Jeff Olsen, CEO at Boart Longyear Limited (ASX: BLY), discusses how his firm has overcome significant challenges to become a major player in drilling services.
BOUNCING BACK BETTER
Boart Longyear is the world’s leading provider of drilling services, drilling equipment and performance tooling for the mining and exploration industries, and is making a name for itself in the drilling technology and geologic data sectors.
The company’s global drilling services division operates for a diverse mining customer base that spans a wide range of commodities, including copper, gold, nickel, zinc, uranium and other metals and minerals. The global products and Geologic Data Services (GDS) divisions design, manufactures and sells drilling equipment, performance tooling, down-hole instrumentation and parts and services to both mining and drilling firms.
Headquartered in Salt Lake City, Utah, Boart Longyear operates across six global manufacturing locations and provides the most advanced drilling technology on the market. Boart Longyear also provides drilling services in over 20 countries.
Jeff Olsen is the CEO of Boart Longyear. By his own admission, he had an ‘unusual’ path into the industry. “My undergraduate degree is in international politics and then I went on to get an MBA in upstate New York,” explains Olsen. “In 1991, I moved to a chemical company called General Chemical and they had mostly chemical operations but some mining operations. Thereafter, I worked at Rio Tinto for 18 years across various locations in several different roles.”
Indeed, Olsen lived and worked in London for a number of years before relocating back to Salt Lake City where Rio Tinto had a large regional office before leaving for Boart Longyear in 2014. “The downturn of the mining industry began in 2012 so I joined in the middle of a downturn in the sector, thinking that it would only last a few years and we’d move onto bigger and better things which unfortunately didn’t prove to be the case,” explains Olsen. “As a result of the market not being very good, we had a number of transactions to help keep Boart Longyear’s position as a leader in the drilling industry, but we were unsuccessful at solving the balance sheet problem.”
“We’re at that point now where to be competitive and to stay ahead, companies will have to innovate and are increasingly looking to new technology”Jeff Olsen, CEO, Boart Longyear
This issue, mixed with the emergence of COVID-19, prompted Boart Longyear to announce a large recapitalisation, which is in process and is subject to a favorable shareholder vote in September. “Our first quarter earnings were very strong in 2021, which means we are on track for a breakout year. Additionally, our proposed recapitalisation will reduce our debt by roughly $800 million, allowing us to invest in capital and further our efforts to provide tangible value to shareholders.” explains Olsen. “I anticipate that we will remain the largest drilling company in the world, which will put us in a very strong place going forward.”
Although the mining industry has had its trials and tribulations, the sector is in a much healthier place. Olsen has overseen Boart Longyear’s rise in tandem with the mining space and the firm is now poised to thrive in the industry. However, Olsen cannot forget the past and reflects on how his organisation has gotten to where it is today. “Mining is a secular industry and if you’re a supplier to the industry then you are in a hyper secular industry,” discusses Olsen. “The secularity tends to define this industry and our customers were all about deleveraging their own balance sheets at the time, and shareholders were clamouring for mining companies to return money to them and be more conservative.”
“One of the areas that they could save money on, in the short term, was on exploration activities and specifically drilling. The fundamentals in the mining industry are that if you don’t explore for new reserves then you don’t have anything to mine. That can only last for so long.”
Today, that has all changed. Boart Longyear’s customers are largely delevered, showcase robust balance sheets and have the ability to invest in their businesses. “There was significant consolidation in the gold industry through the second half of 2019, which also puts them on stronger financial footing,” explains Olsen. “As a business, Boart Longyear was poorly prepared for the downturn. Now, we are a much leaner business and are better focused on serving our customers and giving them what they need. We have a better understanding of where the market is and what the market requires. The last thing, which is a substantial difference between 2014 and now, is that we have been able to grow GDS, our technology division.”
GDS is focused on redefining the future of mineral exploration through innovative and emerging technologies delivered through industry-leading products and services. “GDS consists of tools that are used to gather appropriate information downhole about the hole itself and about the drilling. These are tools that already existed in the mining industry, but we’ve introduced our own tools that are better in many ways. We’ve changed our strategy from 2014 from one of just being the preferred driller in the space to we want to help our customers build our ore body knowledge. We do that by drilling and making tools that are more efficient and we also do it by the use of technology. This is a big difference in our business going forward.”
“We remain the largest drilling company out there and this will put us in a very strong place going forward”Jeff Olsen, CEO, Boart Longyear
With a history of being innovators in the drilling industry, the company recognises its place as a leader in drilling methods. “We don’t try to be everything to everyone, and we don’t try and address everything in the industry but the things that we do well are where we want to be the leaders in,” says Olsen. “The fact that our newest drill rigs have been well received is great, as well as our GDS Group and we’ll see over the next few years just how important these technologies will become. They provide huge cost benefits to our customers but also help stitch together all the different datasets of information they get about their own ore body in what we call a unified ore body knowledge. When you get full-service information from Boart Longyear drilling, then you have a unified set of information about your ore body in much less time and at a significantly cheaper cost.”
To those on the outside looking in, mining is often regarded as an industry that is old school and doesn’t embrace new technology. While that might be an exaggeration, Olsen agrees that mining is not as quick as other industries to leverage the latest innovations but does expect this to change in the near future as miners look to explore for reserves that will be deeper. “I think the influence of technology is growing rapidly,” he explains. “I believe it’s fair to say that the mining industry is slower adopters of new technology than others. However, once you get a critical mass in adoption then it moves very quickly. We are at that point now where to be competitive and to stay ahead, companies will have to innovate and are increasingly looking to new technology.”
Boart Longyear maintains several key, strategic partnerships and has combined the supply chains for its products and drilling services business together to form one global supply chain. “When we look for partners, it is about the ability to be compliant — it is non-negotiable,” says Olsen. “We work in some tough parts of the world and in our business compliance is key. This is consistent with the way that we approach safety. Another core value is innovation. We know that the way we drill and do business today in 2021 is not the same way we’ll do it in 2031, so it is important that we are aware of the latest technologies that can drive us forward.”
Moving forward, Olsen is full of optimism about the future of Boart Longyear. “I’m very excited about the next few years,” he maintains. “We will now have a balance sheet and a capital structure that supports growth, and we have an industry that is poised for significant growth, so it is all coming together at the right time.
The ability to invest in our business as the industry grows is important; however, we will always maintain a disciplined approach to our balance sheet. We have the ability to invest in that growth and that investment will ultimately drive value to our stakeholders. There’s a very bright future ahead.”