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MDM 's Interim Results

30 November 2009

MDM Engineering Group Limited (AIM:MDM) (“MDM Engineering” or “MDM”) is pleased to announce its unaudited interim results for the six months ended 30 September 2009. MDM Engineering is an African-focused engineering and project management company which provides a range of value added services to the mining industry, including project evaluation, process engineering, design and project management.


  • Revenue of US$22.44 million (2008: US$17.33m)
  • Gross profit of US$7.24 million (2008: US$8.85m)
  • Profit before taxation of US$5.05 million (2008: US$6.81m)
  • Cash and cash equivalents of US$13.37 million (2008: US$13.76m)
  • Basic earnings per share of US 9.96 cents per share (2008: US 13.16 cents)
  • Interim dividend of US 3.75 cents (2008: US 3.75 cents)
  • Strong balance sheet with negligible gearing
  • Dividend cover of 2.66 times


  • Project value under execution at period end of US$338 million
  • Continued focus on cost containment and improvement in operational efficiencies
  • Awarded four studies and two execution projects since the financial year end
  • Good prospects of additional execution projects maturing in the near term across multiple resources
  • Carefully directed marketing, specifically targeting junior to mid-cap mining companies, and business development initiative expected to result in a number of new opportunities to expand the order book in 2010

MDM Engineering Chairman, Bill Nairn commented:
"The effect of the global credit crisis, depressed commodity prices and the resultant delays and suspensions of a number of mining projects in the latter part of 2008 had a direct impact on MDM’s first half performance. However, no downturn is permanent and while the global economy has not yet fully emerged from the crisis, there are signs of an improvement in the resources sector. This is evidenced by the strengthening in commodity prices experienced over the last few months, resulting in numerous expressions of interest received by MDM for project related work, and by the award to MDM of two execution projects and four studies in the period since the year end.”

Gross profit margin for the period was 32.1% against a gross profit margin of 46.4% for the year to 31 March 2009 and 51.0% for the corresponding period in the prior year. The reduction in gross margin reflects the lower levels of projects under execution in the period. This was due to the downturn experienced in late 2008, with many projects cancelled and/or postponed. In addition, margins on some new execution projects were restructured in return for a reduction in risk exposure to MDM. Higher site costs incurred by MDM on behalf of our clients also had a dilutive effect on the reported gross profit margins; these costs are shown in the revenue number as they are recovered from the client but are also recorded in the cost of sales.

The increase in the other income from the previous reporting period was due to the fluctuations that have been experienced in the South African Rand and the Euro against the US dollar.

The Group still maintains a strong financial position, with substantial cash reserves and positive free cash flows placing MDM in a strong position to capitalise on opportunities as the resources sector recovers.

The Group’s current workload ensures its highly experienced technical team will be fully utilised well into the next financial year and the combination of increased requests for studies together with good near-term execution prospects bodes well for the Group’s profit growth performance.

MDM continues to provide premium value adding services to its clients, establishing itself as a market leader in the junior and mid-cap mining space in Africa and seeks to reward its stakeholders for their support and belief in MDM Engineering and its business model. MDM has in the past had a very high success rate of converting studies into execution projects. 
The Board believes that MDM Engineering has a robust business model, is financially sound and is well positioned to continue growing its business during the current global economic crisis; due to its positive cash balances, execution pipeline and solid growth prospects it has decided to maintain the interim dividend at US 3.75c, payable on the 31st December 2009, to all shareholders registered as at the 11th December 2009.

In addition, to announcing the interim results, it is with regret that we also announce the resignation of Grant Lowman from his post as Chief Executive Officer (CEO) of MDM Engineering, to pursue other interests. 

Grant has agreed to stay on as CEO of the Group until such time as a new incumbent has been identified and appointed. The Group anticipates making an appointment during the last quarter of the 2010 financial year. Furthermore, once the new CEO has taken up the role, Grant has agreed to remain available in a consulting capacity to ensure a smooth and seamless handover.

MDM would like to thank Grant for the contributions he has made during his tenure and we wish him all the best in his future career.

Operational Review

The tough trading conditions of 2008 continued into 2009, and it was only towards the latter part of the six month period that it was possible to see a slight easing in market conditions. Our industry has by no means fully recovered from the effects of the global crisis, but there are certain indications of late that signal an improvement in sentiment and prospects.

MDM’s target market has historically been mainly African based projects. MDM has, however, received a number of requests to provide services in other parts of the world, and we are examining a number of these opportunities.

The reimbursable EPCM contracting model continues to serve MDM and its clients well, with MDM able to contain and sometimes reduce the cost of plant and equipment for our clients, both as a result of value engineering and the strength and depth of our relationships with the supplier industry. Our staff remained at full utilisation during the period and we were fortunate enough to be in a position which required us to hire skills to accommodate the workload.

