Capital Limited (CAPD) Earnings Call Transcript & Summary

Good morning, and welcome to the Capital Limited investor presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand over to Peter Stokes, CEO. Good morning, to you, sir.

Good morning, and thank you. Welcome for -- to the conference to discuss the Capital Limited H1 2024 results. I'll take you through at a high level, given that the presentation has been up for a week or so, and we're probably focused more on the questions after, but I certainly want to talk through some of the programs we've got underway and some of the things that we are doing in order to continue to drive growth and returns in the business. I'll just flip through the standard disclaimer slide, read that at your own leisure, but nothing untoward in there. On the results, I'll let Rick go through that a bit further into the presentation. Key takeaways, really revenue continues to grow in the business, still have a strong EBITDA in the business. And this year, we're declaring an interim dividend of $0.013 per share. Really, the key focus for the discussion today is around the highlights of where we've been driving the business over the last while, and I might just go and start down at the Sukari mining contract, because I know it's been a discussion for a while. We -- as we talked about in one of our previous investor discussions, the Sukari contract was due to finish in the middle of the year. We received a variation for several more months on that contract and that will now run out at the end of September. We've had a very successful contract with Sukari, we've over-performed. We've had exceptional safety outcomes but that will finish that contract. We have extended the drill & blast contract, and that will go for another 5 years from the start -- from January 2025, which we're very excited about and continue that long-term relationship with the sentiment business, particularly at the Sukari mine. We've also been very conscious that the Sukari contract would likely finish on the mining side and have been very proactive in driving growth in the broader business. I'm really pleased with where we've been able to grow into the U.S. with Nevada Gold Mines, the Barrick-Newmont joint venture, a very large contract for us. And we're in the process of ramping up both the drilling and the assay business that we're doing there. That will constitute 10 drills when fully implemented and we're about halfway through that implementation. When a little bit behind where we wanted to be and hence the transition of the business, we're about a quarter behind on both of those contracts for a number of reasons but I think I can see clear visibility to first sample through the lab in late September, early October, a critical part of our growth with 2 Chrysos units then being on the ground later in the year and the wet chemistry is planned in the middle of next year. The drilling contract, we've got 5 of the 10 drills now fully operational and the next drills arriving and being mobilized over the coming weeks. We've also been very successful in winning a number of other few contracts, both with current customers, I think with the current customers and extending work at a number of our sites. There are a number a Lumwana with Barrick in Zambia, we're back in Zambia after a number of years. It started off with 2 RC drills there doing deep drilling. We've also won the Nyanzaga project with Perseus, which will be 4 drills working there, which have just started. We've also expanded our operations at Reko Diq and now have 6 drills on the ground there. And we've also, as I said previously, the extension of Sukari Gold Mines done, drill & blast drilling and a few other ancillary pieces of drilling is a very exciting opportunity for us. I'll talk very briefly about a new investment that we made in our innovation team, which was as part of a raise for Echo Detection, which is a new technology in Continuous Water Detection and as part of that investment, we have rights for the mining sector and I'll talk about that a bit further in the presentation. We continue to have an exceptionally strong safety record, which underpins winning these major contracts with significant customers like Barrick and Perseus, across the region and continuing to get the extension of projects like Sukari. On the 14th of August, the day before we released our results last week, we sold our shareholding in Predictive. That was -- we had a 9.6% share in that business. We realized a price of $0.21, giving us a return of $31 million. The focus of that money will be to pay down debt. We also have an optional notice that will give us the ability to continue to earn should that share price -- should the company be bought out by other Perseus or another, and we can talk about that in a bit more detail. Just to talk through the growth areas where we've been focused in the business of the Nevada Gold Mines, the significant contract in Nevada, the joint venture between Barrick and Newmont, which will have initially 10 drills. We see a lot of opportunity there for additional drill rigs in that region with the group that we're dealing with in Barrick. They currently operate up to 60 drill rigs. So we see opportunity to continue to grow there. And we're building out our labs business there as well, as I talked about the Belinga project in Gabon with Fortescue continues to grow with 6 drill rigs on the ground now starting to see the sort of productivities that we would like, and certainly at the upper end of productivity for some of the diamond drills, particularly Lumwana, I talked about the requirement there for the specialist deep reverse circulation drilling that we're doing for Barrick, as part of the major expansion of that project. And then the Nyanzaga project that we've won with Perseus for diamond drilling and reverse circulation on that new asset they bought from [indiscernible] later in the year. And then the Reko Diq drill contract where we started initially with 2 drills that's grown to 4, and we've now got another 2 drills about to mobilize with further opportunities to keep growing that contract. As we transition the business over the last year, we continue to drive strong growth in our business, and we're continuing to develop for that business across both Africa and now the U.S.

