Proceeds from a placement at 3.5c per Mitchell share will be used to acquire Tom Browne, currently in receivership, for $9.5 million as well as retire debt and meet working capital requirements.

The offer price represents a 12.5% discount to Mitchell’s last closing price of 4c.

The Tom Browne assets include 29 drilling rigs and ancillary equipment, which will double the number of rigs in the Mitchell fleet to 58.

The acquisition is also expected include the potential assignment of an 18-month drilling contract with an unnamed global mining company.

Mitchell executive chairman Nathan Mitchell said the deal represented an attractive counter-cyclical move to purchase a quality asset base at well below replacement value due to the distressed nature of the sale following the appointment of receivers to Tom Browne in April.

“We believe this is a compelling bottom-of-the-market investment opportunity with significant upside for the company if general market conditions improve, given the quality of these assets and the long lead times required to order new equipment,” Mitchell said.

“According to an independent valuation obtained in July 2014, the replacement value of the material assets being purchased is $52.6 million.”

Mitchell said his company’s fleet of eight drill rigs was operating at near full utilisation and needed to be expanded in order to service a strong tender pipeline and drive growth.

“This acquisition, which includes 15 tier one rigs, will provide Mitchell Services with the capacity required to execute in response to our strong tender pipeline, strengthen the company’s market presence and expand its geographical footprint from predominantly Queensland operations,” he said.

“Mitchell Services will then have a significant fleet in eastern Australia to deliver on our vision of being Australia’s leading provider of drilling services to the exploration, mining and energy industries.”

The newly acquired rigs are expected to enable more than 10,000 additional drilling shifts per year on a single shift basis.

The purchase is expected to be settled in late September after completion of the equity raising.

Shares in Mitchell were last trading 22.9% higher at 4.9c.