REG - Capital Limited - Trading and Operational Update

CapitalAnnouncement

20/01/2025 07:00

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RNS Number : 9233T  Capital Limited  20 January 2025

 
                                         Capital Limited
 
 

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

 

Trading and Operational Update

 

Capital (LSE: CAPD), a leading mining services company, today provides its
trading update for the period 1 October to 31 December 2024 (the "Period") as
well as an operational update.

 

Major new contracts update:

 

The Company is pleased to announce that it has a letter of intent from
Barrick, the operators of Reko Diq, to significantly expand our service
offering at its 50% owned major copper-gold project in Pakistan beyond the
reverse circulation and diamond drilling geotechnical services we have
provided since early 2023.

These additional works will utilise the majority of Group's combined mining
fleets and covers two components:

·      An early works civils and mining services contract award:

-      Reko Diq Mining Company ("RDMC") has received internal Board
approvals for Capital to carry out these works, with both parties working to
finalise contract T&Cs.

-     The initial contract is anticipated to have a 3-year term with works
focused on the construction phase of the project prior to first production.

-     The first items of equipment are due to arrive on site in the first
half of 2025 prior to commencing the agreed scope and ramping up in the second
half of 2025.

·      An additional longer term tailings storage facility ("TSF")
services contract award:

-      Subject to the conclusion of a definitive agreement, Capital will
phase further items of equipment to arrive on site through 2025 with a gradual
ramp up in operations from Q4 2025 onwards, currently envisaged to be at run
rate utilisation from the second half of 2026.

-      Post completion of the Sukari Mining contract, this equipment
requires selective rebuild and maintenance work which will be completed at the
workshop facilities in Egypt prior to shipping the equipment to Pakistan.

 

Trading and operational update:

FY 2024 revenue

·      As detailed below, FY 2024 revenue was $348.0 million, up 9.3% on
FY 2023 ($318.4 million) but marginally below our guidance of $355-375
million.

Drilling business

·      Our drilling business delivered another year of growth with revenue
up 11.1% YoY to $239.1 million.

·      However, as previously announced, Nevada Gold Mines ("NGM") has
seen delays which has had significant impact on Group margins with the
contract revenues not yet supporting the cost base put in place to deliver the
project.

-       In response, management have spent significant time on the ground
to drive change and improvements. These changes will be implemented through
the first half of 2025 as the contract continues to ramp to its full run rate.
 

·      The focus for drilling in 2025 is finalising the delivery of NGM
while also ensuring high utilisation and consistent ARPOR across the rest of
the fleet.

 

·      Q4 drilling contract wins:

-       An 18-month diamond drilling services contract at the Mingomba
Copper Project in Zambia owned by KoBold Metals;

-       A 2-year diamond drilling services contract at Perseus Mining's
Yaouré Gold Mine in Côte d'Ivoire, further strengthening our relationship
with Perseus;

-       A 6-month reverse circulation drilling services contract with Aton
Mining at its various exploration properties in Egypt; and

-       A 6-month diamond drilling services contract with Lotus Gold at its
project site in Egypt.

MSALABS

·      FY2024 revenue of $43.6 million was broadly in line with our
revised guidance of ~$45 million.

·      The delay in the ramp up of our significant contract with NGM has
been the largest driver of the lower revenue outcome but we have also seen
utilisation remaining below expectations across a number of commercial
laboratories.

·      While this has made profitability challenging in 2024, we saw
strong momentum into the end of the year with sample processing commencing at
NGM and the business implementing a number of steps to drive continued
improvements. H1 2025 will see continued focus on addressing our
underperforming laboratories.

·      We have made changes across the management structure of this
division to bolster a number of key functions. Improvements include the
appointment of a Chief Operating Officer and expansion of the global business
development team.

·      New laboratory in Fairbanks, Alaska: We have recently completed
construction of a new laboratory in Alaska. While this is a commercial
laboratory, we expect to reach strong utilisation rapidly with the laboratory
underpinned by a large scale, long-term anchor contract with an existing
client Northern Star as well as a long-term contract with new customer
Kinross.

CAPD Board Update

·      As previously announced, Mr Graeme Dacomb was appointed as an
Independent Non-Executive Director, Chair of the Audit Committee and member of
the Nomination and Remuneration Committees;

·      Michael Rawlinson has now been appointed Senior Independent
Director;

·      Anu Dhir has been appointed Chair of the Nomination Committee; and

·      Alex Davidson has been appointed Chair of the Investment Committee.

2025 Guidance

·      2025 Revenue:

-       Revenue guidance will be provided at our FY24 results.

·      2025 Capex:

-     Capex for 2025 is expected to be ~$45-55 million (significantly below
FY2024 guidance of $70-80 million).  This will fund typical sustaining and
replacement capex across the drilling fleet, necessary rebuilds on the Sukari
mining fleet, as well as the expansion of MSALABS.

 

 

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

"2024 was a challenging year for the business, driven by material mining
contracts coming to an end combined with delays in the ramp up of new
contracts in drilling and MSALABS, most notably at Nevada Gold Mines. These
delays have impacted both Group revenue but also our margins with the start-up
costs from these new business streams not yet fully supported by steady state
operations.

We are delighted to announce today the letter of intent from Reko Diq that
will see the majority of both our mining fleets utilised at this large-scale
project. While this will be a multi-year ramp up, it is a compelling
opportunity for our mining division that will generate stronger returns
compared to an equipment sale.

