Master Drilling Group Ltd INTERIM RESULTS FOR THE PERIOD ... · TYPE OF MACHINE REVENUE ARPOR NUMBER OF RIGS UTILISATION US$ US$ % Drain holes and slot raises 172 505 28 751 4 25.0%

www.masterdrilling.com

Master Drilling Group Ltd

INTERIM RESULTS FOR THE PERIOD

ENDED

30 JUNE 2014Danie Pretorius, CEO

Andre van Deventer, CFO

Cape Town: 8-9 September 2014

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 Drilling’s 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.

2


AGENDA

Group overview

Investment highlights

Corporate strategy

Major clients and commodities

Operations

Historical financials

Order book

Share price

3


GROUP OVERVIEW

4


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

5


GROUP OVERVIEW: GLOBAL OPERATIONS

6


GROUP OVERVIEW: KEY MILESTONES

7

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 Platinum’s 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

World’s fastest completion with HG380 machine at Tara Mines, Ireland (692m x 4.5m in 90 days)

2006 Drilled Europe’s 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

8

SAFER, FASTER, MORE ACCURATE

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

1

2

3

HG380 raisebore machine

Reamer head


INVESTMENT HIGHLIGHTS

9

GLOBAL RAISEBORE DRILLING

SPECIALIST WITH SUBSTANTIAL

GROWTH UPSIDE

STRONG PIPELINE OF ORDERS

FROM TOP-TIER MINING

CLIENTS

PREFERRED EMERGING-

MARKET EXPOSURE WITH

BENEFIT OF COUNTRY AND

COMMODITY DIVERSIFICATION

SUPPORTIVE MARKET

CONDITIONS UNDERPINNED BY

ROBUST COMMODITY PRICES

WORLD-CLASS MANAGEMENT

EXPERTISE

1

25

4 3


0

20

40

60

80

100

120

140

2010 2011 2012 2013 2014 - H1

US

$m

REVENUE

0

5

10

15

20

25

30

35

2010 2011 2012 2013 2014

US

$m

EBITDA


10



11

Global leader in

raisebore-drilling services

Niche drilling segment used extensively in on-mine development (ventilation shafts and ore passes) by

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 flow-

generative 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


MAJOR CLIENTS AND COMMODITIES

12

GROUP REVENUES BY COMMODITY

Gold31%

Platinum7%

Copper16%

Polymetallic11%

Iron Ore21%

Other10%

2014 – H1

Gold36%

Platinum14%

Copper16%

Polymetallic17%

Iron Ore1%

Other16%

2013 - FY


Rest of Africa8%

Latin America60%

South Africa31%

Rest of the World

1%

2013 FY

Rest of Africa13%

South Africa36%

Latin America49%

Other countries

1%

2014 – H1


13

REVENUE BY GEOGRAPHIC LOCATION



REVENUE BY STAGE OF MINING ACTIVITY

Production stage77%

Exploration stage

4%

Capital stage19%

2014-H1

Production stage78%

Exploration stage

9%

Capital stage13%

2013 - FY

14



Client base primarily comprises blue-chip major and mid-tier mining companies

15

AFRICA LATIN AMERICA


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

17

KEY PERFORMANCE INDICATORS SUMMARY

2009 2010 2011 2012 2013 2014 – H1

Total Raisebore rigs 68 73 78 88 88 91

Utilisation % 65% 80% 80% 71% 77% 76%

Revenue per operating rig per month (ARPOR)