MDM has weathered what we believe to be the worst part of the storm, as evidenced by the strong cash position which the Group has successfully preserved. MDM is ideally placed to benefit from the recovery in commodity markets, particularly in the southern African markets in which it specialises, as new execution projects are brought on line.

Execution Projects

MDM has been involved in three execution projects during the period.

The First Uranium Corporation Chemwes Gold and Uranium plant progressed well during the period. The gold plant was commissioned during August and the uranium plant will be commissioned during the first quarter of calendar year 2010.

The First Uranium Corporation Chemwes Phase 2 project was taken into execution in July and is proceeding well.

The Kalagadi Resources Manganese Umtu project proceeded into early execution phase via a FEED (Front End Engineering and Design). This is expected to be completed during the last quarter of calendar 2009. The project is gaining momentum and increased site activity is anticipated during first calendar quarter of 2010.


Safety is a core focus for MDM and we are extremely proud to have achieved in excess of 1,8 million man-hours on site with zero lost time incidents over the six month period. To date, MDM has achieved in excess of 6,4 million hours with only 5 lost time incidents.

Feasibility Studies

An important indication of MDM’s future work is the study pipeline. MDM worked on seven studies during the period under review, with the following studies started during the period:

Rand Uranium – Cooke Uranium Project
The scoping study will explore the economic viability of reprocessing medium grade gold and uranium tailings and the retreatment of the concentrate at a new plant as supplementary feed.

Central African Mining Exploration Company (Camec) – Estima Coal Project
MDM was awarded the contract for the pre-feasibility study (“PFS”) for Camec’s coal project in Mozambique. The scope of work for the PFS will see MDM providing the process plant and infrastructure design as well as the related capital and operating cost estimates.

Mantra Resources – Mkuju River Uranium Project
MDM was awarded the PFS by Mantra Resources on its Mkuju River uranium project in Tanzania. The scope of work for the PFS will see MDM managing the inputs from various consultants as well as the owner’s team, in addition to providing the process plant and infrastructure design as well as the capital and operating cost estimates for these.

Goldfields Ltd – West Wits Tailings Facility
MDM is one of the companies that has been awarded the contract for the Feasibility Study (FS) for Goldfields Limited’s West Wits Tailings Facility at Driefontein in South Africa. Work has commenced and is expected to be completed during the first calendar quarter of 2010.

MDM’s increasing expertise in uranium coupled with active marketing across a range of commodities has resulted in a healthy flow of new studies and many expressions of interest.

MDM was working on a wide range of projects and studies at the time of the global financial crisis, a number of which were suspended for various reasons. We maintain close contact with these clients and remain confident that these projects will be reactivated and that MDM will play a major role in these projects.

The MDM Team

MDM has created a culture that allows every person to develop to the best of their ability, and a working model that allows for the best synergies across a diverse range of personalities and skills. We have taken advantage of the softening labour market to hand pick individuals to bolster our skills in certain areas and to accommodate our growing workload.

The six months under review has not been without its challenges and the result is a credit to the MDM team for their dedication and hard work.


The effects of the global financial crisis has by no means worked its way through the system and MDM is likely to feel the effects for some time to come.

MDM has, however structured its response to this crisis as a challenge to be overcome and has initiated operational and cost optimisation exercises, commercial systems review and increased marketing and new business development strategies.

MDM does not approach the market randomly or sporadically; it aims to nurture key relationships with the objective of adding value to clients, which has resulted in a large percentage of repeat business. MDM is therefore pleased to have a healthy execution pipeline in place, with good near-term prospects in both execution work and studies.

Financials and Notes

Key Information:

MDM Engineering Group Limited is a minerals process and project management company focused on the mining industry. The Company provides a wide range of services from preliminary and final feasibility studies, through to plant design, construction and commissioning. To date, the Company's clients have largely been junior and mid-tier mining corporations with operations in Africa.

In May 2008, the Company successfully listed on the AIM market of the London Stock Exchange. The MDM Engineering core technical team has a 20 year track record of completing a wide range of studies and execution projects across a variety of minerals, including precious metals, base metals, ferrous and non-ferrous metals, uranium and diamonds.

The Company has adopted an approach to project execution based on an open-book Engineering, Procurement, Construction Management ("EPCM" or ";cost-plus") basis. With a core focus on Africa, MDM Engineering is setting the benchmark standard for best practice in the mining services industry through its commitment to providing the highest quality services and actively engaging with clients to ensure maximum transparency.


MDM Engineering Group Limited

Grant Lowman (Chief Executive Officer)
Tel: +27 (0) 11 993 4300

George Bennett (Executive Director)
Tel: +27 (0) 11 993 4300

Dominique de la Roche (Finance Director)
Tel: +27 (0) 11 993 4300

Numis Securities Limited

John Harrison (Nominated Adviser)
Tel: +44 (0) 207 260 1000

James Black (Corporate Broker)
Tel: +44 (0) 207 260 1000

Pelham PR

Chelsea Hayes
Tel: +44 (0) 20 7337 1523



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