Ladies and gentlemen, I do believe we've just lost Peter. Do bear with us while we just reconnect.

Sorry, I must have dropped out there for a minute. Enable us to continue to build our business, and we will growing both the labs business and building on the Tier 1 assets that we have around the world. This over the last while [indiscernible] reflect some of the major investments that we've made, including around $100 million into Gabon, the U.S.A. and the MSALABS business, and they continue to provide meaningful earning contributions for us. Returns from H2 will ramp up as the U.S. and Gabon and Reko Diq come online. And we continue to focus on long-life high ROCE projects, particularly with blue chip mining companies around the world. And we're continuing to deliver consistent returns in the business with the business continuing to drive around 20%, which we expect in the second year and the ramp-up in the first reduced the ROCE that which we've had in the first half. We're continuing to invest in our employees and equipment, delivering high top-tier service offering and really differentiating ourselves from our peers. We've continued to improve our utilization into the last quarter and beyond as we were transitioning some of our drill rigs from West Africa to East over the first quarter or so. The utilization was a bit lower but we expect that to continue back to our target 75% during the second half. Safety records continues to set a differentiated level from our peers. And we've had reached a number of key milestones in our business at Geita in Tanzania, we've been operating for an extended period now with a very long safety LTI-free period. [indiscernible] in Tanzania is now 15 years of safety of LTI-free operation as well. Just for those who don't -- aren't too familiar with the business, the 5 peers -- 5 pillars of the business. I'll talk through those over the following slides and they're easy reference here to go back to after. Firstly, the drilling, which is the core of the business and where we started continues to drive a strong ARPOR, just over $200,000 in H1 that will continue to increase as we drive the growth of the business in the U.S. Utilizations continue to improve as well in into Q2 and we see that continuing to improve as we go into the third quarter of this year. I talked about the 2 contracts in H1 and in addition to the growth that we've got in our key operations as well in the Nevada Gold Mines Reko Diq and Belinga, Fortescue. Into the second half of the year, we'll mobilize approximately 9 additional drills, a couple of last hole drills into Sukari and then other 3 remaining drills into the U.S. and some new drills into the African business as replacements for some of the equipment that's reached the end of life. I think importantly, one of the other areas that really differentiates us from other drillers is that we're some 90% mine site drilling, which underpins a very steady revenue stream in our business we much less susceptible to the ups and downs of the cycle. I think that's a really important part that enables us to deliver consistent high returns to our shareholders. Our mining business will continue to selectively focus on mining contracts. I think one of the things the Sukari contract, while it's been incredibly successful requires very large capital. Our intention is to sell that fleet at the end of the contract and we'll put that into the market later in the year when we demobilize from that mining contract. We've grown our mining fleet down in Gabon with Fortescue. The fleet at the moment is more focused on the drill pad preparation with 6 drill rigs running down there that's become a large piece of the operation that we need to drive as well as building roads and other local infrastructure to enable the drilling operations to really accelerate over the coming months. The Laboratory business continues on its strong growth trajectory. We have 11 Chrysos units now rolled out with another 4 units due by the end of this year, reaching total of 15 of the 21. We expect the other 6 units to be rolled out during next year, slightly behind where we originally planned the growth in Nevada which is both the Chrysos unit at 2 Chrysos units plus a large wet chemistry lab has pushed out the need for additional Chrysos units somewhat, but we still see a lot of opportunity for that business to grow. We've now continued to build out our customer portfolio. We're doing samples across a number of sites with Barrick, with Perseus. We're doing B2Gold as well, Kinross, Northern Star, Endeavour at Agnico Eagle, really, the blue-chip miners are moved, continuing to move towards the Chrysos technology. I think one of the things -- one of the reasons this is a bit slower than we originally planned, the testing of the units in comparisons of fire assay, the mining companies really need to align the what they do through fire assay for their resources and into Chrysos, there's not a question about the technology. It's more about being able to align the sample methods given once nearly is around half a kilo and one is 50 grams or less. And so there's a reconciliation process but we've found as the miners adopted technology and great examples of places like Kibali, that the fire assays dropped off very quickly and we continue to move to almost exclusively to Chrysos for that organization. It continues to