Tuesday 13 October 2015 by Alen Golubovic Company updates

Company update – New DirectBond Barminco Finance


New US dollar bond Barminco Finance has been added to our DirectBond list. Barminco is a leading Australian underground hard-rock mining contractor providing a number of specific services. The bond is available to wholesale investors only with a minimum face value of USD10,000

Underground mining operations

We have added the Barminco Finance Pty Limited 9% senior unsecured bond maturing on 1 June 2018 to the DirectBonds list. The issuer has a B- rating from S&P and a B2 rating from Moody’s. S&P revised its outlook from negative to stable on 1 October 2015.

Currently offered at an indicative yield to maturity of 17.60%*, the bond is a 2.6 year high yield investment. As always, with high yield comes associated higher risk so please make sure to review the supporting documents on this bond and the issuer before considering investment.

Barminco Ltd is a leading Australian underground hard-rock mining contractor providing the following mining services; underground contract mining, diamond drilling, crushing and screening. The complexity of underground mining and organisational ‘know-how’ required to operate in this industry serve as a natural barrier to entry.

Barminco runs a state of the art fleet with over 300 mobile equipment units - the largest single company owned fleet of underground mechanised equipment in the world.

The business was established in 1989 by founder, current shareholder and Non-Executive Director, Peter Bartlett. In August 2007, Gresham Private Equity and certain members of Barminco’s management acquired a majority interest in Barminco (60.1%), with founder Peter Bartlett retaining a significant interest.

Financial and strategic highlights:

  • ~99% of Barminco’s revenue is tied to production and development activities rather than exploration
  • More than 50% of revenue is linked to gold with the balance in nickel, copper, zinc and tin
  • Strong liquidity, with a cash balance of $104.8m as at 30 June 2015
  • Market leader in a niche but technically complex industry (underground mining)
  • Positive free cash flow of $9.0m in FY15 (after interest costs and capex)
  • Revolving credit facility of $50m effectively undrawn
  • While FY15 EBIT was down 11.3% due to challenging market conditions, the company is guiding a single digit increase in earnings for FY16

View Barminco Finance’s annual reportExternal link - opens in a new window for the fiscal year ended 30 June 2015.

In May 2013, Barminco raised USD485m in debt to repay existing debt. The company has since been able to repurchase USD99m of the bond in FY15, with an additional USD25m repurchased in July. The current amount of bonds outstanding is USD361m.

The debt is fully hedged for interest rate and currency risk under a cross-currency swap arrangement. See the 2015 full year business updateExternal link - opens in a new window for more details.

This bond offers a high yield USD investment opportunity for investors comfortable with the risk profile of the B-/B2 rated (S&P / Moody’s) bond and a position in the mining services industry. 

Please note Barminco’s ability to refinance the debt will be challenging under current market conditions, however, high levels of liquidity and improving market conditions mitigate this risk.

Barminco 9% 1 June 2018 USD bond
Issuer Barminco Finance Pty Ltd
Maturity date 1 June 2018
Bond type Fixed
Coupon 9.00%
Indicative yield to maturity 17.60%*
Income (running yield) 10.91%*
Face value USD10,000
Capital value USD8,250

For a summary on the bond view the Barminco Finance USD fixed rate bond factsheet.

*It is important to note that the indicative rates are accurate as at 13 October 2015 but subject to change.


The contents of this document are copyright. Other than under the Copyright Act 1968 (Cth), no part of it may be reproduced or  distributed to a third party without FIIG’s prior written permission other than to the recipient’s accountants, tax advisors and lawyers for the purpose of the recipient obtaining advice prior to making any investment decision. FIIG asserts all of its intellectual property rights in relation to this document and reserves its rights to prosecute for breaches of those rights.

Certain statements contained in the information may be statements of future expectations and other forward-looking statements. These statements involve subjective judgement and analysis and may be based on third party sources and are subject to significant known and unknown uncertainties, risks and contingencies outside the control of the company which may cause actual results to vary materially from those expressed or implied by these forward looking statements. Forward-looking statements contained in the information regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this report. Opinions expressed are present opinions only and are subject to change without further notice.

No representation or warranty is given as to the accuracy or completeness of the information contained herein. There is no obligation to update, modify or amend the information or to otherwise notify the recipient if information, opinion, projection, forward-looking statement, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

FIIG shall not have any liability, contingent or otherwise, to any user of the information or to third parties, or any responsibility whatsoever, for the correctness, quality, accuracy, timeliness, pricing, reliability, performance or completeness of the information. In no event will FIIG be liable for any special, indirect, incidental or consequential damages which may be incurred or experienced on account of the user using information even if it has been advised of the possibility of such damages.

FIIG provides general financial product advice only. As a result, this document, and any information or advice, has been provided by FIIG without taking account of your objectives, financial situation and needs. Because of this, you should, before acting on any advice from FIIG, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If this document, or any advice, relates to the acquisition, or possible acquisition, of a particular financial product, you should obtain a product disclosure statement relating to the product and consider the statement before making any decision about whether to acquire the product. Neither FIIG, nor any of its directors, authorised representatives, employees, or agents, makes any representation or warranty as to the reliability, accuracy, or completeness, of this document or any advice. Nor do they accept any liability or responsibility arising in any way (including negligence) for errors in, or omissions from, this document or advice. Any reference to credit ratings of companies, entities or financial products must only be relied upon by a ‘wholesale client’ as that term is defined in section 761G of the Corporations Act 2001 (Cth). FIIG strongly recommends that you seek independent accounting, financial, taxation, and legal advice, tailored to your specific objectives, financial situation or needs, prior to making any investment decision. FIIG does not provide tax advice and is not a registered tax agent or tax (financial) advisor, nor are any of FIIG’s staff or authorised representatives. FIIG does not make a market in the securities or products that may be referred to in this document. A copy of FIIG’s current Financial Services Guide is available at www.fiig.com.au/fsg.

An investment in notes or corporate bonds should not be compared to a bank deposit. Notes and corporate bonds have a greater risk of loss of some or all of an investor’s capital when compared to bank deposits. Past performance of any product described on any communication from FIIG is not a reliable indication of future performance. Forecasts contained in this document are predictive in character and based on assumptions such as a 2.5% p.a. assumed rate of inflation, foreign exchange rates or forward interest rate curves generally available at the time and no reliance should be placed on the accuracy of any forecast information. The actual results may differ substantially from the forecasts and are subject to change without further notice. FIIG is not licensed to provide foreign exchange hedging or deal in foreign exchange contracts services. The information in this document is strictly confidential. If you are not the intended recipient of the information contained in this document, you may not disclose or use the information in any way. No liability is accepted for any unauthorised use of the information contained in this document. FIIG is the owner of the copyright material in this document unless otherwise specified.

The FIIG research analyst certifies that any views expressed in this document accurately reflect their views about the companies and financial products referred to in this document and that their remuneration is not directly or indirectly related to the views of the research analyst. This document is not available for distribution outside Australia and New Zealand and may not be passed on to any third party without the prior written consent of FIIG. FIIG, its directors and employees and related parties may have an interest in the company and any securities issued by the company and earn fees or revenue in relation to dealing in those securities.