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Craig Kipp’s business is booming. As he walks the floor of Boart Longyear Ltd.’s plant in Mississauga, Ont. , he looks upon row after row of steel drill rods that have no time to gether dust before being shipped to customers from Sydney to Santiago. This year, the Boart factory could hardly be busier. It’s the outlook for 2013 that makes Mr. Kipp a bit uneasy, because the mining world is swooning.
“Is the world more nervous than it was a couple of months ago? Yes,” said Mr. Kipp, the chief executive officer of the South Jordan, Utah-based company. “I’m more nervous.You wouldn’t be breathing in this environment without being a little concerned about what’s going on in Europe, in China and so on.”
But despite a murky outlook for his industry, Mr. Kipp is far from gloomy, energized by customers that include most of the world’s largest miners, which have not let up on drilling.
Every drill and drill bit pushed through the Boart Longyear plant in Southern Ontario has been spoken for, as have those it makes in seven factories around the world to supply companies from Ghana to Guatemala, Tucson to Tierra del Fuego.
That defies a commodity market slowdown that seems to deepen with each new signal that China’s growth charge has slowed or that the U.S. economy can’t seem to stop spinning its wheels, or that Europe is flirting again with economic mayhem.
“We haven’t seen it impact our demand,” said Mr. Kipp, who has run the company since 2008 and helped reshape and streamline the production line so it can react to changes in the commodities cycle. “So we are still fairly bullish on the world.”
Boart Longyear sells 80 per cent of its drills and services to the world’s top 20 mining firms while the remainder goes to junior miners.
Other large drilling companies are equally, albeit cautiously, optimistic, even though risk-averse investors have punished their stocks, just as they have with the pure-play mining companies.
Shares in Boart Longyear are off about 30 per cent from this year’s peaks, with most of the losses occurring since early March, when the prices of gold, copper and other metals began a slow retreat from near-record levels.
Shares in Major Drilling Group International Inc., a Canadian company and Boart’s next biggest rival, are off by about the same amount and Geodrill Ltd., a smaller driller that focuses on West Africa, has seen its stock cut by 40 per cent in the same period.
Those numbers are telling because drilling company stock is a bellwether of the mining industry in general, tied nearly as closely to the prices of metals as the miners themselves. The prices of gold and copper – which have oscillated with tumultuous financial markets – are especially closely monitored because they account for more than 50 per cent of exploration spending.
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/mining-suppliers-cautiously-optimistic-to-the-core/article4391092/