Master-Drilling-Interim-Results-Report 05aug14

Master Drilling Group Ltd
INTERIM RESULTS FOR THE PERIOD

ENDED
30 JUNE 2014
Danie Pretorius, CEO
Andre van Deventer, CFO
Cape Town: 8-9 September 2014
www.masterdrilling.com
Johannesburg: 10 September 2014
DISCLAIMER
This document has been compiled from information provided by the Directors of Master Drilling Group Limited (Master Drilling, Master Drilling Group or the
Company) and from publicly available sources, and involves elements of subjective judgment and analysis, which may or may not be correct, and have not been
independently verified.
Accordingly, Master Drilling and its Advisors accept no responsibility for the correctness or otherwise of the content set out herein and no representation or warranty,
express or implied, is being made or given as to the accuracy or completeness of the information set out herein. The information contained in this document is subject to
completion, revision, verification and amendment without prior notice and without liability to compensate or reimburse any party.
No representation or warranty, express or implied is, or will be, given by Master Drilling or its Directors, Partners, Employees or Advisors or any other person as to the
accuracy, completeness or fairness of this document and, so far as permitted by law and except in the case of fraud by the party concerned, no responsibility or liability
whatsoever is accepted for the accuracy or sufficiency thereof or for any errors, omissions or misstatements negligent or otherwise relating thereto.
Master Drilling shall only be bound by those particular representations and warranties set forth in definitive written transaction documents, when and if such transaction
documents are executed and subject to such restrictions and limitations as may be contained therein.
This document may include certain statements, estimates, targets, forecasts and projections provided by Master Drilling. Such statements, estimates, targets, forecasts
and projections reflect significant assumptions and subjective judgments and analysis by Master Drillings management concerning anticipated future events which may
or may not prove to be correct and there can be no assurance that any estimates, targets, forecasts or projections are attainable or will be realised. Nothing contained in
this document is, or shall be relied upon as, a promise or representation, whether as to the past or the future. Accordingly, (subject as aforesaid) neither Master Drilling
nor its Directors, Partners, Employees or Advisors nor any other person, shall be liable for any direct, indirect or consequential loss or damage suffered by any person
as a result of relying on any statement in or omission from this document and any such liability is expressly disclaimed. In particular, but without limitation, no
representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on, any estimates, targets, forecasts or projections
contained in this document (or otherwise provided by or on behalf of Master Drilling with respect to the subject matter of this document). In all cases, interested parties
should conduct their own investigation and analysis of Master Drilling and the information contained in this document before making any decisions.
This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of an offer to purchase or subscribe for, any securities of the
Company or any other entity, nor shall the information contained in this document or the fact of its distribution form the basis of, or be relied upon in connection with, or
act as any inducement to enter into, any contract or investment decision in relation thereto.
The document is not an offer of securities in the United States. The securities of the Company have not been and will not be registered under the US Securities Act of
1933, as amended (the "US Securities Act"), and may not be offered or sold in the United States absent registration under, or an exemption from the registration
requirements of, the US Securities Act.
The distribution of this document may be restricted by law and persons into whose possession the Information comes should inform themselves about and observe any
relevant restrictions.
This document is not intended to provide, and should not be relied upon for, or as, accounting, legal, tax advice or investment recommendations. You should consult
your tax, legal, accounting or other professional advisors about the issues presented in the Information.
This presentation and the documents provided with this presentation are confidential and may not be disclosed to any third party without the prior written consent of
Master Drilling.
AGENDA
Group overview
Investment highlights
Corporate strategy
Major clients and commodities
Operations
Historical financials
Order book
Share price
GROUP OVERVIEW
GROUP OVERVIEW
1986: founded raiseboring operations in South Africa with two raisebore machines
Global leader in raiseboring market and other specialised drilling services
Operates 158 drilling rigs globally, including
South Africa
Zambia
DRC
Mali
Mexico
Peru
Brazil
Chile
One of the largest fleets of raisebore machines worldwide
Total of 67 slim drill rigs in operation
surface and underground diamond drill
reverse-circulation rigs
Head office in Fochville, South Africa.
engineering facility manufactures most consumables and parts for global fleet within
same complex
GROUP OVERVIEW: GLOBAL OPERATIONS
GROUP OVERVIEW: KEY MILESTONES

2000
Regional associates established in Brazil and Zambia

First self-designed, low-profile blind-hole/raiseborer (BHB200) added to fleet
2001
Acquired largest raise drill ever built (HG380)

