Mitchell Services Limited

Good morning, everyone. Thank you for joining us today. My name is Alan Chair for Bridge Street Capital, and we are hosting Mitchell Services. They are here to present their four-year results. We have Executive Chair Nathan Mitchell, CEO Andrew Elt, and CFO Greg Satala, which talk us through the presentation. We will have a Q&A at the end, so if you could put all your questions into the chat, and I'll address them after the presentation. Andrew, over to you. Thank you.

Thanks very much, Alan, and hello, everybody. Good morning, and thanks very much for joining the Mitchell Services full year results call. Obviously, I'll go through some slides. Nathan certainly had his comments along the way, and Greg as well. And as Alan said, we'll open up for some questions at the end. We'll take the disclaimer on page two as being read as the agenda three. page three as well, and just move straight to the market profile. So we can see there, obviously, the number of shares slightly down year on year with the buyback that's been in place. Share price, obviously, has traded in a fairly wide range throughout the year and just off a little bit in the last little bit. The holdings there, obviously, Mitchell Group, Nathan Mitchell, Executive Chairman and Dream Challenge, Scott Tunbridge, one of our other directors and the founder of DeepCorp, that we acquired back in 2019. A pretty good register of institutional investors for a company of our size and then obviously the retail investors there as well. Just moving on to slide five, a summary of the business. I'm not going to go through every single metric there other than to say there's a couple of key ones heading in the right direction. Operating cash flow, a fantastic result and up year on year and return on capital again, another good result. profit after tax over $9 million, and importantly, a national safety award against all the companies of different sizes and different industries. And certainly our safety performance and our culture within the business is something that we're very proud of. So a good year for the company in summary there from a numbers perspective. From an overview perspective, you can see some of the clients there on the right. Obviously, we make the point towards the bottom of the slide that over 90% of our revenue is from the global major miners and the relevant splits of revenue, surface, underground, gold, et cetera. But demand for drilling services, there is a continued demand. We re-won all of our key expiring contracts in 24, so that's certainly a credit to the team and the quality of the service that we're providing. Inflationary pressures have eased. I think that's pretty well publicised across the industry. The drilling services market, certainly for majors and producers, is stronger than exploration. Exploration remains soft. The business has no exposure to lithium or nickel and obviously we've got those high-quality revenue streams from those high-quality clients that helps us generate that strong cash flow. Importantly, when you look at where commodities are at the moment, gold represents about 40% of our book, and gold is, from a price perspective, very high. Operationally, on page seven, the customer base remains strong. As I said, we've re-won the major contracts that we need to re-win. Obviously, albeit with fewer operating rigs, and that's come through in recent quarterlies. We have been awarded some new contracts in recent times, which is fantastic. Good wins with some new clients as well, including Whitehaven at Dornier and Blackwater, the old BMA assets out there. But the market is expected to soften due to a couple of factors outside of our control, namely the underground fire event at Grosvenor. Again, that's been well publicised. It's a site that we are operating at and We've got a couple of surface rigs going out to do some investigatory slash remediation work at the current time. It is the client's intention to conduct some investigation works and hopefully get back out there again like they did after the last incident. But obviously those assets are for sale as well. So we say here that second point, mining industry corporate activity, obviously rig counts are affected by that transaction as well. And then as mentioned previously, that general market for junior explorers is a little bit softer and you certainly see that in the equity markets. And then again, once the equity side of things improves, it takes the lag time, sort of six to nine months or so for that money to then go into the ground. But importantly, the EBITDA for the year 40.4, slightly lower than the previous corresponding period based on that decrease in utilization. some very strong numbers overall coming through. And again, importantly, a very strong material growth opportunity for the business does exist and certainly pleasing to put these next few slides into the pack for the first time and to tell people a little bit more about this opportunity that we've got in front of us. So again, we've called it Loop and again, it's a partnership between ourselves, Mitchell Services and Talisman. It's a 50-50 joint venture. You've obviously got over 50 years of brand and drilling experience on the Mitchell side and then obviously you've got the expertise and technical focus that Talisman bring on the other side and certainly that operational experience in coal mining, both surface and underground. Really, the aim of this business is to reduce emissions from fugitive gases and then to recycle that waste by using the gas where possible. So we purchased a rig. It's currently clearing customs. We've hired a CEO for that business called Vitesh Megan. He was previously working for Tees, running over a billion-dollar business operations in Queensland. And obviously, a key part of this business is linking in the drilling and the gas management and drainage with operational activities. So hopefully we get some good traction and the aim is to try and get that rig running with a client early next year once it's cleared customs and been set up. So importantly on the next slide with Luke, it is a full service offering from start to finish with Talisman and with Mitchell together. from a decarbonisation strategy perspective and modelling and gas reservoirs, gas content through to operational readiness and then actually conducting the work on the ground and draining the gas and infield management. And again, there's potential downstream opportunities longer term as well. So it's quite an exciting opportunity for the company, but it will take time to develop and it will come And again, there's a couple of slides in here, probably more for those that aren't attending today that can sort of read through these at their leisure and get a bit more of an understanding of it. But it really is that government legislation that has driven the change, the safeguard mechanism legislation. And that basically, the long and short of it is, you're either going to pay a tax if you don't reduce your emissions, or you can do the drilling and reduce your emissions. And at this stage, our modelling certainly shows that in a majority of cases, it's a a case-by-case, mind-by-mind basis, but it's certainly going to be cheaper to drain and manage the gas than it is to pay the tax and certainly more socially acceptable as well. So, Nathan, I'm not sure if you've got any comments on this opportunity and what you've seen previously in your career with things like this.

Yeah, thanks, Andrew. Yeah, I think, look, it's an exciting opportunity for Mitchell Services and Talisman. I think this is something... that's been in the winds for a number of years, even decades. The opportunity around waste gas previously just hasn't been there in the market. And it's something that we've been looking at for a long, long time. And this safeguard mechanism opens that door for us. I think for us, it's around what we saw back in the early 2000s in the start of the CSG industry. Obviously, it will start small and grow. We'll obviously be first mover in this industry. And so we're looking to really grab hold of this and drive it forward over the next 12 months and ongoing. So hopefully we see a number of rigs post the first one. That's the plan. But again, I think it'll be driven by our customers and how we can offer them a full turnkey solution. So it's an exciting time for the business.