Press releases

MDM project pipeline shift

MDM Interim Results

6 December 2010

Interim results
6 December 2010
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 2010. 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$7.19 million (2009: US$22.44m)
  • Gross profit of US$1.51 million (2009: US$7.24m)
  • Loss before taxation of US$2.48 million (2009: US$5.05m profit)
  • Cash and cash equivalents of US$15.03 million (2009: US$13.37m)
  • Loss per share of US 4.78 cents per share (2009: US 9.96 cents earnings)
  • An interim dividend of US 0.50 cents will be declared and paid (2009: US 3.75 cents)
  • Strong balance sheet with negligible gearing


  • Increased requests for study proposals and tenders received and submitted for the period.
  • First Uranium’s Mine Waste Solutions (MWS), Chemwes Phase 2 gold project resumed in August 2010 after being suspended in February 2010.
  • MDM secured the Kinsenda (Metorex) bankable feasibility study (“BFS”) in September 2010. This project is an update of the original study, which was started by MDM in 2008 before its suspension, for a 40 000 tonne per month copper concentrator to be built in the Katanga province in the Democratic Republic of the Congo (“DRC”). The execution phase of the project is expected to start in the second quarter of the 2011 calendar year.
  • Gold Fields West Wits tailings retreatment plant BFS was completed in September 2010. The execution project is due to start in the second half of the 2011 calendar year.
  • The scoping study for Gold Fields International’s, Tarkwa mine (Ghana) was completed in August 2010, with the next phase expected to commence in January 2011.
  • Awarded seven studies and three execution projects since year end.
  • Kalagadi Manganese engineering and project management (“EPCM”) contract awarded in October 2010, providing a base of chargeable man-hours for the next two years.
  • Awarded carbon in leach (“CIL”) secondary crushing project for Goldfields Ghana Limited at their Tarkwa mine in November 2010. Detailed engineering has started already with execution planned to start in the first or second quarter of 2011.
  • Awarded the front end engineering and design (“FEED”) for a 3.6 million tonnes per annum platinum project near Rustenburg in South Africa with the intention of fast tracking the execution phase which it is anticipated will start in the second quarter of 2011 to meet the commissioning timeline for the project.
  • Gradual financial recovery is expected in the second half of the 2011 financial year, and management’s efforts have been focused on securing a healthy order book for the 2012 financial year onwards.
  • Good prospects of additional execution projects starting in the second quarter of the 2011 calendar year.
  • The formation of a strategic alliance with Perth-based GR Engineering Services PTY Ltd (“GRES”). The two companies will cooperate primarily to target the estimated 150 plus Australian mining companies controlling some 400 projects in Africa.

MDM Engineering Chief Executive Officer, Martin Smith commented:

"The effect of the global credit crisis, depressed commodity prices and the resultant delays and suspensions of a number of mining projects continued in the first half of the 2011 financial year had a direct impact on MDM’s first half performance. However, there are signs of an improvement in the resources sector. This is evidenced by the strengthening in commodity prices over the past few months, resulting in numerous expressions of interest received by MDM for project related work, and by the award to MDM of three execution projects and seven studies in the period since the 2010 year end. These will positively impact MDM’s 2011 year end results but more so provide a healthy future order book.”

A gross profit margin of 21.0% was recorded for the first six months against a gross profit margin of 30.5% for the year to 31 March 2010 and 32.3% for the corresponding period in the prior year. The Group made a loss before tax of US$ 2.5 million as opposed to a profit before tax of US$5.0 million for the corresponding period in the prior year. The loss as well as the lower gross profit margins reflects the shift in project pipeline towards the 2012 financial year. This reduced performance was aggravated by the suspension of MWS Chemwes Phase 2 until August 2010, the 7 month delay in the awarding of the Kalagadi Manganese project and low levels of execution project work during this period.

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

The Group’s current workload should ensure that its technical team will be fully utilised going into the next financial year when the anticipated execution prospects will once again return the Group to a profitable position.

MDM continues to provide premium value added services to its clients, establishing itself as a market leader in the junior and mid-cap mining space in Africa. MDM has in the past achieved 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 return positive earnings as soon as the project pipeline recovers during the 2011 calendar year. Due to its positive cash balances, execution pipeline and growth prospects the Board has decided to declare an interim dividend of US 0.50 cents per share payable on the 14th January 2011 to all share holders registered on the 17th December 2010.