First stope long-hole drilling contract begins at Beatrix mine
2002
First hole for HG380 begins at Anglo Platinums Amandelbult mine (501m x 4.5m diameter)
Acquired entire fleet of boxhole machines from RUC
2003
HG380 machine completed 4.5m diameter and 500m length hole at Amandelbult
Introduced stope long-hole drilling project at Mponeng mine
2004
Designed and built remote-operated shotcrete application machine
2005
Obtained coveted ISO 9001:2000 accreditation

Worlds fastest completion with HG380 machine at Tara Mines, Ireland (692m x 4.5m in 90 days)
2006
Drilled Europes deepest 4m hole with HG380 machine at Tara Mines, Ireland (839m)
2007
New cutter design implemented and stope drill monorail system purposely built for Gold Fields Kloof 3
2008
New machines added to fleet

Auto spanner designed
2009
Shaft Support division: Training division introduced with virtual learning

Gripper machine design
2010
Largest hole drilled to date with HG380 (7.3m diameter)
2011
Designed first-ever low profile blind hole borer (LP150)
2012
Longest and most accurate raisebore hole ever drilled
2013
Slim drilling contract at Kolomela

Expanding global footprint to Mali and Guatemala with raiseboring services
First automated machine went live at Sasol and Peru
2014
Horizontal raise bore drilling

Civil Construction piling for foundations
GROUP OVERVIEW: RAISEBORE DRILLING

SAFER, FASTER, MORE ACCURATE
HG380 raisebore machine
Reamer head
1
Working above and below surface, raisebore drilling machine drills pilot hole
Reamer attached in place of drill bit; head has series of tungsten-carbide cutters which cut rock
in circular motion
As drill string raised, reamer pulled up towards the surface, excavated rock drops down shaft
and is removed by standard LHD loader via tunnel
INVESTMENT HIGHLIGHTS
1
GLOBAL RAISEBORE DRILLING
SPECIALIST WITH SUBSTANTIAL
GROWTH UPSIDE
2
SUPPORTIVE MARKET
CONDITIONS UNDERPINNED BY
ROBUST COMMODITY PRICES
STRONG PIPELINE OF ORDERS

FROM TOP-TIER MINING
CLIENTS
3
PREFERRED EMERGINGMARKET EXPOSURE WITH
BENEFIT OF COUNTRY AND
COMMODITY DIVERSIFICATION
WORLD-CLASS MANAGEMENT
EXPERTISE
EBITDA
140
35
120
30
100
25
US$m
US$m
REVENUE
80
20
60
15
40
10
20
2010
2011
2012
2013
2014 - H1
2010
2011
2012
2013
2014
10
Global leader in
Niche drilling segment used extensively in on-mine development (ventilation shafts and ore passes) by
raisebore-drilling services
exiting producers
Raisebore drilling highly differentiated from exploration drilling:
insulated from mining capital cycle
major miners in production; not explorers
benefits from raising safety standards
more ventilation shafts
increasing mining capital intensity
extend existing operations rather than build new mines
Existing cash flowgenerative business
Solid cash flow-generative business since 1986 with significant growth history
Worldwide operations
158 total rigs across seven countries
Fully integrated
business model
Integrated business model including design, manufacture, service and operation of rigs
manufacture of bespoke rigs for customer demands
Good visibility on
future earnings
Strong pipeline of orders from top-tier mining houses
World-class
management expertise
Built business from start-up to global leader
Operational diversification Diversified exposure to mix of commodities and multiple emerging markets
11
MAJOR CLIENTS AND COMMODITIES

GROUP REVENUES BY COMMODITY
2014 H1
2013 - FY
Other
10%
Other
16%
Gold
31%
Iron Ore
1%
Gold
36%
Iron Ore
21%
Polymetallic
17%
Platinum
7%
Polymetallic
11%
Copper
16%
Copper
16%
Platinum
14%
12

REVENUE BY GEOGRAPHIC LOCATION
Other
countries
1%
Rest of the
World Rest of Africa
1%
8%
Rest of Africa
13%
South Africa
31%
Latin America
49%
South Africa
36%
Latin America
60%
2014 H1
2013 FY
13

REVENUE BY STAGE OF MINING ACTIVITY
2014-H1
2013 - FY
Capital
stage
13%
Capital
stage
19%
Exploration
stage
9%
Exploration
stage
4%
Production
stage
77%
Production
stage
78%
14
Client base primarily comprises blue-chip major and mid-tier mining companies
AFRICA
LATIN AMERICA
15
OPERATIONS: SPECIALISED SERVICE OFFERING
Primary and secondary services depending on terms of each individual contract

