Imdex plans $NZ40m acquisition

Mining equipment supplier Imdex expects it will be able to deliver substantial productivity benefits to its clients after striking an option agreement over New Zealand company Flexidrill.

Flexidrill is developing vibration and magnetic field assisted drilling technologies that Imdex believes can be commercialised in the near term.

The option agreement has been finalised six months after Balcatta-based Imdex signed a heads of agreement with Flexidrill.

Managing director Bernie Ridgeway said he now had more confidence in Flexidrill’s technology.

“If we choose to exercise our option to purchase Flexidrill, we would expect the acquisition to be earnings per share accretive in the first 12 months following exercise of the option,” he said.

Mr Ridgeway said drilling costs represented about half of the total spend on global mineral exploration, and achieving reductions had been a major challenge.

“The drilling industry has not seen any material productivity improvements for decades and we anticipate significant market adoption post commercialisation,” he added.

“Upon commercialisation, we would leverage our extensive global presence to penetrate the market.”

Imdex has agreed to immediately pay $NZ5 million ($A5.5 million) in cash and shares to Flexdrill’s owners, giving it exclusivity up to September 2018.

It can extend the option a further 12 months by paying another $NZ5 million, also split between cash and shares.

Imdex will pay a further $NZ3 million in cash upon exercising its purchase option, and $NZ5 million (in cash and shares) following the successful commercialisation of one of Flexidrill’s products.

The vendors will receive a further $NZ22 million, which may be satisfied by the increased value of their Imdex shares over four years.

If their shares do not increase sufficiently in value, the vendors will get 10 per cent of the revenue from sales of Flexidrill products, up to a cap of $NZ22 million.

Flexidrill’s products are known as CoreVIBE and MagHAMMER.

Imdex has conducted field trials of CoreVIBE, which it said can increase productivity by about 30 per cent in traditional diamond coring applications.

MagHAMMER enables RC drilling to be run without compressed air.