, backed by the latest generation rigs and servicing facilities. Initially, it will include the deployment of two underground rigs to service the contract with further increasing the rig count over the contract term as per the requirement and performance of the site.

Kalgoorlie Consolidated Gold Mines Pty Ltd (KCGM) is a joint venture between Tier 1 gold miners, Newmont Australia and Barrick Gold. Its operations are located close to Kalgoorlie-Boulder in Western Australia.

Mitchell’s Chief Executive Officer Andrew Elf stated, “the KCGM award is significant for various reasons as it provides Mitchell with a multi-year multi-rig contract in Western Australia which will supports further growth over time. The contract, which will enhance the company’s geographical revenue diversity, demonstrates its continued ability to secure and service long term contracts for Tier 1 clients at large, long-life producing mine sites.”

This comes as a part of the company’s long-term operational strategy under which Mitchell particularly focuses on the development of its underground minerals drilling business with the adoption of new generation rigs and drilling equipment. In recent years, the company has rapidly advanced its underground capability to realise its ambition of becoming a leader in underground drilling services to the global mining, exploration and energy industries.

The contractor believes that this award will directly favour its financial health which could result in a material long-term revenue and EBITDA growth. Given the timing of the award and the level of ramp-up associated with the new project, the company anticipates that these potential benefits are not likely to have a material impact in the current Fiscal Year, i.e., FY19. Therefore, FY19 revenue and EBITDA guidance have been reaffirmed to the range of $110 million-$120 million and $21 million-$23 million respectively.

Recently, Mitchell declared the special dividend for its shareholders as a part of its ongoing strategy for capital management. The company stated that all shareholders registered on the record date of 28 June 2019 would be entitled to receive the special dividend of 0.1 cents per share.

The Board has resolved to declare the special dividend following the strong operational performance to date and with the expectation to generate EBITDA between $21 million and $23 million.

MSV is trading at $0.063 with a daily volume change of 990,151 shares as at 9 April 2019 (02:40 PM AEST). Its price to earnings multiple stands at 10.160x with a market capitalisation of $109.52 million.

The stock has returned as massive as 127.60% yield over the past five years including an oustanding price change of 65.79% in the past 12 months and 57.50% in the last three months.

Also Read: Mitchell Services Extends The BHP Underground Drilling Contract To April 2020


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