Operational Review

The tough trading conditions of early 2010 have impacted MDM’s performance in the first 6 months of the 2011 financial year. This is mainly due, as the Group reported to the market on the 6th July 2010, to the shift in the project pipeline from the current financial year to the 2012 financial year. This shift has reduced MDM’s project execution work for most of this period. However, during this time MDM has been fortunate enough to have received higher than normal requests for study work which has helped alleviate some of the financial burden. First Uranium’s MWS Chemwes Phase 2 project was reinstated in August 2010 and this will improve the financial performance in the second half of the 2011 financial year. Kalagadi Manganese’s EPCM project was awarded in late October 2010, which had been anticipated since March 2010; this will result in improved overhead recoveries for the 2011 financial year. MDM has also been awarded the Goldfields Tarkwa CIL expansion project as well as the FEED for the platinum project near Rustenburg which is being fast tracked into execution for early 2011.

The award of seven studies since March 2010 is a sure sign of renewed interest in the market; many of these projects are driven by the expiry dates of mining rights and the firm gold price. We are pleased by the increase in project design orders in the third quarter of the 2010 calendar year with a relatively high probability of these becoming execution projects in the latter part of the 2012 financial year.

Historically, MDM’s target market has been mainly African based projects. MDM has, however, received requests to provide services in other parts of the world, specifically in Peru, which is vital for expanding our know-how and penetration in these regions. We will assist strategic partners in process technology, engineering and sourcing of equipment, whilst they will focus on in-country construction and fabrication.

MDM has maintained its position in the market as a cost effective, efficient and fit-for-purpose service provider for our mining clients, specifically in the gold, base metal and platinum sector. It is evident that the market is recovering, although at a slower pace than anticipated. MDM has the necessary cash reserves and with a strong focus on cost efficiencies will successfully weather the market challenges.

Execution Projects

MDM has mainly been involved in studies during the period under review. In August 2010 MDM mobilised its construction team to site at Stilfontein to resume work on the suspended First Uranium Chemwes Phase 2 project.

This project is progressing well and is on target for completion in the second quarter of the 2011 calendar year. Thereafter we anticipate resuming with the finalisation of the Uranium plant which was also suspended in February 2010.

Although the Kalagadi Resources Manganese Umtu project has started work on the sinter plant (critical path), the MDM scope (balance of the plant) was delayed until October 2010. MDM did the early execution phase via a FEED in 2009. The EPCM contract was awarded to MDM and will provide a base work load for 24 months; this work commenced on 25 October 2010.

In November 2010, MDM started the detailed and front end engineering design for both the Goldfields Tarkwa CIL project and the platinum concentrator project near Rustenburg.

Feasibility Studies

An important indication of MDM’s future work is the study pipeline.

The study work MDM did over this period included the finalisation of the Gold Fields West Wits Tailings Retreatment Plant phased BFS, Gold Fields International’s Ghana Tarkwa plant optimisation scoping study and some detail design, and the kick-off of the Metorex Kinsenda (Copper) BFS. All of these studies are significant for MDM as we are confident that the execution projects will follow in the 2012 financial year with the Tarkwa execution project having already been awarded.

MDM completed four more studies in the period for manganese, uranium, platinum and chrome commodities. Due to the market sensitivity of some of these projects, our clients have asked us to keep the details confidential.


Safety is a core focus for MDM and we are extremely proud to have achieved in excess of   1 000 000 man-hours on site after resuming with construction work at Chemwes Phase 2. We have successfully introduced an updated safety programme for both office and site safety with refresher training and bulletins to convey our message to all employees and contractors.

New business – forward look

MDM has been working closely with targeted clients in preparation to provide services on study work and early project execution (FEED). These opportunities will be finalised in the last quarter of the 2011 financial year and typically include projects in gold, uranium and base metals located in South Africa, DRC, Mozambique and further north into Africa.

The next flagship project for MDM will be the execution of the Gold Fields West Wits, giant tailings retreatment project, scheduled to start in the second half of the 2011 calendar year. This project will stretch over approximately 36 months and is expected to be one of the most technically advanced gold, uranium and other mineral extractions from tailings to date.

Tarkwa (Gold Fields International) and Kinsenda (Metorex) are two key focus areas for MDM, based on historical relationships and destined to provide MDM with longer term work. Both projects will require starting on-site work during the first half of the 2011 calendar year.

The MDM Team

MDM team has used the slowdown in the market to enhance its capabilities by optimising the management structure, focusing on best practices, upgrading IT systems and streamlining internal project execution processes. MDM has a strong management team, all with significant industry experience and client focus. Our metallurgical process knowledge and engineering skill match the best in this market sector. We are well-placed for increasing our workload over the next year.
The six months under review has not been without its challenges and whilst we are no means satisfied with the results, the MDM team can take credit for their dedication and hard work.

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.

The MDM Engineering core technical team has a 22 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

Martin Smith (CEO)
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


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