Capital Drilling Limited (LON:CAPD) is making a phased strategic investment of up to US$3.8mln in a company that provides laboratory testing services to the mining and exploration industries.
It has advanced US$950,000 to private company A2 Global Ventures – the first of three tranches to be paid over the course of this year.
Trading as MS Analytical, A2 currently has around 50 blue-chip and mid-tier customers in more than 15 countries.
The investment by Capital Drilling will fund the business’ expansion plans, including the creation of new labs in AIM company’s core African market.
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“Capital Drilling and A2 see significant opportunities to realise synergies and support customers through the cross selling of services and the sharing of infrastructure,” a statement from Capital said.
It added the investment was part its strategy to glean greater exposure to the “improving outlook for mineral exploration markets”.
Capital’s chairman Boyton and non-executive director, Brian Rudd, will join the board of A2.
Resutls in line
In a separate announcement, the company revealed its 2016 results.
Underlying earnings (EBITDA) rose to US$13.1mln from US$10.1mln on the back of an increase in revenue to US$93.3mln from US$78.7mln.
The average fleet size in 2016 fell to 94 drill rigs from 97 in 2015, but they were kept busier, with the fleet usage rate improving to 45% from 34%.
Bang on forecast
House broker finnCap said the results were in line with the recent trading update.
“Market conditions continue to improve, with a strong improvement in exploration activity,” the broker said, as it left its recently updated current year estimates unchanged.
Capital Drilling recapped a number of exploration contracts it had won during the year, the benefits of which are expected to feed through this year.
“After a strong run, the shares have recently seen some profit taking and now offer an excellent buying opportunity,” the broker said.
Up 88% in the last year, shares in Capital Drilling succumbed to mild profit-taking as the fell 5% to 50p after the results.