Drilling down to business

09/10/2007 - 22:00

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Like many drilling companies, Swick Mining Services Ltd was hit hard by the downturn in exploration spending early this decade.

Drilling down to business

Like many drilling companies, Swick Mining Services Ltd was hit hard by the downturn in exploration spending early this decade.

The Guildford-based company, started by current managing director Kent Swick’s father almost 50 years ago, suffered through the tough times, with mounting bad debts and a reliance on its small client base taking their toll.

It was at that stage that the Swicks brought in a business coach, who advised the family on how to expand their business through diversification and the development of a blue chip client base.

“That’s how we started in underground diamond drilling; I saw a niche in that area,” Mr Swick told WA Business News.

Identifying a potential market in Australia of about 200 underground diamond drill rigs, Swick developed a unique, highly mobile rig, which it claims offers a number of advantages over standard underground diamond drills.

Today, Swick has 35 rigs out in the field controlled by more than 200 operation staff.

Targeting existing brownfield exploration, Swick’s clients include Newmont Mining, Barrick Gold, Oxiana, Consolidated Minerals, Sally Malay and Jubilee Mines.

On the back of unprecedented demand for its services, particularly its underground diamond drilling, Swick is preparing to undergo a major rig fleet expansion over the next 18 to 24 months.
The company has committed to a 40-rig build program and aims to increase its total number of rigs to 85 by June 2009.

Swick’s ambitious expansion plan comes after the company reported a net profit after tax of $5.4 million for the 2007 financial year, with revenue of $40.2 million. It is forecasting to double its revenue in 2008.

“They’re all drilling and they’re all drilling aggressively,” Mr Swick said.

“In a commodities boom, drilling is pretty key. That’s why were building more, committing capital, and miners are looking to extend the life of their mines.”

The company recently announced a share placement to raise $28 million to expand its underground diamond drilling division, in conjunction with a partial sell-down by the Swick family of $40 million worth of shares. The family will retain a 35 per cent interest in the company after the sell-down.

Mr Swick said the placement would allow some of its institutional shareholders to increase their holding, and introduce a number of new institutions onto its share register.

“To be a strong company its not wise for one family to have too much of a holding,” he said.

While his outlook is “not ridiculously bullish”, Mr Swick said he was confident the company had insured itself against future market downfalls, minimising its risk by having good gear and a strong blue chip client base.

“We have a very good advantage. Even if the market does pull back there’ll always be that underlying demand,” he said.

Henderson-based drill and blast company Brandrill Ltd displayed a similar recovery, after having administrators, receivers and managers appointed just three years ago.

As part of its restructuring, Brandrill sold its African business, Brandrill South Africa, moved from Pinjarra to Henderson and make a strategic decision to focus on its core business as a surface drilling and blasting contractor.

The company recorded a net profit after tax of $8.1 million in 2006-07, up slightly on the previous year’s result, with revenues from the key drill and blast business up 22 per cent to $123 million.

Brandrill also went on the acquisition trail, recently buying 70 per cent of Forrestfield-based DT Hi-Load Australia, and Kalgoorlie-based exploration drilling business Strange Drilling for $26 million.

Canning Vale-based drilling, blasting and exploration contractor Ausdrill Ltd also experienced a strong net profit growth in 2007, up 44 per cent to $27.5 million, with revenue up 15 per cent to $365.6 million.

It also invested considerable capital into upgrading its Kalgoorlie and Ausdrill Northwest drilling and support equipment, with six new diamond drills, two new reverse circulation drills, and one rebuilt reverse circulation drill expected to be delivered between July and December 2007.

About 20 per cent of the company’s turnover comes from its exploration drilling business.

In its annual report, the company indicated that there was still significant demand for exploration drilling services, and the company’s ability to service future growth was restricted predominantly by the availability of skilled personnel.

Also during the 2007 financial year, global drilling services contractor Boart Longyear Ltd solidified its place in the WA drilling market.

The US-based company raised $2.35 billion through its initial public offering, launched in March, following the acquisition of four Western Australian drilling firms.
Boart acquired both DrillCorp Ltd and North West Drilling in August 2006, followed by drilling company Grimwood Davies in December and manufacturer KWL Drill Rig Engineering.

•The writer has a financial interest in Boart Longyear.

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