Barminco floats past Byrnecut

Underground mining specialist Barminco has met all the forecasts it put in last year’s draft prospectus but says it is unlikely to revive plans for a stockmarket float for at least two years.

Barminco, along with another privately owned contractor, Byrnecut, dominates underground mining in Australia, with a combined market share estimated to be 60 per cent.

With each business recording annual turnover in excess of $700 million, they are also two of the largest companies in Western Australia.

Barminco’s plans for a stockmarket float were dashed last year when the market slumped and it was unable to get the pricing it had been aiming for.

Chairman and interim chief executive Jock Muir said that, with the stockmarket having weakened further since the initial public offering was pulled last June, he did not see much scope to revive those plans.

“I can’t see us going for an IPO for a couple of years now until the market improves,” Mr Muir told WA Business News.

Despite that, he said the business was continuing to enjoy strong growth.

“We continue to grow on a monthly basis,” he said.

Barminco’s annual turnover is tracking at “well over $700 million” while half-owned African Underground Mining Services – jointly owned by Ausdrill – is achieving annual revenue of about $250 million.

On this basis, Mr Muir said Barminco’s performance would match the draft prospectus, which had forecast growth in revenue from $508 million in 2009-10 to $674 million in 2010-11 and $834 million in 2011-12.

Mr Muir said most of the growth was coming from increased mine production for existing clients, which include AngloGold Ashanti, Barrick Gold and Western Areas.

Byrnecut has also achieved rapid growth in revenue, according to managing director Steve Coughlan.

He said the group achieved consolidated revenue of $788 million in the year to December 2011, and revenue in the current year was on track to be "well north of $800 million".

Annual returns lodged with the Australian Securities and Investments Commission show some of the main contributors to the total.

In the year to December 2011, Byrnecut Australia lifted revenue 75 per cent to $498 million, while Byrnecut Offshore increased revenue 82 per cent to $182 million.

The group’s Pinjarra-based subsidiary Murray Engineering also had a good year, lifting revenue 62 per cent to $33 million.

Other entities in the group include Jetcrete Oz, Raising Australia and Mining Plus.

Barminco and Byrnecut were established within two years of each other – Byrnecut in 1987 and its competitor in 1989.

They have followed similar paths, moving interstate and then overseas, with Byrnecut forming an international division in 1999 and Barminco establishing the African Underground Mining Services joint venture with Ausdrill.

Byrnecut has the backing of entities associated with investor Claudio Thyssen, wirh a 70 per cent stake (and not German industrial group Thyssen, as commonly is reported). The balance is held by directors Steve Coughlan and Bill Blake (not finance director Bob Evers, as WA Business News had reported).

Barminco’s major shareholder is Gresham Private Equity, which bought a 70 per cent stake from founder Peter Bartlett in 2007.

In addition, Goldman Sachs invested a further $50 million in February last year, ahead of the planned $600 million IPO. Mr Muir said that investment had not changed.

He said the business was able to pursue growth with its current balance sheet structure, saying Barminco always met its banking covenants and had “done a lot of work” on its working capital.

Mr Muir said Barminco’s appetite for growth was illustrated by being preferred tenderer for two new contracts in Australia and one new contract in Africa.

The scale of the Barminco and Byrnecut businesses is reflected in their employment levels.

Barminco employs 2,214 people directly and its African joint venture employs a further 1,000 people.

Mr Coughlan said Byrnecut has about 2500 employees. Based on the ASIC returns, the group employed more than 1,300 people in Australia at the end of 2011 while Byrnecut Offshore had 597 staff.

Barminco also has contracts at more mine sites – a total of 20.

Mr Coughlan said Byrnecut is working at 16 mine sites (compared to nine current contracts listed on the company's website). This comprises six sites in WA, four interstate and six overseas.

Byrnecut’s major contracts include Newcrest’s Telfer gold mine, as well as Xstrata's Cosmos and Sinclair nickel mines and Newmont's Jundee mine.

Barminco’s WA clients are led by AngloGold Ashanti. Barminco has been running the big miner’s Sunrise Dam underground mine since 2003 and renewed its contract in 2007 and again in 2011. 

The latest renewal was for a term of five years and was worth an estimated $500 million. At the time, Barminco said it was the largest contract in its 22-year history and the second largest to be awarded in Australia.

Another win last year was Western Areas’ newly opened Spotted Quoll nickel mine. Barminco was in the box seat because it already operated Western Areas’ nearby Flying Fox mine.

The wins were slightly offset by the loss of the Paulsens’ gold mine contract, after new owner Northern Star Resources moved to an owner operator model.

Editor's Note: This article contains updated information for Byrnecut that was not available when the print edition of WA Business News went to press.