April 13, 2018
Demand increasing for drilling services and equipment
Boart Longyear is seeing an increase in demand for its drilling services and drilling equipment. Since the beginning of 2018, the Drilling Services division has added several new drill rigs to its fleet to keep up with the increased demand. You can learn more about the new rigs added to the fleet in the press release. Recruiting and training efforts are also increasing to supply the needed talent to meet the demand in mine development and exploration activities.
This follows an upturn in global exploration trends as mines are again starting drilling projects that were previously on hold. According to a recent S&P Global Market Intelligence special report, “Global spending on the search for nonferrous metals rose to an estimated US$8.4 billion in 2017, compared with US$7.3 billion in 2016, representing the first annual increase in exploration spending by mining companies after four consecutive years of declining investment in this area.”
Although commodity prices of copper, gold, iron ore and other metals have been fluctuating, when looking at trends over the last five years, we are seeing increases as commodity prices climb from the trough lows of 2015 and 2016.
During 2017, Boart Longyear recorded that 54% of our Drilling Services revenue came from activities in the gold sector and another 20% from copper. The increase in these commodity prices is having a positive impact on the company’s bottom line.
The S&P Global Market Intelligence report stated, “With the generally positive trend in metals prices extending into early 2018, we expect the global exploration budget for 2018 to increase by a further 15% to 20% year-over-year.”
“With the generally positive trend in metals prices extending into early 2018, we expect the global exploration budget for 2018 to increase by a further 15% to 20% year-over-year.”
Although drilling is often perceived as exploratory in nature, in recent years mines have required drilling equipment and services more for their development projects near existing mine operations rather than for new exploration. When analyzing the different stages of mining and looking to where Boart Longyear offers its services, the company saw 57% of 2017 revenues coming from development or near mine brownfield projects. Additionally, 24% of revenues came from in-pit production projects and 10% from exploration or greenfield projects. During market downturns, mining companies look at ways to slash expenditures to conserve cash and often immediately turn to reducing investment in new ventures and exploration activities and focus instead on maintaining operations and working on brownfield projects.
Following global trends on 2017 exploration spending by region, Boart Longyear sees the majority of demand for its products and services coming from the U.S., Canada and Asia Pacific (largely Australia). This is followed closely by increasing demand for drilling services and drilling equipment in Europe, Africa and Latin America.
Indications show the trend should continue favorably for exploration-related companies. But there are any number of circumstances that can affect the future, such as trade agreements, political and economic uncertainty, environmental regulations, and demand for new technology. A world market provides opportunity with an increasing demand for goods that require resources from mining operations. Whether it’s lithium for the next wave of electric cars, or copper to keep our cell phones and computers advancing, our reliance on mining and metals is assured.
Data for this article was taken from Boart Longyear’s 2017 Full Year Financial Results as reported to the Australian Stock Exchange (ASX) on 28 February 2018.
Industry research and statistics were quoted from S&P Global Market Intelligence's World Exploration Trends 2018 special report. To order a free copy of the full report, visit the S&P Global website here.
Boart Longyear has job openings to help meet the increasing demand for its worldwide drilling services. For information and to search by region, go to http://careers.boartlongyear.com.
Source: S&P Global Market Intelligence's World Exploration Trends 2018 (WET). https://www.spglobal.com/marketintelligence/en/news-insights/research/world-mining-exploration-trends-report-2018
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