LESS than five years after being established, Perth-based GR Engineering is pursing a stock market float that values the mining services business at $150 million.
LESS than five years after being established, Perth-based GR Engineering Services is pursing a stock market float that values the mining services business at $150 million.
GR is looking to raise $30 million through the initial public offering, making it one of the larger Western Australian floats of the past year.
The proceeds of the IPO will be used to fund growth of the mining engineering business, allowing it to pursue larger contracts, with the founding directors all retaining their shares.
The GR deal is second time around for managing director Joe Ricciardo and his executive team, after Downer EDI bought his first business JR Engineering Services for about $35 million in 2001.
Mr Ricciardo worked for Downer for several years before starting from scratch with the new business in October 2006.
GR has grown rapidly since then, with 150 staff, including many former JR staff, delivering 18 projects.
Recent contracts include Allied Gold’s Gold Ridge plant reconstruction in the Solomon Islands, Newmont’s Boddington gold plant upgrade, Catalpa Resources’ Edna May gold plant and Western Areas’ Cosmic Boy nickel plant upgrade.
Current clients include OZ Minerals, Xstrata Nickel, Integra Mining and CBH Resources.
In the year to June 2010, GR recorded an audited net profit of $17.8 million on revenue of $128 million.
For the year to June 2011, the company has forecast an increase in net profit to $18.8 million and a lift in revenue to $138.3 million.
The launch of GR’s IPO follows a recent move by Perth engineering firm Arccon to pursue what is effectively a backdoor listing on the ASX, via a $22 million scrip deal with Melbourne-based Allmine Group.
Arccon is one of a handful of Perth engineering firms that operate in a similar market to GR.
Its founders, Robert Wilde and John McCowan, are veterans in the mining engineering space, having previously established Minproc, which was bought by UK firm AMEC two years ago for $109 million.
Listed Perth company Lycopodium and Forge Group subsidiary Abesque Engineering are also competitors in the mineral processing space, as are Brisbane-based engineering companies Sedgman and Ausenco.
Mr Ricciardo believes GR’s focus on engineering, procurement and construction (EPC) contracting is one of its strengths and sets it apart from most other engineering firms.
He acknowledged that EPC contracting exposes GR to greater risk in the form of cost overruns and time delay penalties, but said it had the potential to generate higher rewards.
“Our track record says we can manage that risk,” Mr Ricciardo told WA Business News.
“We’ve got the discipline and the culture to deliver the results.”
Mr Ricciardo said that, apart from some civil works, GR managed entire projects in-house, from design through construction and commissioning.
“You must retain absolute control of the project, so we don’t sub-contract great packages of work,” he said.
“We’ve also developed great systems for cost reporting and cost forecasting.”
GR co-founder Barry Patterson chairs the board.
Previously he was a founder of contract miner Eltin Mining and JR Engineering, and more recently has chaired Sonic Healthcare and Silex Systems.
The board also includes executive director Tony Patrizi, who was a co-founder of GR and was previously operations manager of JR.
GR has recruited Peter Hood, formerly of Coogee Chemicals and Coogee Resources, and Terry Strapp, of Oakvale Capital, as non-executive directors.
Argonaut Securities is corporate adviser and broker to the offer.
