Capital Drilling PLC (LON:CAPD) saw a strong recovery in activity in its latest quarter but cautioned over the uncertainty in Tanzania due to the recent changes to the country's mining legislation.
The mining driller has a contract with Acacia Mining (LON:ACA) at North Mara in Tanzania.
Jamie Boyton, Capital’s executive chairman, said the legal changes in the country had added more uncertainty to the outlook for the second half.
The Tanzanian Government has passed bills relating to the sovereignty, contractual terms and amended the Mining & Petroleum Act.
This comes on top of a 1% clearing tax recently imposed and a dispute with Acacia Mining over the amount of concentrate the miner is exporting.
“The changes were unexpected and the practical interpretation is at this stage unknown. We will continue to monitor developments closely,” Boyton said.
Revenues grow strongly
Revenues in the second quarter to June rose by 26% over the previous year to US$30.7mln, but were slightly below the previous three months.
Boyton said it had been another solid quarter with the half year revenues of US$62.3mln or 49% higher than a year earlier.
The AIM-listed company has a portfolio of long term, mine site based drilling contracts and was awarded two new long term contracts in the second quarter- grade control drilling at the Tasiast Gold Mine in Mauritania by Kinross and underground drilling at the Syama Mine in Mali (Resolute).
Drill rig fleet utilisation over the half was 56% (40%) with the amount earned per rig up by 9%.
New contracts
Since the half year, Capital has also been awarded a new contract with Aura Energy in Mauritania for one rig, with Orecorp, also in Mauritania, for one rig and an additional underground contract with Resolute at Syama.
"For the balance of FY17 we will continue to focus on improved operational performance at existing contracts, the mobilisation and commencement of operations at Tasiast and Syama, along with diligent cost management and prudent discipline around Group capital expenditure." Boyton added.
“While levels of tendering activity marginally declined in Q2, market conditions remain supportive, with continued supportive commodity prices and capital markets activities, particularly in gold and speciality metals.”