Capital Limited (LON:CAPD), the mining drill rig contractor, has received an upgrade to buy from Peel Hunt, which sees the recent dip in the share price as unwarranted.
A high gold price is leading to plenty of exploration activity, says the broker, which will help revenues in the current year.
A recent third-quarter trading update indicated rig utilisation rates had risen, a feature Peel Hunt expects to continue through to the year to December 2021 and something that will feed into higher rig revenues as availability tightens.
The Bonikro mining services contract is taking longer to settle in than expected but there are an additional six tenders outstanding at present, which might add as much as 20% to longer-term earnings estimates, Peel Hunt estimates.
One win a year is a realistic target suggests the broker, which would add underlying earnings of US$6-10m per mining services contract.
Peel Hunt has raised its target price to 90p from 86p and said it will look at it again if more mining services contracts are won.
Shares were unchanged at 65p.