Primary services include:
raisebore drilling
boxhole and slot riser boring/drilling
drain-hole drilling
drop raising
shaft support
surface blasthole drilling
Primary services offered by Master Drilling Exploration (Drillcorp Africa) include:
core drilling
percussion drilling
reverse-circulation drilling
Secondary services in contracts where scope of services exceeds core, primary services on offer
either offered by Master Drilling or subcontracted to third-party providers
earthworks, piling and foundation construction
directional drilling and wedging
core logging and cutting
Equipment supply services offered to Master Drilling Group companies by Drilling Technical Services
and Master Drilling China
16
OPERATIONS: KEY PERFORMANCE METRICS
Management team uses variety of key performance indicators (KPIs) to monitor performance against
targeted objectives:
rig availability (%)
rig utilisation (%)
achieved drilling hours (hours drilled per day)
achieved penetration rates (metres drilled per hour)
revenue contribution per rig (US$ per machine)
Achieved and targeted performance metrics reviewed by senior management on quarterly basis
KEY PERFORMANCE INDICATORS SUMMARY
2009
2010
2011
2012
2013
2014 H1
68
65%
73
80%
78
80%
88
71%
88
77%
91
76%
83 671
82 651
98 128
108 847
117 047
111 303
Total Slim rigs

Utilisation %
40
39%
43
23%
54
58%
64
51%
74
54%
67
50%
ARPOR (US$)
43 228
71 874
51 705
34 293
50 740
58 570
Total Raisebore rigs

Utilisation %
Revenue per operating rig per month (ARPOR)
- (US$)
**Note that Total raise bore rigs from 2009 2012 includes support equipment
17
Raisebore ARPOR variance
18
OPERATIONS: KEY PERFORMANCE INDICATORS
TYPE OF MACHINE
Drain holes and slot raises
REVENUE
ARPOR
US$
US$
NUMBER OF RIGS
UTILISATION
172 505
28 751
25.0%
Small
1 786 927
85 092
10
35.0%
Medium
7 802 800
80 441
17
95.1%
23 252 616
137 589
34
87.1%
X large
6 164 151
162 214
79.2%
XX large
1 166 300
97 192
100.0%
Slim Drilling: Surface
9 375 401
66 492
47
52.0%
Slim Drilling: Underground
1 987 116
37 493
20
44.2%
Blind Hole Drilling
4 621 122
75 756
16
66.3%
Raiseboring rigs
44 966 421
111 303
91
75.9%
Slim Drill rigs
11 362 517
58 570
67
49.6%
Large
19
OPERATIONS: REVENUE BY DRILLING TYPE
GROUP REVENUES BY STAGE

2009 2014 (H1)
GROUP TOTAL DRILL RIGS BY MACHINE TYPE

2009 2014 (H1)
140
180
162
120
160
120
100
94
93
67
40
63
53
68
46
10
2009
2010
Exploration stage
Large
100
X large
80
XX large
60
Slim drilling: surface
40
Slim drilling: underground
20
Blindhole drilling
15
20
12
110
50
33
11
65
Drill rigs
US$m
80
60
Medium
120
120
Drain holes and slot raises

Small
138
140
101
158
152
16
21
2011
18
2012
Capital project stage
11
2013
12
3
2014 - H1
Other
0
2009
2010
2011
2012
2013
2014 H1
Production stage
Computational reconciliation of totals may not be possible due to independent rounding

Source: Master Drilling Group Ltd
20
HISTORICAL FINANCIALS: FINANCIAL POSITION (US$m)
Assets
Total non-current assets
Total current assets
Total assets
Equity
Equity
Non-controlling interest
Total equity
Liabilities
Total non-current liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
2014 H1
2013
108 976 147

62 945 836
171 921 983
101 965 335

60 455 290
162 420 625
99 920 743
15 171 433
115 092 176
91 867 551
14 250 534
106 118 085
18 484 601
38 345 206
56 829 807
171 921 983
21 015 693
35 286 847
56 302 540
162 420 625
COMMENTS
Total interest bearing debt:

US$13.8m (2014 H1) and
14.5mil (2013)
Gearing ratio
(total debt/total equity): 19.4%
(2014 - H1) and 22.4% (2013)
Current ratio
(current assets/current liabilities):
1.70 (2014 H1) and 1.91 times
(2013)
21
HISTORICAL FINANCIALS:
COMPREHENSIVE INCOME (US$m)
2014 H1
Unaudited
2013 H1
Unaudited
2013 Full Year

