Imdex (ASX.IMD) Presentation, FNN Online Investor Event, November 2020

Company Presentations

Imdex Limited (ASX:IMD) CEO Paul House discusses the need for real-time mining data, the company's market, the impact of COVID-19, acquisitions, strategy and outlook.

Thanks very much Clive a pleasure to join you today. I might ask that we skip through, I think, to the very next slide of the presentation. So just a quick overview on IMDEX itself. We are a Mining Tech Company, we go to great lengths to make the distinction between being Mining Tech and Mining Services. In Mining Tech, we are not as exposed to the geographic risk, or a single client risk, or the capital risk, or the labour risk, or the commodity risk. We play right across the mining spectrum geographically, and obviously the invested capital we have is much lower than some of the mining services players. So IMDEX is attractive from that perspective. And I'm hoping to give you a little bit more insight into what that looks like. On the slide in front of you, you can see that our products fall into three basic categories, drilling optimisation, which is a series of products that work together to reduce the cost and improve the accuracy and efficiency of drilling through to a target to indeed prove that you have a resource or body in to work with. Second is the rock knowledge sensors, which is a collection of very smart instrumentation tools that we can deploy down hole to work out exactly what portion of the rock we're drilling through exactly the location, where it is, and any other characteristics of the whole body that we're looking to determine. And then real time data and analytics, which is the insights and the software that we use, to generate answer products for customers. And the schematic down the bottom really just indicates that whilst IMDEX is history, which is over 30 years originated in the exploration phase of the mining lifecycle. The reality is we are dealing with the same ore body, the same ore body owner, and the same technologies to understand the ore body right throughout the mining value chain. And, so one of the opportunities that IMDEX has in front of it, is to continue to deploy its technologies in later stages. And that's something we'll show you today that we're working on.

Next please Clive.

So why is real time rock knowledge important? So geologists, in resource companies today, ultimately are responsible for deploying a billion dollar capital investment decisions based on what knowledge they can gather about the ore body, which is often as little as 1% of 1% of the ore body bank sample. And so they worked very hard to gather as much as they can, to make it consistent, to make it representative. And so what IMDEX does is try to find ways to give better quality, a better volumes, a more homogeneous representation or standardised datasets, and to do so in real time. Once you have that knowledge in real time, every geologist and indeed every driller, they know what decisions they would make once they have that information. And the three panels you can see on the slide in front of you attempt to show, how less information is a little bit like looking through a foggy shower screen, and the more that you rub that screen and provide more information, slowly it becomes clearer what the ore body is like that you're working with. And one of the things that's evident to us when we talk to clients is that once you've seen that degree of clarity that you have on the right-hand side, you can't unsee it. It'd be like going from your iPhone back to your Nokia 3210. And so the value of that information is hugely important. And it's only really available now with some of the technologies that are coming to market.

Next please.

Our growth strategy is really. We have four pathways to growth, essentially. The bottom right, sorry the bottom left hand corner of that quadrant is our ongoing R&D business. We have the ability to double the addressable market just by taking out existing products in our existing markets and creating better solutions. We can double the addressable market. Again, if you move to the top left quadrant where we add new products to our existing product suite. We can do that through acquisition or through R&D. And as you move to the right, you can see that we're moving into new markets from exploration and development, into mining and production. Once again, that doubles the addressable market for us. And the fourth driver is really we exist at the moment in a rising tide, where the growth in the industry is expected to continue for the next seven to eight, nine years. And that rising tide will lift all boats who sit in the Mining Services and Mining Tech space.

Next.

The IMDEX business has had an excellent history at outperforming market growth. I'll draw your attention to two points on this slide. On the left, you can say that the S&P, which is the best proxy for exploration expenditure in the global mining market, has had a four year compound annual growth rate of 4.5%, as opposed to IMDEX's history of North of 13%. And that is our commitment to our strategy to outperform market growth by adding new products and providing new solutions to our marketplace. And the second point I draw your attention to is on the right-hand side, which is the strong market presence. We exist today in over 70% of mineral drilling projects globally. The difference there is that is not market share. So that distribution network is a hugely an immensely valuable asset for us, through which we can distribute more technologies as we put them together with our solution sets.

Next.

We often get asked how COVID has impacted our business. The tables that you can see in front of you attempt to show by major mining region around the world, what the impact was of government mandated lockdowns, are any particular the restrictions on the movement of people to mine sites and mine operations.

What you can see is that since the initial government response in April this year, you've seen a steady relaxation of restrictions. And even within that you're finding that mining companies, as key economic drivers in a lot of economies, had given permission license or exemption to operate where possible. We are very clearly today in a normalised resumption phase, where drillers and resource companies have found ways to navigate the impact of COVID-19 restrictions to keep their people safe, and to keep their operations operating uninterrupted. And certainly IMDEX is seeing the benefit of that since April, and we've seen month on month growth in every region around the world, all of the regions you can see in front of you, as those restrictions have come off. And as we found new ways to operate. Looking forward, we're very watchful of secondary infections leading to what more isolated or regionalised lockdowns. However, the confidence for companies drillers and resource companies both to navigate those, is increasingly clear. And so we expect the business to continue strongly into calendar year 21 and 22.