deliver the faster turnaround, the ESG benefits and also process optimization for this technology and with nondestructive analysis, and we're looking at further automation of the technology to ensure it's as efficient as possible. The Labs business now has a footprint of 33 laboratories, including our 7 franchises. We have a Chrysos network across the key Gold Belts, both in Canada now in the main gold area in the United States as well in Nevada with those units, the first unit is now on the ground and the second and third ones will be there later in the year. And then also across Africa in both Birimian Gold Belt and also in the Lake Victoria Gold Fields where a number of our large customers are as well. And our franchise network continues to feed samples into our multi-element lab in Langley and we are using both the Chrysos units work well to provide us drilling opportunities as do the drilling opportunities provide us of a laboratory volumes going through those. And a good example is the new contracts that we have both with Barrick but also with a number of other customers where we do both drilling like Perseus where we drill and also do the laboratory samples. Our investments have really delivered significant return. And I think the sale of the predictive discovery last week really materialized what we've been talking about. We were able to achieve $31 million, which will leave the remaining some around $20 million in our portfolio, the bulk of which is the really exciting wear contract down in Namibia. I think the timing of the predictive sale certainly was in line with what we've said in the full year results when the site had gone to start doing its mine permitting is when it makes sense for capital to exit. It's generally a different ownership structure, different requirements and we've realized that a lot of the value, I think the great part of the deal that we've been able to do with Perseus is that there is further upside through a call option and profit share arrangement that we have with Perseus or should a third party take over. There's also upside provided that happens before the 31st of December next year. On going forward, the bulk of the Predictive funds will go to pay down debt in the business and we'll continue to look for further investment opportunities like we have done with Predictive [indiscernible] others start more on those opportunities and see where they go. I think that we've proven historically that we've been able to deliver exceptional returns as indicated in the blue bubble on the top with the 2.8x return -- total return versus our net investment of $17.6 million today in the program. In our innovation part of the business, we've always focused on bringing new technologies or new methods to drive innovation around what we're doing either at the drill bit or in our operations more broadly. In our Well Force business, we value add to the holes that we are drilling, whether that's through geophysics, by doing directional drilling and/or for deep holes and/or other value-added orientation of core or cameras down holes and things. I think our training institute in Tanzania continues to grow, which is a fantastic partnership we have with the local organization to build skills in our sector. We're driving safety improvement programs. We're training our operators from our business and others on specific programs like working at heights and in confined spaces, and they're now starting to explore trade skills for individuals, particularly in Tanzania at the start, but see opportunities in a number of the other African countries that we work in. We're continuing to look for opportunities with our Mine Power Solution, which is a clever technology that balances the use of solar and diesel, particularly for start-up operations, whether that's account or mine sites building before they build their permanent infrastructure. And the most recent investment is in Echo Detection, which I'll go into the next slide to talk about. We made a strategic investment of $7 million in June this year for a 22% of the business. Echo Detection, we're looking for a AUD 10 million, and we decided to take the whole amount. In return, we have exclusivity for all of the mining industry globally. So we see a lot of opportunities for us to -- on both our mining companies and particularly the early stage of mining when you want a baseline water quality ongoing for mining operations where you want to check downstream to make sure there's nothing getting into local water streams or groundwater. And also, I think for inputs into mining operation, quality of water into the plants and into drinking or and the like for operations. I think the technology has a very broad application, particularly in water treatment and water provision across the world and also into other treatment plants for sewerage and other things, so the water can be tested before it's put back into our mainstream water for either underground or into rivers and the like so that the company is doing that can be assured that the quality of the water is at the level it needs to be. We expect to start trials with a number of our mining companies into this half. And are in the process of getting a number of units ready to ship to our operations in Tanzania to start some trials in the next few months. On that note, I'll hand over to Rick to go through the financials.

