04/10/2007 - 14:26

Swick raises $28m in placement, completes $40m sell-down

04/10/2007 - 14:26

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Guilford-based Swick Mining Services Ltd has 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.

Guilford-based Swick Mining Services Ltd has 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 drill rig provider, which listed in November 2006, is preparing to undergo a major rig fleet expansion over the next 18 to 24 months on the back of significant demand for its services, particularly its underground diamond drilling service.

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 currently has contracts with Newmont Mining, Barrick Gold, Mincor, Consolidated Minerals and Sally Malay.

The company reported a net profit after tax of $5.4 million for the 2007 financial year on a revenue of $40.2 million. It is forecasting to double its revenue in 2008.

The Swick Group was founded in 1960 as primarily a water drilling contractor, and has since expanded its operations to include both surface and underground drilling.

Following its partial sell-down, the Swick family will retain a 35 per cent interest in the company.

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

 

The full text of a company announcement is pasted below

Swick Mining Services Ltd (ASX Code: SWK) is pleased to announce a placement of 19.89 million new shares at A$1.42 per share to raise gross proceeds of approximately A$28.25 million to fund the further expansion of its underground diamond division.

The placement will be made under the Company's available 15% capacity under the ASX Listing Rules and is being made to institutional and sophisticated investor clients of Euroz Securities Limited.

The Company is pleased to report that the placement has been heavily oversubscribed underlining the high regard in which Swick Mining Services is held by the investment community.

Swick Mining Services Outlook

Swick Mining Services has been experiencing a high level of demand for its services, in particular underground diamond drilling. Following the award in April 2007 of a contract to provide up to 9 underground diamond rigs to Newmont Mining Corporation at its Jundee and Tanami mine sites, the decision was made to construct a further 20 rigs for completion by mid 2008. However, such is the level of demand and the strong outlook for the mining industry that the directors have decided to construct a further 20 rigs, bringing the current build program to 40. These additional 20 rigs will be constructed progressively from mid 2008 with the program due for completion by mid 2009.

"Swick Mining Services' underground diamond drilling rigs offer our clients improved productivity and safety," Mr Swick said.

"The take up by industry within Australia has been significant and we expect this to continue with the Company currently on trial at Jubilee Mines NL's Cosmos mine and about to commence a trial with Oxiana Limited at Golden Grove. The completion of this build program of 40 rigs will see Swick operating 65 rigs in the Australian market, or approximately 25% of the market."

At the same time as expanding its underground diamond drilling division, Swick Mining Services is aggressively growing its other core divisions. Presently Swick Mining Services has 4 new reverse circulation (RC) rigs in build and is commissioning its purpose built surface diamond drill rigs, an area slated for significant expansion.

"The outlook remains extremely positive for Swick Mining Services and the funds raised will facilitate a continuation of the growth that the Company has been able to achieve year on year over the past 5 years".

Vendor Share Sale

The Swick family has also elected to reduce their holding by 28 million shares via a vendor share sale. The Swick family members together retain an ongoing ownership interest in Swick Mining Services of approximately 35% and have agreed to enter into voluntary escrow for a further 12 months in relation to their remaining shares.

Per Kent Swick "The institutional interest in Swick Mining Services since our ASX listing on 1 November 2006 has been extremely high and we saw this placement by the Company as an opportune time for some of our Institutional Shareholders to increase their holding and for the introduction of a number of new institutions onto the Company's share register. Without a vendor share sale it would not have been possible to achieve the institutional support and spread that we have."

The vendor share sale will occur simultaneously with the placement and is also being made to institutional and sophisticated investor clients of Euroz Securities Limited.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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