- (US$) 83 671 82 651 98 128 108 847 117 047 111 303

Total Slim rigs 40 43 54 64 74 67

Utilisation % 39% 23% 58% 51% 54% 50%

ARPOR (US$) 43 228 71 874 51 705 34 293 50 740 58 570

**Note that Total raise bore rigs from 2009 – 2012 includes support equipment


Raisebore ARPOR variance

18


OPERATIONS: KEY PERFORMANCE INDICATORS

19

TYPE OF MACHINE REVENUE ARPOR NUMBER OF RIGS UTILISATION

US$ US$ %

Drain holes and slot raises 172 505 28 751 4 25.0%

Small 1 786 927 85 092 10 35.0%

Medium 7 802 800 80 441 17 95.1%

Large 23 252 616 137 589 34 87.1%

X large 6 164 151 162 214 8 79.2%

XX large 1 166 300 97 192 2 100.0%

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%


OPERATIONS: REVENUE BY DRILLING TYPE

20

GROUP REVENUES BY STAGE

2009 – 2014 (H1)

GROUP TOTAL DRILL RIGS BY MACHINE TYPE

2009 – 2014 (H1)

9 921 18

113

11 12

10 1516

12

33

46

6368

93

50

53

67

94

101

120

65

0

20

40

60

80

100

120

140

2009 2010 2011 2012 2013 2014 - H1

US

$m

Exploration stage Capital project stage Production stage

110

120

138

152

162158

0

20

40

60

80

100

120

140

160

180

2009 2010 2011 2012 2013 2014 -H1

Dri

ll r

igs

Drain holes and slot raises

Small

Medium

Large

X large

XX large

Slim drilling: surface

Slim drilling: underground

Blindhole drilling

Other

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

Source: Master Drilling Group Ltd


HISTORICAL FINANCIALS: FINANCIAL POSITION (US$m)

| 21

2014 – H1 2013 COMMENTS

Assets

Total non-current assets 108 976 147 101 965 335 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)

Total current assets 62 945 836 60 455 290

Total assets 171 921 983 162 420 625

Equity

Equity 99 920 743 91 867 551

Non-controlling interest 15 171 433 14 250 534

Total equity 115 092 176 106 118 085

Liabilities

Total non-current liabilities 18 484 601 21 015 693

Total current liabilities 38 345 206 35 286 847

Total liabilities 56 829 807 56 302 540

Total equity and liabilities 171 921 983 162 420 625


HISTORICAL FINANCIALS:

COMPREHENSIVE INCOME (US$m)

| 22

2014 – H1

Unaudited

2013 – H1

Unaudited

2013 Full Year

AuditedCOMMENTS

Revenue 65 187 683 54 055 183 119 688 645 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%

Cost of sales (43 857 184) (34 856 225) (79 930 462)

Gross profit 21 330 499 19 198 958 39 758 193

Other operating income 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

Investment revenue 461 819 866 307 1 473 911

Finance costs (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)

Profit for the year 9 347 005 7 729 475 15 795 744

Other comprehensive income – net of

taxation(465 826) (9 802 981) (12 562 962)

Exchange differences on translating

foreign operations(465 826) (9 802 981) (12 562 962)

Total comprehensive (loss)/income 8 881 182 (2 073 506) 3 232 782

Profit attributable to: 15 795 744

Owners of the parent 8 426 106 7 635 451 15 127 395


Total comprehensive income

attributable to:8 881 182 (2 073 506) 3 232 782

Owners of the parent 7 960 283 (2 167 530) 2 564 433



ORDER BOOK

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-

20 000 000

40 000 000

60 000 000

80 000 000

100 000 000

120 000 000

140 000 000

2014 2015 2016 onwards

US

$m

Other

Iron Ore

Coal

Chrome

Diamonds

Platinum

Zinc

Tin

Silver

Gold

Copper

Poly Metalic

140

120

100

80

60

40

20

0

www.masterdrilling.com 24

CORPORATE OFFICE

Master Drilling Group Ltd

4 Bosman Street

PO Box 902

Fochville

2515

South Africa

Telephone: +27 18 771 8100

Email: [email protected]

Documents

Master Drilling Group Ltd INTERIM RESULTS FOR THE PERIOD ... · TYPE OF MACHINE REVENUE ARPOR NUMBER OF RIGS UTILISATION US$ US$ % Drain holes and slot raises 172 505 28 751 4 25.0%