A touch of The Good, the Bad and the Ugly in Tuesday’s trading session for miners Havilah Resources and OZ Minerals, distiller United Malt Group, and drilling contractor Mitchell Services.
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The big wet and Covid combined to whack revenue and earnings for drilling company Mitchell Services (ASX: MSV) and yesterday that news in turn whacked Mitchell shares, which slumped more than 17% by the close of trading.
The Brisbane-based contractor told the ASX on Tuesday that its 2021-22 results would be adversely impacted by the combination of the wet weather and Covid – especially labour shortages and absenteeism linked to infections by the virus.
As a result of these disruptions, the company now expects EBITDA for the June year to be between $31 million and $35 million compared to the previous guidance of $40 million to $44 million for the same period.
The company said “This change to guidance is a direct result of costs associated with project delays and interruptions that have temporarily restricted revenue growth and reduced operating margins.”
But there is a small positive with the impact on revenue of the weather and COVID-19 related disruptions being “partially offset by new contract wins and contract extensions successfully negotiated by the Company throughout the year.”
“As a result, the company confirms FY22 revenue guidance of between $200 million and $220 million,” Mitchell said in the statement.
“It is anticipated that the capital spending on the company’s organic growth strategy will be largely complete by 30 June 2022 and as stated in previous quarterly reports the company will focus on generating strong cash flows with the world class fleet that it has invested in.
“The company anticipates that the temporary disruptions to operations experienced during FY22 will lessen in frequency and severity during FY23 allowing its expected operating rig count to drive increased revenue and earnings for the year,” it added.
The shares ended at 28.5 cents, down more than 17%. Even well explained bad news has its price these days.
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United Malt Group (ASX: UMG), the spin-off from GrainCorp, has trimmed its interim dividend by 25% after confirming a lower first half profit.
The company told the ASX on Tuesday that it will pay an unfranked dividend of 1.5 cents a share for the six months to March after reporting, as it had forecast, a weak result.
That compares to the 2 cents a share paid for the first half of 2020-21.
The company revealed underlying EBITDA $57 million in line with its recent guidance, down 5% on same half of 2021.
Net Profit After Tax was $10 million compared to $14 million for same half in 2021.
UMG reaffirmed its full year guidance of underlying EBITDA expected to be $115 – 140 million.
And the company also repeated earlier forecasts for a “Meaningful increase in FY23 EBITDA expected as conditions normalise and strategic initiatives, including transformation program, deliver earnings uplift.”
Group revenue rose 11% for the half year to $652 million “as customer demand increased in each of the Company’s domestic markets and due to the higher barley price.\”
As revealed in the trading update issued in late April, UMG said “this improvement was offset by external factors, predominately affecting our Processing segment, including the Canadian drought impacting barley quality, supply chain disruption and timing of recovery from customer of input cost inflation.”
UMG shares lost nearly 1.5% to close at $3.96.
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Has OZ Minerals (ASX: OZL) saved Havilah Resources (ASX: HAV) from a near death experience?
An option deal with OZ over an interesting South Australian copper prospect saw Havilah shares end up 80% yesterday at 30.5 cents after they surged 165% to an intraday high of 45 cents
At the close Havilah was valued at more than $94 million, compared with the $51.1 million at Monday’s close.
The driver was the agreement that could see OZ Minerals acquiring Havilah’s Kalkaroo copper-gold- cobalt project in South Australia for a total $205 million.
The deposit in the east of South Australia, just inside the NSW border and close to Broken Hill.
On top of that agreement the two companies have entered a strategic alliance that will help Havilah Resources fund a major copper exploration program
The deal isn’t done yet – OZ Minerals has 18 months to decide if it will front up with the cash for what is potentially one of Australia’s largest undeveloped open-pit copper deposits. In that time, it will be conducting a study program on Kalkaroo.
At the moment the prospect has a mineral resource of 451 million tonnes of ore with 1.1 million tonnes of contained copper, 3.1 million ounces of gold, and 23,200 tonnes of cobalt (which is an interesting group of minerals in South Australia where it is usually gold and copper, although BHP’s Olympic Dam and Oak Dam have silver and uranium as well).
OZ Minerals can back out of the agreement as long as it’s drilled at least 5,000 metres at the project. Otherwise, it will be forced to pay a shortfall of $400 for each metre not drilled.
The agreement also includes a potential $65 million consideration payable if the project’s resource estimate increases by 30%. Another annual contingent payment is linked to the price of copper. It is valued up to a cumulative $135 million, indexed to inflation.
The strategic alliance between the two will help Havilah Resources fund a major copper exploration campaign and will run for the duration of the 18-month option agreement.
It will see Oz Minerals paying Havilah Resources $1 million each month, with 50% of that going towards exploration at the Curnamona Copper Belt.
The acquisition plan will be subject to Havilah Resources shareholder approval. The company expects it will be put to a shareholder vote in August.
OZ Minerals already (and expanding) foundation copper gold mine at Prominent Hill, as well as the more recently development Carapateena mine, also in the state.
It is pushing towards a decision later this year on what could be a third mine in West Musgrave, just insider the WA border. West Musgrave will be a copper nickel mine (as opposed to the two gold copper mines.
OZ Minerals has been spending on infrastructure at West Musgrave and will make a final decision in a few months time.
It also has two exploration JVs in the Northern Territory.
