Indodrill

Capitalising on a depressed market through expansion

About This Project

Mining services providers have been forced to strip back to the bare requirements in recent years as the global mining downturn has driven down costs across the industry. Indodrill and its competitors have had to implement efficiencies, cut down the workforce and maintain the level of quality of service that their clients are used to. With the storm almost over, the company’s management believes green shoots in the market point towards a positive outlook.

 

Currently headquartered in Singapore, Indodrill has been operating out of Asia since establishing in Indonesia in 1993. The company now has a presence across the Asia Pacific region with operations in Laos, Cambodia, Malaysia, and the Philippines and has recently launched a subsidiary in Papua New Guinea. Having demonstrated resilience and agility during the slump when RGN caught up with Indodrill founder John Horne and newly-appointed chief executive officer Jason Lee they discussed the potential recovery of the market, the EMEA joint venture and where the company is looking to expand into next.

 

Horne asked Lee to take the reins at Indodrill a few months ago. This move transpired after Lee started consulting for Indodrill on a wide range of issues. Having built up a career as a solicitor in the financial sector, Lee worked for Avocet Mining (LSE:AVM) as general counsel and developed a knowledge of the resources and drilling industry from there. Lee began assisting Indodrill on all sides of the business including: corporate matters, business processes, development opportunities abroad and while he may not have the technical background, Horne felt Lee’s corporate expertise was suited to take Indodrill forward.

 

Lee says Indodrill is in a position to capitalise on the measures it implemented to survive the mining downturn.

 

“Indodrill has done well to ride the storm and survive where lots of our competitors failed and went into bankruptcy. We are well positioned to move forward on many levels both in existing countries we operate in, taking further market share from our competitors, but also expanding within Asia Pacific,” the CEO says.

 

For a mining services company in the current environment Indodrill has shown significant resilience. Not least in seeking opportunities in new countries within the Asia Pacific region, the trait is further demonstrated by Lee’s plans to tackle Europe, the Middle East and Africa (EMEA).

 

“We want to further expand into EMEA. The idea is that if we are at the beginning or very close to the beginning of the next cycle then we are well positioned to take advantage of that and expand both organically and acquisitively.”

 

Surviving the downturn

 

The company’s agility in a suppressed market is the only reason it is still operating today. Horne says upon realising the market was crashing he had to implement severe cut backs across the workforce and the purchasing department. Competitors were entering the market with extremely cheap drilling costs and to make sure Indodrill continued to win tenders Horne had to ensure it remained price competitive.

 

While consolidating the workforce and making cuts in purchasing to focus on maintenance of existing rigs were the primary focus’ for Horne, he says the long term relationships with clients that he had nurtured over the years are really what kept the company afloat.

 

“We were able to maintain our level of consistency and keep the group on the front foot from other companies because of the way we completed our cutbacks and kept servicing our existing clients,” says Horne.

 

Lee agrees that it is the approach Indodrill took to its clients where he says the company sat down with clients to find out what they needed, what their budget was and what they really wanted to achieve. He says that close relationship meant Indodrill could maintain the contracts and remain profitable.

 

Conversely, Indodrill has built up such strong relationships with its supply chain that when the drilling prices took a nosedive Indodrill had strategic alliances with its suppliers to where they cut their costs and then the reduced costs were passed onto clients. Indodrill had particularly strong relationships with drilling equipment and consumable suppliers Indexss and Tiger Fluids.

 

Expansion

 

Earlier this year Indodrill established a subsidiary in Papua New Guinea, Indodrill PNG. The subsidiary expands the parent company’s vast Southeast Asian network in a country where there is an ‘increasing focus on exploration and resource development’.

 

The expansion into PNG was a calculated move in terms of region and timing. There are a number of grade 1 mining companies operating in Papua New Guinea and the country is open to foreign investment in mining. Horne wants to establish Indodrill PNG at the bottom of the market so that when the industry feels the upswing the company will be positioned to provide Papua New Guinea clients the same services they provide to the rest of the region through the well-established Indodrill name.

 

Lee reinforces Horne’s sentiment when it comes to the strategy behind the expansion plans, “First and foremost we are focusing on the countries we already operate in then secondly the countries within the Asia Pacific region where we feel there are opportunities, like Papua New Guinea.”

 

According to Lee, the Asia region was hit harder by the investor market than the EMEA region or the Americas over recent years and while Indodrill has a strong track record in Asia, a recent joint venture with Scottish Mulraney Group and GeoSonic Drilling Limited meant expanding into EMEA was ‘inevitable’.

 

With EMEA comprising more than 90 countries Indodrill’s strategy is to focus on those countries that are seeing the highest levels of exploration and mining investment. Lee has already identified countries in Africa and the Middle East that are represented by a small group of local drilling companies and he believes they represent the strongest opportunities.

 

While expansion has its obvious benefits, there are a number of roadblocks which can end up making it costlier than expected. Every country has different mining regulations, the levies, taxes and royalties change wherever you go, business culture varies all over the world and the local populations often take a different approach to mining operations. These are all issues that Horne and the vastly experienced Indodrill management team have faced during their previous roles across the global mining industry.

 

“The first thing you have to do when you go to a new country is to learn the laws of the country and the way they operate in business and it’s always challenging to make sure you are doing the right thing,” says Horne.

 

“You have to be able to fit in with the different cultures and make sure you employ a local workforce, train the local people and get them on side. With every country you go to as long as you can show the local people you have their interests at heart they tend to work with you.

 

“There are challenges with moving into a different country but once we settle in, start operating, fit in with the culture and employ local people things tend to go relatively smoothly.”

 

Lee says it is the combination of the global experience of setting up operations at the management level and the professional approach that Indodrill takes as a company with a focus on contributing to the local community and economy which will serve it well for the upcoming expansion plans.

 

Diversification

 

The global price downturn has forced mining services suppliers to change their way of thinking. It isn’t as easy as simply offering drill services or pigeonholing yourself in one element of the operation. To this end Horne has led a diversification process to ensure Indodrill are not completely exposed to the price-volatile mining industry.

 

Through establishing a new company within the group, called Indodrill Geotechnical, Horne has de-risked the mining drilling branch and the group as a whole. Horne identified that in some countries within Asia Pacific an opportunity was available for an experienced drilling firm with a strong track record to come into the civil drilling area.

 

Indodrill Geotechnical’s first contract was for Mott Macdonald Singapore. The new branch was contracted to drill a number of grade 1 granite holes of up to 200m for underground caverns. It was undertaken in conjunction with the Singaporean firm Fosta.

 

“That was our first geotechnical job for the new division and since then we have had very good interest from clients within the region. We feel there is a good market and we want to service it with the standards that Indodrill upholds” says Horne.

 

Indodrill is one of the very few drilling companies in Asia that has pursued the strategy and specifically diversified out of strictly mining-specific reverse circulation and diamond drilling. Lee says it is all part of the wider plan to make Indodrill fully diversified across regions and disciplines.

 

While neither of the management team want to tempt fate of a full mining price recovery they are confident that Indodrill is well-positioned if the industry begins to thrive off the predicted upswing in prices. With a number of precious metals on the rise, the company looking for new markets across the world and the ability to diversify the services it provides, Indodrill looks good to survive the next 20 years as well as the last.

Company

Indodrill

Category
Mining
Tags
commodities, metals, mining