Swick Mining Services increases its order book to $353m

Mining contractor Swick Mining Services (ASX: SWK) has continued it recovery after announcing this morning its order book now totalled $353 million.

The boosted order book is a result of contract extensions and Silver Lake Resources (ASX: SLR) selecting Swick as the preferred tenderer for underground core drilling services at Mount Monger in Western Australia.

Swick has aslo been awarded a three-year contract extension at the Barrick and Newmont Nevada gold mines joint venture in the US and an increase in the contract scope at Northern Star Resources’ (ASX: NST) Jundee mine in WA.

According to Swick, these latest contracts secure work for 18 rigs and increase the company’s current contracted work to $353 million.

“We are delighted to be deepening our relationships with existing clients and, in the case of the new work with Silver Lake, returning to a project where we have extensive experience,” Swick managing director Kent Swick said.

“This work builds on a successful strategy of moving rigs onto reset rates of better performing projects, while lowering our operating costs, providing us with a strong platform to drive earnings growth in FY2020.”

Mr Swick added it was “particularly pleasing” the company’s international strategy was “yielding significant results”.

He noted a third of the company’s deployed underground diamond drilling rigs were now operating outside of Australia.

“By the end of September, we will have at least 22 rigs operating in our international operations including the US, Portugal and Spain – all major mines with tier one clients,” he said.

New contract details

The contract at the Nevada gold mines joint venture is for three years and will involve Swick deploying another two rigs to the operation.

Swick noted the contract extension at the joint venture secures work for 10 rigs at fixed pricing over two years, with the third-year subject to a rise and fall application.

“Our US operations are now locked in for high volume, high-value work for the next three years with 10 rigs at the Nevada gold mines joint venture and another eight recently announced at Northern Star’s Pogo gold mine in Alaska,” Mr Swick said.

“We are excited about the prospects of further expanding our services at the Nevada gold mines joint venture and are currently reviewing exciting new equipment designs to achieve greater productivity in the challenging drilling environment.”

He added at Pogo the eight rigs will all be in operation by the end of September.

Meanwhile, at Silver Lake’s Mount Monger operation, Swick will undertake underground diamond coring services for two years, with provision to extend the contract to three years.

The contract is due to begin in August and will involve three rigs.

At Northern Star’s Jundee mine, Swick will deploy an extra five diamond coring rigs which add to Swick’s nine that are currently operating at the site.

“Once we reach 14 full time rigs at Jundee, it will represent a record number of rigs that Swick has had at any one mine, and the largest Australian underground diamond drilling program I am aware of since we have been in the underground contracting business for over 20 years,” Mr Swick said.

Swick is yet to release its results for the June quarter, but revealed a 58% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) of $7.3 million for the March 2019 quarter – up from $4.6 million in the previous corresponding period.

Revenue was up 7% from $32.9 million to $35.1 million during the same period.

Swick’s shares had risen almost 9% to sit at $0.245 by early afternoon trade.