Thanks, Peter, and good morning, everybody. So just to touch on the financials. Obviously, I want to present them [indiscernible] but cover off a couple of important points. So EBITDA and EBITDA margin, as Peter has provided context for -- off half-on-half impacted by the ramp-ups across the U.S.A., Gabon across the Labs, the broader Labs business. But I think one of the things on it to emphasize is our expectation on margin going forward. So we're maintaining our target margin on adjusted EBITDA of 25% to 30% or albeit at the lower end of that range. I think as we see the business move forward and evolve, as Peter has talked to, the new contracts that across primarily U.S.A. and Gabon will serve to offset some of the impact of losing economies of scale at Sukari to reduce our presence on that site at the end of the mining contract. But also those new contracts will serve to offset the lower adjusted EBITDA margins that the Labs business will earn. Now those lower margins in the Labs business, as we've talked to you before, 15% to 20% adjusted EBITDA, they're less dilutive, although not -- we're not expecting them to be dilutive at the EBIT level. Clearly a function of a capital-light model in MSA. Just looking at the net debt waterfall, obviously, this is presented at the half pre the proceeds from the PDI sale, which will obviously significantly alter the net debt position. But to touch on a couple of points the CapEx, I'll come to talk to on the next slide. The investment is the Eco Detection investment that we made in the half and resulting in that net debt at the half of $86 million. So if you look at just focusing on the CapEx. So in that first half, $44 million of what we call the gross CapEx spend, so cash CapEx with the OEM financing and prepayment tied together. And that's in line or still -- we're reiterating our guidance on CapEx for the year of $70 million to $80 million. So obviously, a touch over the midpoint now, if you like. So yes, reiterating that guidance into the second half. On a net debt perspective, again, presented PDI sale. So with gross debt there, $126 million at half, that's reflective of some of that investment or a lot of investment has gone into the U.S., et cetera, in the half to help with the growth there. That's pushed our trailing net debt-to-EBITDA ratio up to the 0.9x. We still well within our covenants. So all the covenants on the debt facilities are still have a comfortable margin ahead of them. But what I would say is we're probably marginally ahead of our sort of conservative position that we want to stick to internally. So with the PDI proceeds, we have a real strong catalyst to de-lever the balance sheet. And so our intention is to put the $30 million or $31 million of proceed against the debt targeting our higher cost debt. But straight away that on a simple math basis puts our net debt-to-EBITDA ratio at 0.6x. And then beyond that, as Peter has alluded to, we're actively marketing the Sukari fleet for sale, which will obviously generate proceeds, timing-wise is up in yet because we're early on in that process. It may be that packages are sold discretely as opposed to all the fleet we want to go. But as I say, that process has started. Obviously, the contract is yet to finish. That's due to finish next month. But yes, we're on our way to hopefully realize proceeds against that fleet. On a dividend basis, we've declared an interim dividend in line with previous years. I think based on what I've said on the previous page, we are very committed to maintaining a strong balance sheet here. So that's sort of taking [indiscernible] PDI and we'll certainly have a desire to maintain our dividends going forward. Guidance-wise, we're reiterating our guidance across revenue and CapEx, as I've previously touched on. I'll hand over to Q&A.

[Operator Instructions] And Conor at this point, if I can just hand over to you to chat the Q&A, that would be great. And I'll pick up at the end.

Thanks. Yes. Look -- I'll go through these, if they keep coming in, I'll be able to keep reading them. I guess we'll start with quite a few questions on MSALABS. We've talked about -- Rick mentioned at our target EBITDA margin guidance of 15% to 20%. Could you talk to that why that guidance level is there? And also when do we expect the business to become profitable?

Sure. So Conor, just two parts. So one was what the guidance -- the set target percentage and then profitability?

And then we get into the timing of that?

