Q3 2024 Trading Update

Capital Limited

17 October 2024

 

                                                                                             Capital Limited                                                                 

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

Q3 2024 Trading Update

Capital (LSE: CAPD), a leading mining services company, today provides its trading update for the period 1 July to 30 September 2024 (the "Period").

THIRD QUARTER (Q3) 2024 KEY METRICS

	Q3 2024*	Q3 2023	vs Q3 2023	Q2 2024*	vs Q2 2024
Revenue ($m)	93.7	79.7	17.6%	89.2	5.0%
Drilling and associated revenue ($m)	63.9	51.2	24.8%	60.1	6.3%
Mining revenue ($m)	19.3	18.0	7.2%	18.1	6.6%
MSALABS revenue ($m)	10.5	10.5	-	11.0	-4.5%

All amounts are in USD unless otherwise stated

* Unaudited numbers

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

"Through the quarter we continued to navigate the structural transitions across the Group. In drilling, the business is now performing above target utilisation rates and at a strong ARPOR. Total rig count will increase further as rigs arriving on site, predominantly in Nevada, are commissioned. MSALABS has now started receiving samples at its significant contract with Nevada Gold Mines, albeit ramping slower than we had anticipated. Whilst this delay has impacted our 2024 revenues, we look forward to continuing to ramp the business through 2025.

Mining revenues were strong in Q3 2024, particularly driven by the extended activity at Sukari. At Belinga, however, Fortescue Metals Group (FMG) has now decided to pivot its development strategy from pre-production mining to resource development and, consequently, given the very limited mining activity at Belinga, has made the decision to conclude our mining contract early. As a result, Capital will have available mining fleets, across both Egypt and Gabon, once demobilisations are complete. We are now finalising next steps for this mining equipment and will then update the market.

Despite these challenges, we are retaining our Group revenue guidance of $355-375 million including contribution in Q4 from Capital Mining pertaining to typical demobilisation payments as well as early contract closure fees."

Financial Highlights

·      Revenue was US$93.7 million, a 17.6% increase on Q3 2023 (US$79.7 million) and a 5.0% increase on Q2 2024 (US$89.2 million);

-     Drilling and associated revenue for the quarter was $63.9 million, up 24.8% on Q3 2023 ($51.2 million) and up 6.3% on Q2 2024 ($60.1 million);

-     Mining revenue for the quarter was $19.3 million, up 7.2% on Q3 2023 ($18.0 million) and 6.6% on Q2 2024 ($18.1 million); and

-     Laboratories (MSALABS) revenue for the quarter was $10.5 million, flat on Q3 2023 ($10.5 million) and down 4.5% on Q2 2024 ($11.0 million).

·      Interim dividend of 1.3 cents per share (cps), paid on 3 October 2024, (1.3 cps H1 2023).

Operational Update

·      Safety performance remains world-class with a nine-month YTD Total Recordable Injury Frequency Rate ("TRIFR") of 0.84 per 1,000,000 hours worked (H1 2024: 1.1).

·      Capital Drilling: Above target utilisation and total rig count geared to increase

-     Fleet utilisation for the quarter of 76% increased on Q3 2023 (72%) and on Q2 2024 (72%) driven by the ramp up of our recent contract at Perseus's Nyanzaga project, alongside consistent operations across the rest of our portfolio;

-     Total rig count was 126 at the end of Q3 (from 127 end Q2). Our rig count is geared to increase in the near future as rigs arriving on site are commissioned (the trigger point at which we formally add them to the rig count); and

-     Average monthly revenue per operating rig ("ARPOR") was US$210,000 in Q3 2024, up 17.3% on Q3 2023 (US$179,000) and 1.4% on Q2 2024 ($207,000). This strengthening in ARPOR is primarily the result of the ramp-up of high-quality contracts, older rigs being replaced with newer and more efficient rigs and a continued focus on efficiency at our more established sites.

-     Q3 2024 contract win (previously announced):  

§  A diamond and reverse circulation drilling services contract with Perseus Mining at the Nyanzaga Gold Project in Tanzania.

