19/02/2008 - 11:51

Haddington to acquire Underdale Drillers

19/02/2008 - 11:51

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Diversified base metals explorer, Haddington Resources Ltd, is set to acquire the mineral exploration division of Adelaide-based drilling company, Underdale Drillers, for a potential consideration of $18 million.

Haddington to acquire Underdale Drillers

Diversified base metals explorer, Haddington Resources Ltd, is set to acquire the mineral exploration division of Adelaide-based drilling company, Underdale Drillers, for a potential consideration of $18 million.

West Perth-based Haddington has also set a new annual revenue target from its services businesses of $40 million, which it aims to achieve through acquisition of drilling companies and the expansion of existing businesses by buying additional equipment.

The total acquisition cost of Underdale will be between $16 and $18 million, depending on verification of earnings during the due diligence process.

The acquisition cost will include the retirement of debt, and will be partly satisfied by the issue of $3 million worth of Haddington shares valued at the time of issue.

The cash component of the acquisition will be funded entirely out of debt and from Haddington's existing cash reserves. Anticipated completion date of the acquisition is mid May 2008.

Haddington managing director Colin McCavana said the acquisition was an important step in progressing the company's growth and diversification strategy.

Underdale operates 12 mineral exploration rigs and is currently providing drilling services in South Australia, the Northern Territory, Western Australia and Victoria.

In addition to 12 drill rigs, the acquisition of the Underdale business adds an operating base in Adelaide and operating facilities at Bachelor in the Northern Territory to the Haddington services business.

"The acquisition fits with Haddington's strategy of aggressively expanding its international drilling business to allow greater participation in an industry that appears set for a period of sustained profit growth. Last year, the company acquired minerals services company Minvest, which is already providing a stable cash flow," Mr McCavana said.

"Haddington's ongoing objective for its drilling businesses is to grow its position in the coal industry in Australia and Indonesia, expanding where profitable contracts arise, and diversify into minerals exploration drilling where greater equipment utilisation and higher revenues are achievable."

Currently, Haddington owns drilling companies Belldale Enterprises Pty Ltd in Australia, PT Asiadrill Bara Utama in Indonesia and Madagascar Drilling SA in Madagascar and operates 20 mineral exploration rigs.

Underdale has long term contracts with blue chip clients, and Haddington expects the Underdale business to add approximately $15 million per annum to its revenue base and contribute approximately $5 million in EBITDA per annum.

The annual revenue generated by Underdale is expected to immediately increase the revenue generated by Haddington's services businesses to approximately $28 million per annum.

The existing senior management of Underdale has agreed to stay on for at least three years to manage an experienced staff of approximately 50 people.

Following the acquisition of Underdale and completion of its internal expansion program by the end of 2008, Haddington expects to be operating 40 rigs across Indonesia and Australia.

The company is also considering additional growth opportunities in the coal and coal seam gas industries using larger drilling equipment and more advanced drilling techniques.

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