So yes, so just a bit of background on the MSA business. So we run effectively really there's two models. There's a model where we do commercial labs, and we target a higher return. And in that business, we had a targeted adjusted EBITDA around 20% across those commercial labs. And then we have a slightly lower return for -- at which we have 15% of adjusted EBITDA and that adjusted EBITDA flows largely through to EBIT. So you can see while it's a lower EBITDA in both those businesses, it's very low CapEx across the MSA business relative to drilling or mining. And so that's the lower targets that we have there, but they do flow through into similar overall EBIT to the broader business around 15% or just under 15%. The MSA business is still in a growth phase, and we expect that during next year will move towards profitability. And certainly, towards the end of next year, we expect to be hitting our overall margins as we've rolled out the last of the units and continue to build up the commercial units that we've now put on the ground.

And just on that you mentioned there and earlier in the presentation that our target of rolling the map next year is a bit of a step from what we originally said. What are the implications on the business? And was that due mostly to a slower adoption from the market?

So not really slower adoption, I think. So the big Nevada contract, as I briefly mentioned in my presentation, is about half that is wet chemistry for the business to continue to do some of the traditional methods that they need to do, sort of non-fire assay, but other metallurgical samples and the like. And then also that business has -- it's been a bit slower to roll out there, in the U.S. than we'd expected some of the permitting contracting and other things that we needed have meant that that's probably about a quarter behind where we wanted to be. We will -- our intention is still to have so 15 units rolled out by the end of this year. And the 21, the remaining 6 of our total commitment during next year. And we've got good visibility on where those additional 6 units could go.

And one last one on Labs. We originally had a Lab in Morila in Mali. Can you talk to what the unit is in Mali?

Yes. So we have a commercial lab now in Bankan. So we're now running commercial samples through that and doing testing with a number of mines. But we also are running some samples there through for a couple of customers already. And that's in its early stage and growing that [indiscernible] lab.

Moving over maybe to a few finance on to Rick. Quite a few questions have come in, in terms of what value do you see the Sukari fleet being thoughtful? And how is that relative to the book value to be hold it up?

Yes. So book value at the end of the contract will be in the order of mid-20s million dollars, $25-ish million across the fleet. As for proceeds, look, as I say, we're at the early part of that process. So we are expecting proceeds to be broadly in line with that net book value. But look, it does depend on how much of the fleet we decide to sell as close to redeploy. And also the timing of that, the proceeds coming in. As I said, we might end up splitting the fleet into discrete packages and selling those off piecemeal, which will obviously take a little bit of time -- is the time and price trade-off clearly. So our current expectation is hopefully to sell some of that fleet later this year, early next, with the rest to follow up to sort of over the course of the first half next year and slightly lower.

A couple more from the finance. Firstly, I think you took this in H1, but it's been, why are we holding so much cash at the end of H1 in the context of our debt levels?

Yes. So I mean, contextually though, obviously, we operate in a number of jurisdictions. We have an invoicing cycle and receiving cash into those jurisdictions before we're able to pull the cash up, to the centralized sort of cash management level. So I think cutting it at the half there, we did have elevated cash levels, reflective of collections at the end of June. But also reflective as you have seen through the AP reflective of just the timing of some of the AP when it fell due, particularly in the U.S. in that movement there. So I think $40.5 million is an elevated cash level. We're typically running more into the 2025 maybe as a business. Again, in FY '25, that is a function of the number of jurisdictions we operate in. We need to keep obviously flows within those jurisdictions and there's a timing component in there round repatriation, et cetera.

And one more maybe for both of you. What should investors be thinking in terms of sort of a broad target net/debt leverage metric?

Yes. So I'll complete the first. Obviously, the -- as we talked to you in the presentation, the current levels of net debt to EBITDA probably beyond what we see as a conservative level that we want to maintain internally. So as a target, I would say, the -- that sort of 0.6x net debt to EBITDA is a sensible level to have in your mind. But as I say, as we have done in the first half, we have gone beyond that to facilitate growth, provided there's a strong payback ahead of it. So as a target 0.6-ish but as I said, it's flexible as to what growth opportunities we have ahead us.

And I think just building on that, Rick, that we're not saying we wanted just pay down debt now and not grow. We will still for the right growth opportunities, we'll continue to look for those. I mentioned in the presentation, a number of places where we see still great opportunities to keep growing. We'll continue to do that in a structured way. I think this first half is a bit of anomaly in the growth that we've done in 5 different places at once. I think we've got to consolidate over this half really get those projects to the profitability levels that we need -- that we've agreed that we will and continue to drive the MSA business back to profitability as well. And then that, in the meantime, we'll be generating cash continuing to pay down debt. That gives us the firepower to go and start looking for additional contracts again over the next number of months.

