Boart's shares start rebound, coming from a long way back Philip...

Boart's shares start rebound, coming from a long way back Philip Wen
October 18, 2010

THE turnaround at Boart Longyear is gathering pace as the drilling contractor looks to capitalise on strong mining activity that has been spurred by surging commodities prices.

Boart's share price jumped 10 per cent last week, extending its surge to 18 per cent this month and prompting the Australian Securities Exchange to issue a price query on Thursday.

Goldman Sachs said the recent strength in copper and gold prices was adding to already strong drilling demand, and was particularly encouraged by strong demand across all major mining regions. A recent report by the industry consultant Metals Economics said worldwide spending on drilling would be 44 per cent for 2010.

Advertisement: Story continues below ''Miners have recapitalised and they've got money to spend,'' an Austock Securities analyst, Craig Stranger, said.

Also helping Boart's share price last week was drilling support services provider Imdex, which reported a strong first-quarter result and provided a buoyant trading outlook at its annual meeting on Thursday.

In response to the ASX price query, Boart said it had "no reason to think" its 2010 revenue and earnings would vary by more than 15 per cent - the threshold for market updates - from its guidance in August.

Boart, one of the world's largest drilling service providers, was on the brink of collapse under a crippling debt load after a severe drop in demand for its services during the financial crisis. Its share price crashed from $22 to a low of 50c at the peak of the crisis. It is now at $3.63.

Boart's recent gains, however, pale in comparison to its main competitor, Canada's Major Drilling. Its share price has surged more than 40 per cent in the past six weeks.

''Boart Longyear is still lagging but people are seeing the positive drivers and are starting to have a closer look at it,'' Mr Stranger said.

Boart is forecasting full-year earnings of $205 million, but analysts say that guidance is now conservative.