Press releases

MDM project pipeline shift

MDM Interim Results

06 December 2011

MDM Engineering Group Limited (“MDM Engineering”, “MDM” or “the Company”) (AIM:MDM) the minerals process and project management company, focused on the mining industry, is pleased to announce its unaudited interim results for the six months ended 30 September 2011.


  • MDM’s return to profitability in the last six months of the previous financial year, ending on 31 March 2011, has continued into the first six months of the new financial year;
  • Revenue up 176 per cent to US$19.81 million (2010: US$7.19 million);
  • Gross profit up 398 per cent to US$7.52 million (2010: US$1.51 million);
  • Pre-tax profit of US$3.31 million (2010: US$2.48 million loss);
  • Cash position of US$11.90 million as at 30 September 2011, which has increased to $US14.5 million as at the date of this announcement, with negligible gearing;
  • Basic earnings per share of US 6.51 cents per share (2010: US 4.78 cents loss);
  • An increased interim dividend of US 2.5 cents declared (2010: US 0.50 cents).


  • MDM is pleased to announce that it had no lost time injuries during the first six months of FY2012;
  • Seven execution projects in process, representing some US$600 million of confirmed contract value work with leading industry names and a focus on Africa;
  • Five Bankable Feasibility Studies (“BFS’s”) and a number of Pre-Feasibility Studies (“PFS’s”) currently being undertaken;
  • Studies represent a pipeline of potential projects in the order of US$1.5 to US$2.0 billion in potential work.


  • MDM’s project pipeline has been further enhanced by the awards of a number of new studies and execution projects in the first half which has continued into the second half;
  • As a consequence of this better than expected trading, MDM anticipates that its results for the 2012 financial year will be substantially ahead of current market expectations;
  • The current and anticipated project workload will continue to support MDM’s organic growth plan over the next five years.

MDM Engineering Chief Executive Officer, Martin Smith commented:

"MDM continues to provide premium value added services to its clients and we are delighted that the first half of this financial year has clearly demonstrated the continued profitability of MDM as the Company grows from strength to strength.  This has primarily been driven by the positive results we have achieved through our increased marketing initiatives as well as the awards of several studies and execution project contracts we have secured.

“The above, combined with an improved resources sector backdrop, as well as increased tenders and proposals submitted by MDM since the year end, means that we enter the second half of the financial year with a strong order book and pipeline of contracts. We are confident that we will deliver results in the second half that will further exceed these results and substantially exceed current market expectations.”

Financial Review

The gross profit margin for the first half is at 37.9 per cent which represents an 80.5 per cent increase from the comparative period gross profit margin of 21 per cent. MDM Engineering is showing a profit before tax of US$3.3 million for the first half of FY2012 which represents a 232 per cent increase from the comparable period’s loss of US$2.5 million. This improvement is primarily a result of the increased workload since 31 March 2011 year end which is due to the shift in the project pipeline to the 2012 financial year as previously indicated.

The cash balance, since year end, has reduced by US$5.9 million and which is as a result of exchange rate fluctuations against the South African Rand, dividend payment combined with the timing difference of when cash and revenue are recognised for construction contracts under International Financial Reporting Standards. However, this has improved since 30 September and now stands at US$14.5 million.

The Board believes that MDM Engineering has a robust business model, is financially sound and is well positioned to continue with its positive earnings as a result of the increased project pipeline during the 2012 financial year.

Dividend policy

MDM will continue with its dividend payment policy of 50 per cent of any earnings after tax. In anticipation of a profitable FY2012, due to its positive cash balance, execution pipeline and growth prospects, the Board is pleased to declare that MDM will pay an interim dividend of US 2.5 cents per share on 17 January 2012 to all shareholders registered on the share register as at 16 December 2011.

Operational Review

Execution projects:
MDM has had a steady increase in orders since April 2011, due to improved market sentiment and MDM’s reputation of listening to clients’ needs, designing for purpose and delivering above expectations. The increased workload has contributed significantly to MDM’s increased profitability in the first six months of FY2012.

MDM is currently working on the execution of seven medium to large size projects, representing some US$600 million of confirmed contract work. These projects are currently in different phases, which complement the current spread of resources. Four projects are in the construction phase, one in the engineering and procurement phase and two projects are in early set-up with detail engineering to follow in January 2012. The combined effect and the timing of our pipeline will ensure a steady workload over the next 18 months. The execution projects are listed in further details below.

Kalagadi Umtu (Republic of South Africa (“RSA”), Northern Cape Province)
MDM is constructing a 2.4 million tonnes per annum (“mtpa”) manganese beneficiation plant for Kalahari Resources, owned by Arcelor Mittal (50 per cent), Kalahari Resources (40 per cent) and the Industrial Development Corporation (RSA) (10 per cent). This project is due for completion in the last quarter 2012.

