Mining’s Exploration Surge Helps Spur $500 Million Driller Deal

LAGOS (Capital Markets in Africa) – Rising exploration is driving growth opportunities for mining services providers, according to Ausdrill Ltd., which has agreed to acquire a smaller rival to create Australia’s second-largest company in the sector.

Ausdrill’s A$697 ($500 million) cash and share acquisition, including debt, of Barminco Holdings Pty will form a company with a client roster that includes BHP Billiton Ltd. and Newmont Mining Corp., Ausdrill said Wednesday in a statement.

The mining sector is revving up a hunt for mines after a period of meager investment, while there are also opportunities to target a rise in development projects in Africa and the industry’s expansion into underground operations, Ausdrill’s acting Chief Executive Officer Theresa Mlikota said in a phone interview.

“Exploration has now ticked up, and mining will naturally follow that in due course,” Mlikota said. “A number of mining houses have announced the need to add to their exploration activities, because there’s been a fairly significant under-spend in the recent past.”

Spending on exploration for non-bulk commodities is forecast to rise to $11 billion this year after hitting a low of about $9 billion in 2016, according to Melbourne-based MinEx Consulting Ltd.

The combined company will win about half its revenue in Africa and half in Australia, Ausdrill said. It’ll also have greater exposure to underground work, which is typically more lucrative than simpler surface operations, according to Mlikota.

“Our pipeline in Africa is incredibly strong, both in surface mining and underground,” said Mlikota. ”The opportunities there are very substantial.”

There’s a slate of gold projects underway across West Africa, including AngloGold Ashanti Ltd.’s redevelopment of the Obuasi mine in Ghana. In Australia, iron ore giants have begun a wave of investment in mines to replace retiring operations, while lithium exporters are bringing a roster of new assets into production.

Source: Bloomberg Business News