With this award together with the operational and organisational changes we
have implemented and will continue to implement over the first half of 2025,
we see a clear pathway to putting the challenges of 2024 behind us."

Q4 2024 Trading Update:

FOURTH QUARTER (Q4) 2024 KEY METRICS

                                          Q4 2024  Q4 2023  vs        Q3 2024  vs        FY 2024*  FY 2023  FY 2024 vs FY 2023

                                                            Q4 2023            Q3 2024
 Revenue ($m)                             84.9     84.5     0.5%      93.7     -9.4%     348.0     318.4    9.3%
 Drilling and associated revenue(1) ($m)  62.9     54.1     16.3%     63.9     -1.6%     239.1     215.3    11.1%
 Mining revenue ($m)                      9.6      19.6     -51.0%    19.3     -50.3%    65.2      64.7     0.8%
 MSALABS revenue ($m)                     12.4     10.8     14.8%     10.5     18.1%     43.6      38.4     13.5%

All amounts are in USD unless otherwise stated.

* Unaudited numbers

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

 

Financial Highlights

·      FY 2024 revenue of $348.0 million, up 9.3% on FY 2023 ($318.4
million), marginally below guidance of $355-375 million;

·      Q4 2024 revenue $84.9 million, a 0.5% increase on Q4 2023 ($84.5
million) but a 9.4% decrease on Q3 2024 ($93.7 million);

-       Drilling and associated revenue for the quarter was $62.9 million,
up 16.3% on Q4 2023 ($54.1 million) but down 1.6% on Q3 2024 ($63.9 million);

-       Mining revenue for the quarter was $9.6 million, down 51.0% on Q4
2023 ($19.6 million) and down 50.3% on Q3 2024 ($19.3 million); and

-       Laboratories (MSALABS) revenue for the quarter was $12.4 million,
up 14.8% on Q4 2023 ($10.8 million) and up 18.1% on Q3 2024 ($10.5 million).

Operational Update

·      Safety performance maintains its exceptional standing on a global
scale with the 2024 Total Recordable Injury Frequency Rate ("TRIFR") of 0.78
per 1,000,000 hours worked, broadly in line with FY 2023 (0.75).

·      Capital Drilling:

-       Fleet utilisation for the quarter was 77%, compared to 72% in Q4
2023 and 76% on Q3 2023;

-       Average monthly revenue per operating rig ("ARPOR") was $197,000 in
Q4 2024, up 4.8% on Q4 2023 ($188,000) but down 6.2% on Q3 2024 ($210,000);

§ ARPOR was particularly impacted in Q4 by lower productivity at Sukari, in
part driven by the fleet running ahead of plan through the previous quarters.

-       Rig count increased from 127 to 130 through Q4 2024, net of
depletion.

§ We still expect rig count to grow to ~135 rigs in part driven by the
completion of the ramp up at NGM, with rigs only added to the rig count upon
commissioning.

 

                                                Q4 2024  Q4 2023  vs        Q3 2024  vs        FY 2024*  FY 2023  FY 2024 vs FY 2023

                                                                  Q4 2023            Q3 2024
 Closing fleet size                             130      127      2.6%      126      3.2%      130       127      2.6%
 Average Fleet                                  129      127      1.6%      126      2.4%      126       125      0.8%
 Fleet utilisation (%)                          77%      72%      6.2%      76%      0.6%      73%       73%      -0.8%
 Average utilised rigs                          99       91       8.8%      96       3.1%      92        92       0.0%
 ARPOR(1)($)                                    197,000  188,000  4.8%      210,000  -6.2%     204,000   186,000  9.7%
 Surveying revenue                              1.8      0.9      99.9%     1.4      30.7%     5.4       3.7      45.0%
 Total Drilling and associated revenue(2) ($m)  62.9     54.1     16.3%     63.9     -1.6%     239.1     215.2    11.1%

All amounts are in USD unless otherwise stated

*Unaudited numbers(

1) Average revenue per month per operating rig(

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

·      Capital Mining: Existing operations have now concluded

-       Operations at both Sukari Gold Mine and Belinga concluded in Q3
2024;

·      MSALABS: Initiated strategic global partnership, breaking into the
USA market with largest contract in MSALABS history

-       Q4 revenues increased with our significant contract with Nevada
Gold Mines now receiving samples with the ramp up the PhotonAssay(TM) units
over the next 12 months with wet chemistry and multi-element assaying
capabilities due to commission in the later stages of the year;

-       We continue to focus on establishing widespread uptake of the
PhotonAssay(TM) technology; and

-       New laboratory in Fairbanks, Alaska: We have recently completed
construction of a new laboratory in Alaska. While this is a commercial
laboratory, we expect to reach strong utilisation rapidly underpinned by large
scale contracts with both Northern Star and Kinross.

·      Capital Investments: Continued strong returns

-       The total value of investments (listed and unlisted) was $30.3
million as at 31 December 2024 vs $30.9 million as at 30 September 2024 and vs
$47.8 million as at 30 June 2024;

-       Major divestment in H2 2024: On 14th 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 14th
August announcement;

-       The portfolio recorded investment gains (realised and unrealised)
of $12.4 million in H2 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.

 

 

- 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

 

FTI Consulting
                            +44 20 3727 1000

Ben Brewerton
                          capitallimited@fticonsulting.com

Nick Hennis

Lucy Wigney
 

 

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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