Australia’s leading minerals drilling contractor, DDH1 Limited, has joined the ASX boards as a listed company amid one of the most extraordinary exploration booms this century.
Trading under the ASX ticker DDH, the Perth-based company – established in 2006 with a vision to become the country’s premier mineral drilling contractor – raised $150 million through a partial selldown of shares by founders and financial backer Oaktree Capital Management.
DDH1’s initial public offering was one of the biggest in Australia over the past 12 months and the largest by a WA-based stock in six years. Its float comes amid soaring levels of exploration activity across the full range of commodities, including gold, nickel, iron ore, copper and lithium.
DDH1 shares began trading on Tuesday and co-founder Murray Pollock told a “bell ring” celebration – the first such event in the ASX Perth office in 12 months because of COVID-19 – that market demand for his company’s 96 rigs was soaring.
“As we begin life as a publicly listed company it will be business as usual. Demand for our services has never been greater and our clients are well-funded and experiencing extraordinary exploration success,” Mr Pollock said.
“The company has grown year on year and has been consistently profitable since its inception.
“In those early days, there was no thought of the eventual scale but only an unwavering focus on the principles of safety, technical excellence and client service – which has been maintained through to today.”
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DDH1’s fleet of mineral drilling rigs – the second-largest in Australia – carries out work for a who’s who of the largest and most successful ASX-listed mining and exploration stocks. The company’s business brands are DDH1 Drilling, Ranger Drilling and Strike Drilling.
Angus Aitken, of DDH1’s IPO joint lead manager Aitken Murray Capital Partners, described the drilling company as “the best-run mining services business in Australia”.
“The founders are keeping 33% of the company and Oaktree 22% and this business is IPO`ing to grow,” Mr Aitken said in a note to clients as DDH1 hit the ASX boards on Tuesday.
“We are absolutely nowhere near the top of the commodity cycle because we know how lonely we feel being massive commodity bulls on the cycle and hence why we love the DDH1 business.”
DDH1’s other IPO joint lead managers were Bell Potter, Macquarie and UBS. Gilbert + Tobin acted as legal adviser.
Tribeca Investment Partners has emerged as the largest new investor, with a 6.1% stake.
DDH1 managing director Sy van Dyk told investors the company’s “significant market position” reinforced the strong levels of industry recognition.
“There is growing demand in the Australian mineral drilling sector for DDH1’s services because of increased exploration, development and production spending by minerals exploration and mining companies,” Mr van Dyk said.
“As an ASX-listed company with a strong balance sheet, a committed shareholder base, a disciplined approach to growth and access to capital markets, DDH1 is well positioned to pursue its growth strategy.”
At last night’s close of 95c, DDH had a market capitalisation of $329 million. The IPO was priced at $1.10 more than a month ago, since when the sharemarket – particularly across the mining services and contracting sector – has shed 20 to 25% of its value, which was reflected in DDH1’s debut trading performance this week.
Tuesday’s ASX bell ring was the culmination of decades of hard work by Mr Pollock and his DDH1 co-founders Matt Thurston, Matt Izett and Richard Bennet.
DDH1 used its IPO prospectus to forecast revenue in the financial year to 30 June 2021 of $280.2 million, pro-forma earnings before interest, tax, depreciation and amortisation of $69.3 million and a pro-forma net profit of $30 million.
To drive home its confidence in the near and long-term outlook, DDH1 has talked up its intentions to be a regular dividend payer, beginning with a payout that could be declared as early as late August with its full-year results.