REG - Capital Limited - Q3 2024 Trading Update

CapitalAnnouncement

17/10/2024 07:00

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RNS Number : 5753I  Capital Limited  17 October 2024

 
Capital
Limited

("Capital", the "Group" or the "Company")

 

Q3 2024 Trading Update

 

Capital (LSE: CAPD), a leading mining services company, today provides its
trading update for the period 1 July to 30 September 2024 (the "Period").

 

THIRD QUARTER (Q3) 2024 KEY METRICS

                                       Q3 2024*  Q3 2023   vs       Q2 2024*  vs

                                                          Q3 2023             Q2 2024
 Revenue ($m)                          93.7      79.7     17.6%     89.2      5.0%
 Drilling and associated revenue ($m)  63.9      51.2     24.8%     60.1      6.3%
 Mining revenue ($m)                   19.3      18.0     7.2%      18.1      6.6%
 MSALABS revenue ($m)                  10.5      10.5     -         11.0      -4.5%

All amounts are in USD unless otherwise stated

* Unaudited numbers

 

Commenting on the trading update, Peter Stokes, Chief Executive, said:

"Through the quarter we continued to navigate the structural transitions
across the Group. In drilling, the business is now performing above target
utilisation rates and at a strong ARPOR. Total rig count will increase further
as rigs arriving on site, predominantly in Nevada, are commissioned. MSALABS
has now started receiving samples at its significant contract with Nevada Gold
Mines, albeit ramping slower than we had anticipated. Whilst this delay has
impacted our 2024 revenues, we look forward to continuing to ramp the business
through 2025.

Mining revenues were strong in Q3 2024, particularly driven by the extended
activity at Sukari. At Belinga, however, Fortescue Metals Group (FMG) has now
decided to pivot its development strategy from pre-production mining to
resource development and, consequently, given the very limited mining activity
at Belinga, has made the decision to conclude our mining contract early. As a
result, Capital will have available mining fleets, across both Egypt and
Gabon, once demobilisations are complete. We are now finalising next steps for
this mining equipment and will then update the market.

Despite these challenges, we are retaining our Group revenue guidance of
$355-375 million including contribution in Q4 from Capital Mining pertaining
to typical demobilisation payments as well as early contract closure fees."

Financial Highlights

·      Revenue was US$93.7 million, a 17.6% increase on Q3 2023 (US$79.7
million) and a 5.0% increase on Q2 2024 (US$89.2 million);

-     Drilling and associated revenue for the quarter was $63.9 million,
up 24.8% on Q3 2023 ($51.2 million) and up 6.3% on Q2 2024 ($60.1 million);

-     Mining revenue for the quarter was $19.3 million, up 7.2% on Q3 2023
($18.0 million) and 6.6% on Q2 2024 ($18.1 million); and

-     Laboratories (MSALABS) revenue for the quarter was $10.5 million,
flat on Q3 2023 ($10.5 million) and down 4.5% on Q2 2024 ($11.0 million).

·      Interim dividend of 1.3 cents per share (cps), paid on 3 October
2024, (1.3 cps H1 2023).

 

Operational Update

·      Safety performance remains world-class with a nine-month YTD
Total Recordable Injury Frequency Rate ("TRIFR") of 0.84 per 1,000,000 hours
worked (H1 2024: 1.1).

·      Capital Drilling: Above target utilisation and total rig count
geared to increase

-     Fleet utilisation for the quarter of 76% increased on Q3 2023 (72%)
and on Q2 2024 (72%) driven by the ramp up of our recent contract at Perseus's
Nyanzaga project, alongside consistent operations across the rest of our
portfolio;

-     Total rig count was 126 at the end of Q3 (from 127 end Q2). Our rig
count is geared to increase in the near future as rigs arriving on site are
commissioned (the trigger point at which we formally add them to the rig
count); and

-     Average monthly revenue per operating rig ("ARPOR") was US$210,000
in Q3 2024, up 17.3% on Q3 2023 (US$179,000) and 1.4% on Q2 2024 ($207,000).
This strengthening in ARPOR is primarily the result of the ramp-up of
high-quality contracts, older rigs being replaced with newer and more
efficient rigs and a continued focus on efficiency at our more established
sites.

-     Q3 2024 contract win (previously announced):

§  A diamond and reverse circulation drilling services contract with
Perseus Mining at the Nyanzaga Gold Project in Tanzania.