	Q3 2024*	Q3 2023	vs  Q3 2023	Q2 2024*	vs Q2 2024
Closing fleet size	126	126	-	127	-0.8%
Average fleet	126	125	0.8%	127	-0.8%
Fleet utilisation (%)	76%	72%	5.6%	72%	5.6%
Average utilised rigs	96	90	6.7%	91	5.5%
ARPOR1 ($)	210,000	179,000	17.3%	207,000	1.4%
Surveying revenue ($m)	1.4	0.9	55.6%	1.3	7.7%
Total drilling and associated revenue2 ($m)	63.9	51.2	24.8%	60.1	6.3%

*Unaudited numbers

¹ Average revenue per operating rig per month

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

All amounts are in USD unless otherwise stated

·      Capital Mining: Finalising next steps for mining equipment as contracts end 

-       Sukari Gold Mine (Egypt) waste mining contract has now been completed, after a slight extension in the previous quarter;

§  Capital will shortly begin demobilising the mining equipment;

-       At Belinga (Gabon), FMG has altered its development strategy at the project to focus more on resource definition and project feasibility and less on early mining works. Therefore, given very limited mining activity, FMG has given notice to conclude our mining contract early;

§  Capital is due early contract closure fees in relation to the contract termination;

§  Capital will retain the mining equipment which is currently on route to the port in Gabon; and

§  Our drilling contract remains in place to support FMG's resource definition at Belinga;

·      MSALABS: Now receiving samples in Nevada after delayed ramp up

-    Q3 revenues were broadly in line with the previous quarter with our significant contract with Nevada Gold Mines not yet making a contribution. We have now begun receiving samples at Nevada Gold Mines with the ramp up the PhotonAssay^TM units and subsequently fire assay and multi-element assaying capabilities progressing over the next 12 months;

-    Nevertheless, the ramp up of this significant contract is taking longer than we would have liked and, therefore, we are reducing our MSALABS FY 2024 revenue expectations to ~$45 million.

-    We continue to focus on establishing widespread uptake of the PhotonAssay^TM technology. Whilst the adoption cycle has been slower than expected, engagement with top tier customers is very strong and underpins a healthy long-term outlook;

·      Capital Investments: Strong returns realised

-     Predictive Discovery Sale: On 14^th 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 14^th August announcement;

-       Investment in Sanu Gold Corp: On 26^th September 2024, and alongside AngloGold Ashanti, Capital invested ~$0.9 million (C$1.2 million) for a ~10% ownership stake in Sanu Gold Corp;

§  Together with the investment, Capital has been awarded an air core drilling contract across Sanu Gold's Daina and Diguifara properties in Guinea;

-       The total value of investments (listed and unlisted) was $30.9 million as at 30 September 2024, down from $47.8 million as at 30 June 2024;

§  Along with the proceeds from the disposal of our shareholding in Predictive Discovery, the portfolio recorded investment gains (realised and unrealised) of $15.0 million in Q3 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.

Outlook

·      Revenue guidance for 2024 remains $355-$375 million;

·      Capital expenditure guidance for 2024 remains $70-$80 million; 

·     Capital Drilling anticipates revenue growth into the back of the year, driven by the ramp-up of operations, particularly at Nevada Gold Mines; 

·     Capital Mining is finalising next steps for the mining equipment across both Egypt and Gabon and will then update the market;

·     Guidance for MSALABS has been reduced to ~$45 million for 2024 predominantly given the delays in the ramp up of the significant contract with Nevada Gold Mines; and

·      Tendering activity remains robust across the Group with a number of opportunities progressing.

- ENDS -

For further information, please visit Capital's website www.capdrill.com or contact:

Capital Limited                                                                     [e-mail]                      

Peter Stokes, Chief Executive Officer                             

Rick Robson, Chief Financial Officer

Conor Rowley, Corporate Development & Investor Relations

Tamesis Partners LLP                                                          [phone]

Charlie Bendon

Richard Greenfield

Stifel Nicolaus Europe Limited                                          [phone]

Ashton Clanfield

Callum Stewart

Rory Blundell

Burson Buchanan                                                                 [phone]

Bobby Morse                                                                          [e-mail]

George Pope

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.

 

END