Capital Limited £CAPD - A Valuation on 21st June 2021

This Africa and Middle-Eastern mining and drilling solutions business has benefited from the medium-term gold price rally. But has their drive to reduce fixed costs inhibited their upside?

Capital Limited provides mining and drilling solutions to customers in the minerals industry primarily across Africa, the Middle East, Eastern Europe, Asia and Latin America.

The company offers exploration, grade control, technical, and blast hole drilling services. It also provides downhole survey, core orientation, borehole management, rig alignment, remote communications infrastructure, safety and security monitoring cameras, data management, reporting services, equipment rental and IT support.

The Story

Capital — as with the industry — is a cyclical business. Mining services, their cost-viability and procurement demand, depend on underlying commodity prices. For Capital, the underlying metal is gold. Accordingly, most of their customers are gold and precious metal miners with a presence in Africa (Hummingbird, Allied gold, Barrick, AngloGold Ashanti, and Centamin).

The company boomed as gold prices appreciated following the GFC right through to the end of 2012. But, revenue collapse…