                                                Q3 2024*  Q3 2023   vs         Q2 2024*  vs

                                                                    Q3 2023              Q2 2024
 Closing fleet size                             126       126      -           127       -0.8%
 Average fleet                                  126       125      0.8%        127       -0.8%
 Fleet utilisation (%)                          76%       72%      5.6%        72%       5.6%
 Average utilised rigs                          96        90       6.7%        91        5.5%
 ARPOR(1) ($)                                   210,000   179,000  17.3%       207,000   1.4%
 Surveying revenue ($m)                         1.4       0.9      55.6%       1.3       7.7%
 Total drilling and associated revenue(2) ($m)  63.9      51.2     24.8%       60.1      6.3%

*Unaudited numbers

(1) Average revenue per operating rig per month

(2)Associated revenue refers to revenue generated from complementary services
tied to our drilling operations

All amounts are in USD unless otherwise stated

 

·      Capital Mining: Finalising next steps for mining equipment as
contracts end

-       Sukari Gold Mine (Egypt) waste mining contract has now been
completed, after a slight extension in the previous quarter;

§  Capital will shortly begin demobilising the mining equipment;

-       At Belinga (Gabon), FMG has altered its development strategy at
the project to focus more on resource definition and project feasibility and
less on early mining works. Therefore, given very limited mining activity, FMG
has given notice to conclude our mining contract early;

§  Capital is due early contract closure fees in relation to the contract
termination;

§  Capital will retain the mining equipment which is currently on route to
the port in Gabon; and

§  Our drilling contract remains in place to support FMG's resource
definition at Belinga;

 

 

·      MSALABS: Now receiving samples in Nevada after delayed ramp up

-    Q3 revenues were broadly in line with the previous quarter with our
significant contract with Nevada Gold Mines not yet making a contribution. We
have now begun receiving samples at Nevada Gold Mines with the ramp up the
PhotonAssay(TM) units and subsequently fire assay and multi-element assaying
capabilities progressing over the next 12 months;

-    Nevertheless, the ramp up of this significant contract is taking longer
than we would have liked and, therefore, we are reducing our MSALABS FY 2024
revenue expectations to ~$45 million.

-    We continue to focus on establishing widespread uptake of the
PhotonAssay(TM) technology. Whilst the adoption cycle has been slower than
expected, engagement with top tier customers is very strong and underpins a
healthy long-term outlook;

·      Capital Investments: Strong returns realised

-     Predictive Discovery Sale: On 14(th) August 2024, Capital sold its
entire stake in Predictive Discovery to Perseus Mining for a total cash
consideration of ~$31.2 million. The agreement with Perseus also included a
call option and profit share arrangement in the event of a takeover or
subsequent sale by Perseus, with full details available in our separate 14(th)
August announcement;

-       Investment in Sanu Gold Corp: On 26(th) September 2024, and
alongside AngloGold Ashanti, Capital invested ~$0.9 million (C$1.2 million)
for a ~10% ownership stake in Sanu Gold Corp;

§  Together with the investment, Capital has been awarded an air core
drilling contract across Sanu Gold's Daina and Diguifara properties in Guinea;

-       The total value of investments (listed and unlisted) was $30.9
million as at 30 September 2024, down from $47.8 million as at 30 June 2024;

§  Along with the proceeds from the disposal of our shareholding in
Predictive Discovery, the portfolio recorded investment gains (realised and
unrealised) of $15.0 million in Q3 2024; and

§  The portfolio continues to be focused on a select few key companies with
our holdings in WIA Gold, Leo Lithium, Asara Resources and Sanu Gold
comprising the majority of our investments.

 

Outlook

·      Revenue guidance for 2024 remains $355-$375 million;

·      Capital expenditure guidance for 2024 remains $70-$80 million;

·     Capital Drilling anticipates revenue growth into the back of the
year, driven by the ramp-up of operations, particularly at Nevada Gold
Mines;

·     Capital Mining is finalising next steps for the mining equipment
across both Egypt and Gabon and will then update the market;

·     Guidance for MSALABS has been reduced to ~$45 million for 2024
predominantly given the delays in the ramp up of the significant contract with
Nevada Gold Mines; and

·      Tendering activity remains robust across the Group with a number
of opportunities progressing.

 

- ENDS -

 

For further information, please visit Capital's website www.capdrill.com or
contact:

 

Capital Limited
 
investor@capdrill.com

Peter Stokes, Chief Executive
Officer

Rick Robson, Chief Financial Officer

Conor Rowley, Corporate Development & Investor Relations

 

Tamesis Partners LLP
 
+44 20 3882 2868

Charlie Bendon

Richard Greenfield

 

Stifel Nicolaus Europe Limited
 
+44 20 7710 7600

Ashton Clanfield

Callum Stewart

Rory Blundell

 

Burson Buchanan
                      +44 20 7466 5000

Bobby Morse
                              capital@buchanan.uk.com

George Pope

 

About Capital Limited

 

Capital Limited is a leading mining services company that provides a complete
range of drilling, mining, maintenance and geochemical laboratory solutions to
customers within the global minerals industry. The Company's services include
exploration, delineation and production drilling; load and haul services;
maintenance; and geochemical analysis. The Group's corporate headquarters are
in the United Kingdom and it has established operations in Canada, Côte
d'Ivoire, Democratic Republic of Congo, Egypt, Gabon, Ghana, Guinea, Kenya,
Mali, Mauritania, Pakistan, Saudi Arabia, Tanzania, United States of America
and Zambia.

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