Tharisa chrome and PGM concentrator (RSA, North West Province)
MDM has commenced construction at site on a 3.6mtpa chrome and platinum group metals (“PGM”) concentrator plant for Tharisa Minerals, owned by private investors. The project is due for completion in August 2012. MDM is managing the construction component of the project with its own in-house resources due to the fast track nature of the project.
Mintek Atomiser (RSA, Gauteng Province)
A nickel atomiser integrated with a 3 megawatt direct current arc-furnace plant to produce 325 tonne per month (“tpm”) atomized nickel powder for the Mintek testing facility. The project is in the engineering and fabrication stage with construction due to start in the last quarter of 2011 calendar year. Completion is due in the second quarter of 2012.

Gold Fields International Tarkwa Carbon in leach (“CIL”) and crushing optimisation (Ghana)
MDM is currently in the construction phase of a gold ore secondary crushing plant for Gold Fields International. The project is due for completion in the second quarter of 2012.

Camrose dense media separation (“DMS”) (Democratic Republic of the Congo (“DRC”)
MDM has commenced civil and earth works at two 1mtpa DMS plants to handle copper and cobalt ore for ENRC’s Camrose / Comide resource. The project is due for completion in the second quarter of 2012.

Kinsenda Project (DRC)
Currently small infrastructure works are supervised on site at a 720 000tpa copper concentrator for Metorex, owned by the Jinchuan Group in China. Detail engineering will start in January 2012 and the project completion is forecast for mid 2013.

Namoya Project (DRC)
Early infrastructure, final test work and project set-up are in progress for a 2mtpa gold heap leach gravity & CIL recovery plant for Banro Corporation. The engineering and procurement phase is due to start in January 2012 with project completion scheduled for mid 2013.

Bankable and Pre-Feasibility Studies:
To further supplement the workload, MDM is currently undertaking five BFSs and a number of PFSs. One of the more significant BFS’s is for African Barrick Gold on a brown-field 2.4mtpa gold tailings retreatment plant at Bulyanhulu in Tanzania. If successful, the Engineering, Procurement and Construction (“EPC”) execution contract will commence in the first quarter of 2012. The balance of the studies, being a combination of BFS’s and PFS’s, (ten in total together with a steady flow of new requests) will result in smaller projects over the next 12 months and would provide a good base workload to continue contributing to profitability. These studies represent a pipeline of potential projects in the order of US$1.5 to US$2.0 billion.

MDM is known in the market for its gold expertise and the recently completed tailings retreatment process plants for Mine Waste Solutions Phase 1b and 2, ensure a keen interest from gold producers. However, the MDM’s commodity range of projects also includes uranium, coal, manganese, chrome, PGM’s, nickel, copper and cobalt. This spreads the risk of commodity market price fluctuations having an effect on the demand for the Company’s services.

MDM has secured sufficient technical skills in the market to be able to execute the projects successfully. The risks involved with these projects have been individually assessed and appropriate contracting strategies selected. As a further risk mitigating measure, MDM has adopted a culture of hands-on management, working closely together with their clients. Safety is MDM’s management and employee’s first priority and the Company has recruited sufficient safety resources to focus on all the operations. MDM is pleased to announce that it had no lost time injuries during the first six months of FY2012.

Business model and contracting strategies:
MDM’s projects are contracted on both engineering, procurement and construction management (“EPCM”) and EPC models. This ensures a healthy mixture of risk profiles. The EPC projects have generally been engineered to a point whereby sufficient information was available to address typical risks of price, quantities and schedule.

Currently only two projects are contracted on an EPC methodology, whereas the other projects are mainly on EPCM bases.


Longer term prospects:
MDM’s forward work load has been identified, both within our current client base as well as with newly targeted clients. The current strategy is to ensure repeat business with clients having multiple projects in the pipeline.

MDM is currently engaging with feasibility studies in its main field of expertise, which hold the promise of longer term projects to follow onto its existing workload.

Organic and Strategic Growth:
MDM would like to expand its project workload to execute at least ten execution projects simultaneously, with an equal amount of feasibility studies, spread over various phases, to smooth the workload over the coming years.

The Company is actively engaging in the Australian market and would like to participate in projects in Africa, owned by Australian clients. This market has shown exceptional growth and MDM is well positioned to benefit from this in the short to medium term. MDM currently has a strategic alliance with an Australian engineering company called GR Engineering Limited.

Financials and Notes


MDM Engineering Group Limited

Martin Smith (CEO)
George Bennett (Executive Director)
Dominique de la Roche (Finance Director)
Tel: +27 (0) 11 993 4300

Collins Stewart Europe Limited

John Prior
Sebastian Jones
Tel: +44 (0)20 7523 8350

Tavistock Communications

Paul Youens
Emily Fenton
Tel: +44 (0)20 7920 3150

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 23 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, and Construction Management “EPCM” or “cost-plus” basis and on an Engineering, Procurement and Construct (EPC) 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.


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