Ausdrill Shares Spike to 16.9% Increase Upon Lift of Trading Halt

The trading halt placed on Ausdrill Limited [ASX:ASL] was lifted today, and at time of writing, shares have been trading at a share price of $2, up almost 17%.

The mining services company has had significant growth recently, and now has operations all over Australia, as well as Africa and the UK. With over 5,000 staff across the globe, Ausdrill is a leader in mining services and mineral analysis.

The trade-halt lift coincided with the announcement of the completion of an Institutional Entitlement Offer, which has raised around $175 million at $1.47 per new fully paid ordinary Ausdrill share.

Results of Entitlement Offer

The Entitlement Offer had strong support from existing shareholders, who took up around 93% of the new shares available.

The completion of the Institutional segment is the first stage of the fully underwritten Entitlement offer, which aims to raise around $250 million for the company. These proceeds are intended to go towards repaying the Ausdrill’s Senior Unsecured Notes, due in November this year.

Ausdrill’s Interim CEO, Theresa Mlikota: ‘The success of the Offer is testament to Ausdrill shareholders’ confidence in the opportunity.’

Additionally, the Offer was composed in order to reduce pro-forma gearing from a recent agreement.

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Acquiring Barminco

On Wednesday, 15 August 2018, Ausdrill entered in to a binding agreement to acquire Barminco Holdings, ‘Australia’s leading underground hard-rock mining contractors and is the Group’s long standing joint-venture partner in AUMS.’

This agreement gives Ausdrill all of the equity in Barminco for $150.7 million fully paid ordinary ex-dividend Ausdrill shares.

Ausdrill’s annual report to shareholders — released on the ASX — acknowledges the intense competition within the mining industry at the moment, outlining Ausdrill’s intended response to these difficult market conditions. One recorded response was to ‘invest in higher barrier to entry businesses that deliver sustainable profits to shareholders.’

This explains Ausdrill’s jump to acquire Barminco. It will create the second-largest mining services company in Australia.

The future for Ausdrill

The annual report also showed a sales revenue of $887.3 million, and impressive 16.4% increase from the previous financial year. Their EBITDA was also up substantially by 30.6% at $177.4 million. And most impressive was their reported NPAT of $61.1 million, which is up a whopping 95.7% from FY17 figures.

And the merge with Barminco has received positive reviews. Barminco chief executive officer, Paul Muller, says:

By bringing these two businesses together and creating Australia’s second largest mining services company, we will be able to provide a broader range of services for our customers and generate additional opportunities for our employees.’

All seems to be going well for Ausdrill. Time will tell if this streak is maintained.


Ryan Clarkson-Ledward,

For Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

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