Maybe over to you, Peter on Echo Detection, a couple of questions. An interesting one if the Eco Detection, find -- sees a problem with the water. What is -- what does the client then do? I mean maybe it's helpful to give some key studies of how it actually works on the field?

Yes. So a great example is there's a couple of really good case studies. One that comes to mind is around in a non-mining application that I can give you one for mining as well. [indiscernible] process all the water that they use and store it and test it, before they were able to release it. What this technology could then do is enable you to run a continuous testing on the water and either divert it into storage if it's not fit for purpose or straight in to enable that to be discharged if it is. Similarly, in the mining operations for us so we can be giving a mine visibility of where there may be acid leaking from a waste dump or below from a storage pond of different types. And so we can give them instantaneously that sort of measure depending on the typically, most operations would be testing maybe once a week or unless there's a major event, we can be testing with these units every hour, providing that forward-looking data to customers so that they can be acting. So with Eco Detection team would proactively provide that back to the relevant mining operation in this case so that they're getting visibility of data as soon as the test comes through. And unlike a sample that would be collected by human and taken into a laboratory, you've got a time lag. We're getting those samples are being tested continuously, and we can be monitoring whether it's a one-off event or it's something that's continuing. The mine can deal with it as they need to.

And there's a question on just the distribution arrangement around this. How is that going to -- apart from just a pure investment part of it, how is it going to affect our revenue and margin? How is that working in terms of distribution?

I think -- at this stage, it's very early days. So we have a distribution agreement for mining contracts. We're just about to start doing trials. It's likely that the models would be on a lease or a per sample basis that we had sent to mine sites. So there'll be a revenue stream, but we haven't really got to a point where we've got a clear model of how that will work yet until we really get a good understanding of the size of the market, the adoption rates, and the like. And also the types of testing that would be wanted to be done by the mine. So units can potentially have up to -- have several different test methods within 1 unit and that would drive pricing and complexity of install and things safe. And equally, whether a unit might have a installing on it or solar panel those sort of things drive a different cost outcome. But I think there's a revenue stream that will come through per sample basis or something similar to these units is where we're thinking.

Maybe move to one in drilling. Could you give us -- can you talk about the contract we had in Sudan and the status of the rigs we have there?

Yes. So obviously -- with what's happening in Sudan at the moment, that contract is still paused. We've recovered some of the equipment from there. We haven't taken drill rigs out. In a location like that, we would always put older equipments, where we're unsure long terms where things might be. So we have relatively low equipment, some of the ancillary equipment removed and taken to Egypt. At this stage, Perseus to put people back on the ground but we don't have clear visibility when drilling might start again.

Maybe one on direct investments. Question is PDI has been clearly very successful. Do you plan to allocate some of the funds to more investments?

I think the simple answer is yes, but not specifically from this. We continue to -- we expect that we'll continue to find great investments like those that like PDI and wear. And we typically have started these investments with $1 million or $2 million. They're not large investments. So we expect that we'll continue to do that as the method that we go forward. It's worked very well. And I think the knowledge that we have in a couple of our key personnel in the business or directors in our business really gives us a very good insight into some of these opportunities. And I think we'll continue to follow the path, but not specifically put a certain number of dollars away for this payment.

Question, it might be easier to go back to the slide, actually question is confusable. But which our Labs are Commercial rather than mine site Labs? Just talk to it at the...

So the mine site labs, we have the Nevada Gold Mines. The Prince George Lab at the moment is doing only mine site with samples coming down from Alaska but we're about to move put a lab into Alaska to do that. We have a mine site lab at Kibali -- or 2 at the Kibali 2 Chrysos units and another one at Bulyanhulu in Tanzania. And we have the [indiscernible] Lab, while it's a commercial lab, it has a large contract with a mining company nearby. So it's a commercial lab. So generally, the other labs are commercial, the Chrysos -- franchise labs we don't own. So what happens with those as they prepare samples. They come into our central lab in Langley and we do the specific analysis that's needed to be done and there's effectively a revenue share on those samples that come in, whereas the young commercial Chrysos units, and we run those completely doing prep and doing those samples. We expect that we'll continue to grow more mine site labs over the coming period. There will be a couple of others that will be dedicated to mining companies going forward.

