June 25, 2023

DDH1 provides a complete range of specialised surface and underground drilling solutions to their mining and exploration clients globally.  The company aspires to be the world’s leading driller through innovation and a continued focus on high-quality, reliable services.  DDH1 went public on the Australian stock exchange in March 2021.

Over the last five years, EBITDA has grown at a 12.8% CAGR, while EBITDA margins have avreraged 21-22% even during the recent inflationary environment.  ROIC is 19%.

The dividend yield is 7.0% and the company is on track to buy back 10% of the shares outstanding.

DDH1 is comprised of four different drillers.  The founder of each driller still runs their respective operations and is rewarded accordingly.  Also, each founder owns shares of stock.  DDH1 overall has 193 drilling rigs and is involved in all the cycles of a mine’s life.

DDH1 is marketed under four distinct brand names:

    • DDH1 focuses on deep section, underground diamond core drilling.
    • Ranger Drilling was acquired in April 2019 and focuses on iron ore drilling.
    • Strike Drilling was acquired in June 2018 and focuses on air core and reverse circulation drilling.
    • Swick Mining Services was acquired in February 2022 and operates mainly underground drilling rigs.

DDH1 has the highest revenue per rig in the industry.

Here is a good writeup on Value Investor’s Club:

Gold mining is cyclical, and it is likely that a long cycle of growth for gold drilling has begun.   Gold mine drilling services will be greatly needed going forward.  Here is a quote from the LBMA, the London Bullion Market Association:

In order to sustain production at or above current levels, significant capital will need to be deployed by miners in order to develop projects or expand existing operations to offset declining production from aging mines.  With current prices, which at time of writing are around $1,850/oz, well in excess of the 90th percentile of the all-in sustaining cost curve, which sits at $1,300/oz, the vast majority of gold mines are making very healthy profits.  These margins should allow the industry to deploy capital to develop new projects, with the average capital cost to construct a new gold mine approximately $200/oz over the life of mine.


The market cap is $233.5 million.  The company has $31.5 million in cash and $57.7 million in debt.  Enterprise value is $252.3 million.

Here are the current multiples:

    • EV/EBITDA = 2.79
    • P/E = 7.26
    • P/B = 0.91
    • P/CF = 3.77
    • P/S = 0.61

Total insider ownership is 41.8%.  Insiders have recently been buying shares.

TL/TA (total liabilities/total assets) is 28.7%, which is excellent.  ROE is 18.1%, which is good.

The Piotroski F_score is 8, which is very good.

Intrinsic value scenarios:

    • Low case: During a recession, the stock could fall 50% from $0.53 to $0.26.
    • Mid case: EV/EBITDA is 2.79, but should be at least 5.0.  That would mean the shares are worth at least $0.95, which is 80% higher than today’s $0.53.
    • High case: The stock could easily be worth a 6x EV/EBITDA, which would translate into an intrinsic value of $1.14.  That is over 115% higher than today’s $0.53.


Gold prices could fall significantly.  This seems very unlikely but is possible.



An equal weighted group of micro caps generally far outperforms an equal weighted (or cap-weighted) group of larger stocks over time.

This outperformance increases significantly by focusing on cheap micro caps.  Performance can be further boosted by isolating cheap microcap companies that show improving fundamentals.  We rank microcap stocks based on these and similar criteria.

There are roughly 10-20 positions in the portfolio.  The size of each position is determined by its rank.  Typically the largest position is 15-20% (at cost), while the average position is 8-10% (at cost).  Positions are held for 3 to 5 years unless a stock approaches intrinsic value sooner or an error has been discovered.

The mission of the Boole Fund is to outperform the S&P 500 Index by at least 5% per year (net of fees) over 5-year periods.  We also aim to outpace the Russell Microcap Index by at least 2% per year (net).  The Boole Fund has low fees.


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Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.