Ausdrill Share Price up 12% With Contract Announcement

The Ausdrill Limited [ASX:ASL] share price is up more than 12% at time of writing, following the news that the company’s subsidiary (Barminco) had secured a lucrative contract.

Barminco, a leading hard-rock underground miner, has been awarded a five-year contract at the Zone 5 mine from Khoemacau Copper Mining Pty Ltd, worth an estimated AU$800 million. Their work spans across mine development, diamond drilling and production, with an initial rate of 3.6 million tonnes of copper ore per year, with multiple expansion opportunities.

At time of writing, the metal mining services company is trading for $1.765 a share.

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More on the Ausdrill’s Botswana contract…

The Ausdrill share price appears to be picking up, following news of a ‘Non Cash Impairment’ for this financial year earlier this month.

The company announced they would be experiencing a $75-$95 million impairment to the value of their assets — 2.8–3.6% of their total asset base. Previous to this announcement, Ausdrill admitted they would be incurring a $31 million write-down of their subsidiary Energy Drilling Australia.

However, a deal like this could be a turning point for the company. Especially following last month’s announcement of a three-year extension being awarded to BTP, its earthmoving parts and equipment subsidiary. The deal was worth $126 million, in addition to its existing contract with Peabody Australia, a leading pure-play coal company.

Ausdrill describes the African site as ‘highly-prospective’, being situated in the Kalahari copper belt. The new Zone 5 is a large, long-life development project, which is good news for Ausdrill.

Mark Norwell, Managing Director of Ausdrill said,

We are very pleased to have been awarded this significant contract in Botswana, a highly desirable country to do business in Africa. This contract award is further endorsement of our acquisition of Barminco and its strong contribution to our international growth strategy.

Further, Khoemacau CEO, Johan Ferreira said,

We are delighted to partner with Barminco at Zone 5 to create a safe, large-scale, highly productive and fully mechanised mine, delivering high quality employment and sustainable skills development and employment outcomes for Botswana citizens.

The company expects to resume mining in December this year, subject to the closing of the Khoemacau Project funding.

What does this mean for investors?

A major 5-year contract is certainly welcome news for Ausdrill investors and will benefit its bottom-line going forward.

This could have flow on effects to its dividend yield and gives the company more opportunities for growth.

As the company looks to the future, it will likely be hoping to secure more new contracts in Africa to complement its Australian operations.


Ryan Clarkson-Ledward

For Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

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