Audited
65 187 683
54 055 183
119 688 645
Cost of sales
(43 857 184)
(34 856 225)
(79 930 462)
Gross profit
21 330 499
19 198 958
39 758 193
706 319
759 358
891 774
Other operating expenses
(8 726 054)
(8 200 803)
(18 106 951)
Operating profit
13 310 764
11 757 513
22 543 006
461 819
866 307
1 473 911
(693 540)
(1 513 665)
(1 926 791)
Profit before taxation
13 079 043
11 110 155
22 090 126
Taxation
(3 732 038)
(3 380 680)
(6 294 382)
9 347 005
7 729 475
15 795 744
(465 826)
(9 802 981)
(12 562 962)
(465 826)
(9 802 981)
(12 562 962)
8 881 182
(2 073 506)
3 232 782
Revenue
Other operating income
Investment revenue
Finance costs
Profit for the year

Other comprehensive income net of
taxation
Exchange differences on translating
foreign operations
Total comprehensive (loss)/income
Profit attributable to:
Revenue: year on year growth 20.6%

Operating Profit margin 20.4% (2014
H1) and 18.8% (2013)
EDITDA: US$17.0m (2014 - H1) and
US$14.6m (2013 H1)
PAT: year on year growth 20.9%
15 795 744
Owners of the parent

Total
comprehensive
attributable to:
COMMENTS
income
Owners of the parent

8 426 106
7 635 451
15 127 395
920 899
94 024
668 349
8 881 182
(2 073 506)
3 232 782
7 960 283
(2 167 530)
2 564 433
920 899
94 024
668 349
22
ORDER BOOK
140 000 140
000
120 000 120

000
Other
100 000 100

000
Iron Ore
Coal
US$m
80 000 000
80
Chrome
60 000 000
60
Platinum
Diamonds
Zinc
Tin
40 000 000
40
Silver
Gold
Copper
20 000 000
20
Poly Metalic
-0
2014
2015
2016 onwards
23
CORPORATE OFFICE
Master Drilling Group Ltd
4 Bosman Street
PO Box 902
Fochville
2515
South Africa
Telephone:
+27 18 771 8100
Email:
info@mdilimited.com
24

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Master Drilling Group Ltd

INTERIM RESULTS FOR THE PERIOD

Major clients and commodities

GROUP OVERVIEW: GLOBAL OPERATIONS

GROUP OVERVIEW: KEY MILESTONES

Regional associates established in Brazil and Zambia

Acquired largest raise drill ever built (HG380)

Designed and built remote-operated shotcrete application machine

Obtained coveted ISO 9001:2000 accreditation

New machines added to fleet

Shaft Support division: Training division introduced with virtual learning

Largest hole drilled to date with HG380 (7.3m diameter)

Designed first-ever low profile blind hole borer (LP150)

Longest and most accurate raisebore hole ever drilled

Slim drilling contract at Kolomela

Horizontal raise bore drilling

GROUP OVERVIEW: RAISEBORE DRILLING

HG380 raisebore machine

STRONG PIPELINE OF ORDERS

158 total rigs across seven countries

Strong pipeline of orders from top-tier mining houses

Built business from start-up to global leader

MAJOR CLIENTS AND COMMODITIES

MAJOR CLIENTS AND COMMODITIES

MAJOR CLIENTS AND COMMODITIES

MAJOR CLIENTS AND COMMODITIES

OPERATIONS: SPECIALISED SERVICE OFFERING

Primary and secondary services depending on terms of each individual contract

OPERATIONS: KEY PERFORMANCE METRICS

rig availability (%)

rig utilisation (%)

achieved drilling hours (hours drilled per day)

achieved penetration rates (metres drilled per hour)

revenue contribution per rig (US$ per machine)

KEY PERFORMANCE INDICATORS SUMMARY

Total Slim rigs

Total Raisebore rigs

Raisebore ARPOR variance

OPERATIONS: KEY PERFORMANCE INDICATORS

Drain holes and slot raises

Slim Drilling: Surface

Slim Drilling: Underground

Blind Hole Drilling

Slim Drill rigs

OPERATIONS: REVENUE BY DRILLING TYPE

GROUP REVENUES BY STAGE

GROUP TOTAL DRILL RIGS BY MACHINE TYPE

Slim drilling: surface

Slim drilling: underground

Drain holes and slot raises

Capital project stage

Computational reconciliation of totals may not be possible due to independent rounding

HISTORICAL FINANCIALS: FINANCIAL POSITION (US$m)

108 976 147

101 965 335

Total interest bearing debt:

2013 Full Year

119 688 645

(43 857 184)

(34 856 225)

(79 930 462)

Other operating expenses

(18 106 951)