By Rhiannon Hoyle
SYDNEY-- Boart Longyear Ltd., the world's biggest provider of
drilling services for the mining sector, has tried everything from
a new chief executive to slashing thousands of jobs to weather a
global downturn in resources spending.
Now, management is considering an even more drastic approach:
breaking the Utah-based company up.
Boart Longyear said on Monday it has hired Goldman Sachs to
carry out a strategic review of the business, which is reeling from
a downturn in exploration globally as prices for commodities such
as copper have fallen.
The company recorded a net loss of US$620 million for the 12
months through December, down from a US$68 million profit a year
earlier, painting a bleak outlook for the year ahead despite recent
signs of a revival in the global economy.
"2013 was a brutal year," Kent Hoots, the head of Boart's global
products division said on a conference call Monday.
A onetime darling of the resource-rich Australian stock
exchange, Boart rode the commodities boom as mining companies
ventured deep into the jungles of Africa and arid regions such as
Mongolia's Gobi desert in search of new deposits to feed Asia's
demand.
Now, it is has become one of the biggest victims of a slowdown
in mining investment as companies plow earnings into existing
developments and return more cash to shareholders instead. BHP
Billiton Ltd., the world's largest mining company by market value,
cut capital and exploration spending by 28% to US$7.9 billion in
the six months through December.
Boart, which generates 75% of its revenue from drilling
services, said that in the last three months of fiscal 2013 only
three out of every 10 drilling rigs were operating. The company has
seen its market value shrivel to less than 200 million Australian
dollars (US$179 million) from a peak of around A$4 billion before
the global financial crisis in 2007.
Boart isn't the only mining services provider feeling the heat
as a long mining boom slows. Australia's Forge Group Ltd. this
month laid off 1,300 workers after calling in insolvency
specialists as its lenders withdrew financial support.
Heavy machinery firm WesTrac--an authorized dealer for
Caterpillar Inc. equipment in Australia owned by Seven Group
Holdings Ltd.--said late last year it would ax hundreds more
jobs.
In Australia, the resources sector accounts for almost 10% of
the nation's jobs--around double the level a decade ago--and close
to 20% of national output. In recent years, much of the employment
growth in the industry has come from companies that service mining
operations, including power generators, engineering firms, and
those that ferry raw materials to ports for export.
The mining services downturn isn't confined to Australia,
however. In Canada, Cabo Drilling Corp. reported a loss for the
three months through September and said revenue was down more than
50% on a year earlier.
Boart said the latest review could lead to a refinancing,
recapitalization, sale of assets or a possible breakup of the
firm's drilling services and products divisions aimed at reducing
debt. It didn't provide any deadline for the review.
The mining services company has already taken drastic steps in
the past year to shore up its balance sheet, shedding 2,600
workers, axing dividend payments, and relocating its manufacturing
operations from Perth, in Western Australia, to a cheaper plant in
Poland.
In 2012, the company ousted Craig Kipp as chief executive
following a sharp decline in the company's share price. He was
succeeded by Richard O'Brien, the former chief executive of Newmont
Mining Corp.
Monday's result included US$461 million in restructuring costs
and asset write downs.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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