Perenti boosts shareholder value with surging cash flow and new mining contracts
Diversified mining services group Perenti (ASX: PRN) has advised the market that its free cash flow for the 2024 financial year is expected to be “materially above guidance” at approximately $180 million.
The cash flow will be generated from operations after interest, tax and all capital expenditure and after the company’s investment in the digital services business idoba.
The company expects to deliver continued strong free cash flow in the new financial year.
Debtor collections
Perenti said the free cash flow generation could be attributed to above-forecast debtor collections inclusive of contract rate adjustments, with cash flow conversion above 95% despite the risk of late payments due to 30 June falling on a Sunday.
A reduction in capital expenditure for the 2024 financial year to approximately $305m (compared to guidance of approximately $350m) was due to the redeployment of assets released from the discontinued Savannah and Cosmos nickel projects and the timing of capital payments.
Shareholder value
Perenti managing director Mark Norwell said the revised figures were evidence that the business could return meaningful value to the company’s shareholders.
“In recent years, we have built a global business of scale with a proud history of underground expertise, surface mining, production and exploration drilling and supporting mining services, which distinguishes us in our peer group,” he said.
“We believe our leading underground and drilling businesses will become increasingly critical to deliver the minerals required to transition to an electrified economy.”
“It has positioned us to deliver additional upside as demand increases for drilling services and continues for underground mining capability.”
Key merger
Chief financial officer Peter Bryant said he was pleased to see the company’s investments and efforts pay off.
“The seeds of our success were sown back in 2018 with the merger of the Barminco and Ausdrill businesses and further enhanced through the acquisition of DDH1 in October,” he said.
“Since the inception of Perenti, the goal has been to build a business capable of sustainable growth and strong free cash flow, which we have delivered and will continue to deliver, with an ongoing focus on returns to shareholders.”
Barminco contracts
Perenti subsidiary Barminco has been awarded a new development contract with Spartan Resources (ASX: SPR) and contract extensions to four existing projects.
The Spartan scope focuses on the construction of an underground exploration drive at the greenfield Dalgaranga gold project in Western Australia, running adjacent to mineralised gold zones at the Never Never, Pepper, Four Pillars and West Winds deposits.
Work is scheduled to start in the current quarter and is expected to take 10 months to complete.
It will utilise a combination of existing capital equipment and $5m in new growth capital.
Barminco has also been granted contract extensions for the Siou and Wona underground development at the Mana gold mine in Burkina Faso owned by Endeavour Mining, IGO’s (ASX: IGO) Spotted Quoll nickel mine in Western Australia, the Mt Colin copper mine in north-west Queensland owned by Aeris Resources (ASX: AIS) and an existing copper-gold underground project in Canada.
The extensions will not require new capital and are expected to contribute revenue of approximately $160m to Perenti’s books for the 2025 financial year.