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TORONTO (miningweekly.com) – The world’s largest drilling company, Boart Longyear, has positioned itself to weather the difficult markets and emerge a leaner, more efficient company that had taken to heart lessons learnt in its recent overleveraged past.
CEO Richard O’Brien said the company was now positioned to perform better with its significantly reduced cost footprint.
“The plan is to keep the costs permanently off the balance sheet, even in the event of a rebound in market conditions,” O’Brien, who joined Boart Longyear this year from gold mining giant Newmont Mining, told Mining Weekly Online in an interview on Monday.
He blamed over-enthusiastic outlook assumptions for the debt blowout and spending that left the company exposed to the recent downturn. The Utah-based and Australia-listed company had last month finalised issuing $300-million in senior secured notes to retire most of its $450-million in debt.
Despite the newly issued notes bearing a 10% coupon, the debt restructuring would give Boart at least some relief from debt covenants that had cast an uncertain shadow over its immediate future.
Boart functions as something of a bellwether for the mining industry. In February 2012, the company announced record revenues of $2.02-billion, for the 2011 financial year.
However, by August 2012, Boart could see what many others in the industry had not yet seen: a looming downturn, indicated by a drop in future contracts. At the company’s half-year earnings report that month, it cut its earnings outlook for the 2012 financial year by $300-million, making Boart the first firm of any significant size in the mining sector to signal the coming trough.
Boart’s businesses have been hit hard by the downturn in the resources sector, with demand for its drilling rigs falling. Utilisation rates across its fleet have fallen from about 70% in June last year, to just 45%, and the group had cut more than 5 000 jobs, which saw its head count plummeting from about 11 400 to about 6 100 during the same period. This was nearing levels experienced during the global financial crisis of 2007/8.
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