New driller on gas block

DARRELL Von Stanke, former founder and owner of Valley Longwall Drilling, has re-emerged as a new player within the in-seam directional drilling industry in what is becoming a battle for a share of the market as gas drainage grows.

Lou Caruana

Published in the June 2011 Australian Longwall Magazine

Von Stanke, better known as “Roundy” around the industry, is considered by some as a pioneer in the field of directional drilling.

He founded VLD in 1994 starting with one in-seam rotary drill rig using single shot cameras as a form of potting in-seam holes for gas drainage.

Valley Longwall Drilling Pty Ltd was formally registered in June 1996 and commenced actual operations on October 16, 1996.

It started with three directional drill rigs at Dartbrook coal mine (having bought the NSW portion of Strata Drilling Pty Ltd) from the former owner Norm Blanche.

At that time, it was using single shot cameras and one DDM acoustic steering tool. VLI purchased AMT Drilling Australasia in 1999 which gave it access to the new DDM MECCA.

VLI was sold in a joint management buy out/equity investment (by Crescent Capital) on July 12, 2005 for $12.6 million.

Chris Freer was general manager at the time and led the MBO, he said.

“Over the ensuing years, as CEO and working with Crescent Capital, I led an aggressive aggregation and growth process that culminated in a sale to Catalyst in 2007 for $A250 million,” said Freer, who is now VLI’s global manager drilling & president international business development.

After a five year break, Roundy was contacted for his advice by an Australian-based company in Hong Kong to look at the emerging gas drainage market in China, Russia and Australia.

Roundy formed a partnership with the company and set up three companies: Global Drilling System International (GDSI), Australian Drilling Systems (ADS) and ADS Engineering (ADSE).

ADS operations manager Daniel McCarthy said he had been overwhelmed by the response of the industry to a new player in the gas drainage industry, with the company securing its first drilling contract with Peabody Energy at its Hunter Valley Wambo mine in April this year.

GDSI has secured a contract to design, manufacture and deliver a drilling package to one of the biggest oil petroleum companies in Russia. The Yarega Mines, owned by Lukoil, supplies Russia with petroleum oil and titanium, which is mined in frozen oil saturated sandstone.

Once drilling has been completed the sandstone body is heated to 100 degrees from bore holes drilled from the surface releasing the oil and titanium. Current methods of rotary drilling at these mines only allow drilling to a maximum of 120 metres.

ADSE completed a newly designed directional drill rig in May this year for Lukoil in Russia.

This machine has been designed and built in 17 weeks and has a push/pull capacity of 20 tonnes, rotational torque of 4000 newton-metres and runs on a rack feed system, doing away with conventional cylinders and chains.

Plans are also underway to start manufacturing four more of these machines for the ADC.

Valley Longwall’s original gas drainage contract business, which is firmly entrenched in the gas drainage market, has now been bought by cashed-up Chinese Taiyuan Mining Machinery Group and new competitor Mastermyne has picked up its first gas drainage contract at Centennial’s Newstan colliery.

In April Prime Minister Julia Gillard attended the official ceremony at Parliament House to mark the completion of Shanghai-based Taiyuan Mining Machinery Group Coal Machine’s acquisition of the original Valley Longwall International.

China’s massive coal industry dwarfs Australia’s, providing plenty of expansion opportunities for Valley Longwall’s products and services to a larger underground coal sector.

“The coal industry in China is increasingly seeking to work with suppliers and partners with high safety standards and access to quality technology – both of which are core to VLI’s business,” Valley Longwall chief executive officer Brett Lynch said.

“The signing of this agreement marks a very exciting time for our company and will create tremendous opportunities for all VLI employees.”

The Valley Longwall brand will be retained by China’s TMG.

Investment firm Catalyst put Valley Longwall up for sale last year and Australian OEM Industrea was involved in the bidding process.

But TMG clinched a deal to fully acquire Valley Longwall just a few days before Christmas.

The sum was not disclosed and Catalyst, which bought Valley Longwall for almost $A250 million in 2007, did not put out its own public announcement on the transaction with the Chinese manufacturer. Last year Valley Longwall consolidated its business into three divisions – drilling, diesel and conveyors.

Valley Longwall also manufactures specialised in-seam directional drilling systems and stocks a wide range of hydraulic and mechanical spares and consumables.

“We now have three divisional structures, with VLI Pty Ltd encompassing a broad range of products and services across the three divisions (VLI Drilling Pty Ltd, VLI Diesel Pty Ltd and VLI Conveyors Pty Ltd) chiefly focused on underground gaseous coal mines globally,” said Freer.

“We continue to aggregate, grow and innovate.

VLI Drilling Pty Ltd -- when combined with REI in the US (which we currently own 50% of) -- now runs the largest fleet of in seam directional drilling systems in the world with our contract services business operating about 27 directional drill systems on paid-by-the-metre services for clients in Australia, China, the USA, Mexico, Canada and New Zealand and an installed equipment fleet of over 70 drill systems delivered to mine operators in Australia, China, New Zealand and Russia.

“We have a busy few years in front of us with our new Chinese shareholders again working with our excellent management team to sustain and enhance our global growth.”

The other big player, Industrea Gas Management, paid AJ Lucas $25.5 million for its Underground In-Seam Services (UIS) business in March.

At the time of the acquisition, Industrea said the business – which provides underground in-seam drilling for mine exploration, mine dewatering and coal mine methane gas drainage – would enable the company to roll out a fully integrated gas management solution on an accelerated basis.

The business would combine with Industrea’s newly formed gas management division to service clients such as Anglo Coal, Centennial Coal, Xstrata and Rio Tinto, Industrea managing director Robin Levison said.

“The acquisition and integration of the UIS business will augment Industrea’s new gas management division and allow us to provide a broader and enhanced gas management solution to both Australian and international clients, especially in China and Russia,” he said.

“The transaction provides Industrea with further earnings diversification and a client base which includes many of the industry’s leading operators.

“The addition of the UIS business is part of Industrea’s strategic objective to selectively target earnings enhancing bolt-on acquisitions and to pursue high margin opportunities across related sectors.”

The AJ Lucas UIS business was the second largest underground in-seam drilling provider in Australia, with about 44% market share and 45 staff, including a dedicated operational management team. The acquired fleet includes seven drilling rigs and eight survey systems.

“Over recent months Industrea has leveraged its experience to develop and manufacture an Industrea drill rig which, when incorporated with the unique AMT Drill Guidance System, represents a clear technological step change over existing gas drainage solutions,” Levison said.

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