Next.

After our 30 June year end in that disruptive fourth quarter, the first quarter of FYI 21 has been very strong. The speed at which we have rebounded has been excellent. Our revenue in the first quarter is up 26% and we have a record number of tools out on hire. We would normally be seeing a seasonal decline in our tool fleet, as weather patterns change around the world. And so far, that's not the case, we're actually still experiencing record high numbers of tools on rent, and record plans from our customers drillers and resource companies, both to keep drilling as much as possible.

Next please.

Slide nine is really simply to say that the positive if there is one, within this COVID world is that, we are seeing an increased demand for innovation and technology in the mining sector. And this is a trend that's been well underway, leading up to COVID. And certainly COVID has accelerated that. And the comments in here from drilling companies, resource companies, and industry consultants alike affirm that. And what we're finding is that resource companies and drilling companies that had a strong innovation culture are very well positioned. And the next speaker today, I think is Andrew weld from Mitchell's, is one of those organisations that have always invested heavily in being well-positioned and bringing new technologies to the marketplace. And they're critical partners for companies like IMDEX, who are looking for strong collaboration opportunities to introduce efficiencies to the whole mining value chain.

Next.

So how do we grow our core? We invest about $25 million a year in research and development. It's across quite a range of products. And the projects that we select to invest in typically allow us to deliver more value to our customers, and gather more value for our shareholders as a result. Typically every time we build new tools, they tend to earn more revenue than our older generation tools, sometimes three to five times more revenue. And the way you see that is that increasingly the average revenue per tool in our fleet is growing year on year, and certainly we're seeing that today. All of our tools are being developed to be connected to IMDEX Hub IQ Cloud platform. And the strategy there is depicted in the right-hand slide, where first of all, we add a client, then we add the sites within that client, and then we add services or tools within each site. And that is a way that we can make sure that all of the data that drillers and resource companies want can come together with a high confidence in quality and chain of custody, and allow those data sets to work together, to generate the answers they need to make the next decision in the mining value chain.

Next please.

So IMDEX is a growth company and we spoke about the ABCs of growth, Acquire, Build and Collaborate. This year we've made two acquisitions already and the most recent one in July, was the acquisition of AusSpec. We love the AusSpec’s AI series technology. A human trained AI algorithm that allows the mineralogical analysis of an ore body to be determined automatically in near real time. It is low cost. It has got high degree of quality and standardisation and removes human subjectivity, and allows you to do it across large amounts of the ore body that were previously impossible. And most importantly, for IMDEX, we get to deploy that technology through our IMDEX Hub IQ platform, making it yet another data set that works together with the other data sets, so that geologists can make really informed decisions about the ore body. And that acquisition is proceeding as planned. It's been a fantastic addition to the portfolio.

Next.

In addition to the acquisition, we invest in R&D. The updates on the technologies on the slide in front of you is just a small selection by a couple of million dollars worth of the $25 million that we spend each year on new technologies. COREVIBE extractors and MAGHAMMER, all aim to improve the speed and accuracy and cost of drilling, which is ultimately key to unlocking value in the mining value chain and proving up reserves and resources for mining companies. Our rock knowledge sensors aim to give more value downstream in the mining value chain, where you can understand your ore body prior to blasting it. That improves the way in which you can then process through the mill. And during these times of COVID-19 restrictions and travel restrictions, our IMDEX Hub IQ and our other ioGas software platforms, which is a geochemistry analytical software. The remote location and remote management of workforces means that these products are in exceedingly high demand. And we're experiencing record growth in those areas. As those technologies are being pulled into the marketplace.

Next.

I talked about acquire and build. But in addition to that is collaboration. And simply put our technologies require us to work with partners in the case of Blast Dog, Anglo American, Orica and Tech have been critical partners, just as Mitchell's have been critical partners on our drilling optimisation technologies. And in this slide, we've recently won an award with a Queensland based company, Universal Field Robotics, that enables the deployment of the blast of technology, and a great example of different stakeholders in the mining bloody chain coming together.

Next.

Looking forward, there's quite a lot of external data that points to the things that we hear from our clients, whether that's capital raisings and the amount of money available to juniors and intermediates, to prosecute drilling programs. And the estimates that drilling exploration expenditure will go up year on year. It's important to note that we are less than $10 billion in spend globally today. And this compares to $21 billion that was the spend at the peak in 2012. And hence my earlier comment that you see, we see a long runway yet through this particular cycle, for growth in this sector, and the opportunity to invest in it, and enjoy that growth profile.

Next.

The key drivers in the industry, we've spoken previously about the increasing demand. The diminishing reserves, resources are being extracted at a faster rate that they're being replaced. And the only way to overcome that is by lifting that drilling span from circuit 10 billion to somewhere around 20 billion over time, we expect that to happen across all commodities consistently.

Next. And I'll move again next please Clive.

So the outlook for us Q1 supports a strong outlook for the year ahead and beyond. And if you roll forward to the next slide,

Really the overall thesis for IMDEX is its strong core business. It is a growth business and the underlying fundamentals are truly excellent. Thank you.
 

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