The question is come on just in terms of our guidance, we've talked clearly in our release and presentation that there are some operational challenges in the first half. What is the confidence level on group guidance and also MSALABS guidance?

We're still confident to provide guidance in that range for the total year. A number of the contracts that were slow to start and now coming into full run rates. And we've also grown a number of the other early-stage contracts of some of those have come on line, a bit quicker than we were able to achieve in H1. So we're still confident that we'll achieve within that range on revenue.

Thanks. And I think one last one and let more come in, in the meantime. What are your thoughts on M&A in the sector? We've obviously seen M&A plus mining but also in the contract you face [indiscernible]. What are your thoughts on M&A in the sector?

I think there's still opportunity. There are a number of specialist drillers. Obviously, they are the very large ones like for Long Year in DDH1 and major. [indiscernible] similar size to us. I think there's -- for us, as we bed down our U.S. operations, I do think that we can grow our presence there, both organically but I think there might be some inorganic opportunities as well. I don't -- I'd be surprised if we bought other businesses in Africa. I think we've got a very large presence there already it would really be for us to get some further geographic reach in our business. But we, at this stage, our focus is on paying down our debt, generating more cash again and then we can start to look at that one when we are in a stronger financial position going forward.

And I got one very last question is coming on remuneration. Can you talk about the SFL tip and how it's calculated and on what basis? Any sort of bonus intern based done on?

Yes. So the S/TIP program is based on the results in the year. It's a combination of metrics for -- across profitability of the business, the return on capital. We normally have a couple of other specific metrics on growth and then there's a safety metric. The majority of people also have a personal KPI, which is part of that percentage. The L/TIP is based on a 3-year trailing with based on shareholder return.

I think, Conor, just to add to that and complete the question. The zero cost share option concept, I mean, that's a structural point. There's still a performance -- broader performance-driven metric behind that. So i.e., total shareholder return, EPS accretion over that period drives the incentive amount. So the zero cost option is literally the structure that we have adopted as opposed to it being zero cost share options.

And I guess last one, maybe to gold sitting all-time highs. Can you talk about the general impact on the sector and potentially just talk about general demand levels, I guess?

Yes. I think -- so I think part of what -- generally, there's strong demand. I think even with the high gold price, high copper at the moment, I think the juniors are struggling to get funding. So generally, if I look across whether it's Australia or Africa or all Canada, and I think that's typically what's driven rates in drilling up in previous cycles. I think the majors have been very disciplined while they're spending large amounts of money, whether that's Barrick, Agnico or Newmont or other majors. I do -- I think we're seeing strong demand, but it's not necessarily flowing into rates because we generally do multiyear contracts. So we're not in the market on effectively spot rates at a given time. We have longer-term contracts that give us the, I guess, stability in our business and good long-term returns as opposed to the ups and downs of the cycle. I think that's probably -- if you look at the utilization of our fleet in the mid-70s, again, on 72% on the half, but increasing into this half, I think that demonstrates that there's a strong market out there. But we see some of our bigger competitors who have a much greater exploration focus, have a much lower utilization and it wouldn't be until that utilization really lifted that you'd see rates increase. I think the other thing that, while gold is high, the same drill rigs do nickel, iron ore and other lithium and other commodities. So while those commodities are down, I think it's how the drill rigs and others are available. And so it hasn't seen the same spike a general increase across all commodities.

Okay. Thanks, everyone, for the questions. I think we'll leave it there, and I'll pass it back to you, Peter, for any closing comments.

Thanks, Conor. Thank you very much, everyone, for joining the call this morning. I appreciate you taking the time, and thank you very much for the questions. Look forward to talking to you on our next investor call, and thank you for joining us.

Perfect. Peter, Rick, Conor thank you very much for updating investors today. Could I please ask investors not to close the session, as you now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. This will only take a few minutes to complete, but I am sure will be greatly valued by the company. On behalf of the management team of Capital Limited, we'd like to thank you for attending today's presentation and good morning to you all.