More than two decades of success

Minerex’s achievements for the year 2012 included increasing the company’s fleet of support and auxiliary equipment and boosting its extensive stock of consumables and spares.

In addition, the company increased its operations in West Africa, with Minerex maintaining a strong presence in Ghana and Senegal and signing new contracts in both countries.

Africa

Minerex’s ties to Africa are deep. Indeed, the company’s operations began in Africa, where an abundance of natural resources created the initial demand for Minerex’s services. Even a small sampling of Minerex’s client list is like a who’s who of African mining: AngloGold Ashanti, Teranga, Basari Resources ,BHP, Newmont, Goldfields, and Iamgold have all worked with the company.

With over two decades of experience in West Africa, Minerex’s client base most recently seems to be clustered in Ghana, a country that has bought the company great success, says managing director and chief executive officer Laszlo Toth.

“Ghana has Africa’s longest standing democracy,” he says. “In addition, the country has been described as the second most politically stable country in Africa and the gateway to Africa. What makes Ghana interesting to us as investors is that it is well-endowed with natural resources, particularly gold. Ghana is the second biggest gold producer in Africa. The quality of our drilling program and a commitment to technical excellence and safe operations has resulted in satisfied clients, thus enhancing our reputation.”

Ghana’s economy grew from four per cent in 2009 to 13 per cent in 2012. This has made the country the fastest growing economy in the world.

Senegal is one of the most economically successful countries in the region. It remains the economic centre in the region and is the most visited country in West Africa. The Dakar port is the second biggest in West Africa. An estimated US $5billion has been invested in the Senegal mining industry from 2000 to 2012.

The company is currently undertaking exploration drilling work in both Ghana and Senegal although plans call for the company to expand operations into other geographical regions.

Challenges

Work in Africa is not without its challenges. Toth cites the usual frustrations of working in emerging nations: lack of infrastructure development, perceptions of corruption and unfair licensing practices, and high capital costs of establishing or expanding a mining presence.

“The threat of civil unrest in some parts coupled with wars, internal ethnic or political conflicts, and refugee displacements continues to destabilise some West and East Africa countries and constrains new investment in mineral exploration,” he says.

“Secondly, many West and East African countries are still not politically stable and the possibility of a change of government, with the resulting turnaround in mining policies, can be very off-putting for a prospective investor. Accessibility [is problematic], both physical access to relevant sites and from indigenous people, inadequate infrastructure and lack of trained local personnel.”

On the upside is the attraction of working in an environment where the regulatory frameworks reflect government keenness to develop.

“While there are other industries, among them tourism and telecommunications, that are growing in stature as drivers of Africa’s economic growth and development,” says Toth, “none has the same depth of potential to generate revenue, create employment, provide sustainable economic and social benefits and attract large-scale, long-term international investment as mining exploration.”

Indeed the market for exploration in the area has opened up due to the stable political environment,” says Toth, offering the exploration industry as “a favourable investment and operating climate in [an area] enriched in mineral resources.”

27 Years of Experience

Minerex has seen many changes over the years.

“Some 27 years ago, when the company started operations, we were faced with some challenges such as telecommunication and lack of infrastructure such as roads and accessibility to drill locations,” says Toth. “Also, we could not communicate with drill crews at remote areas; this was done only through VFS communications. Today, with the advent of GSM phones we are able to communicate effectively with our drill crews by transmitting information via the internet as well as video conferencing. Due to regulations and enforced laws, the drilling industry has also seen improvement in limiting the environmental impact of drilling.”

However, not all changes are so beneficial. Toth believes there is an industry-wide slowdown in drilling activities due to pressure on early stage exploration companies as financing from the capital markets becomes more difficult to come by and there is also pressure on producing companies to manage their exploration costs in the light of increasing costs on the production side.

The company has recently seen some clients reduce the number of drill rigs operating at their sites. Forecasts call for the slowdown in drilling activity to continue into the first quarter of 2013 and as such Minerex continues to actively bid for new jobs. The company has also taken immediate steps to reduce both costs and contract workforce, and continues to review capital expenditure throughout the remainder of the year and into 2013.

Looking to the Future

While he says new exploration companies have made drilling very competitive over time, Toth looks towards the future with optimism, saying Minerex has plans to maintain its strong presence in West Africa by providing a high quality, diverse, innovative and reliable contract drilling service to all sectors of the industry.

“We will also continue our commitment to continuous improvement and industry best practice,” says Toth. “We expect to do more of the same, executing the strategies and programmes that we have because we believe, right now, that these are the right places to be and the right things to do, and we will do our best to continue growing the company.”

“We believe in the long-term, the fundamental drivers of our business remain positive and despite the difficult environment which currently exists, demand for drilling services will continue to grow and with our modern rig fleet and experienced staff, we are well positioned for a recovery in the industry.”

The Company plans to grow progressively and build its current client base, he says, while continuing to “assess expansion opportunities throughout West Africa and other jurisdictions of Africa to meet demand for our services and expertise.”