VANCOUVER (miningweekly.com) – A 20% jump in first-quarter revenues bears witness to strong demand for drilling services provided by Canada-based Geodrill, prompting president and CEO Dave Harper to bill the three months ended March as “the most promising start to any fiscal year ever”.
The Toronto-based company recorded revenue of $18.6-million for the three months ended March 31, compared with $15.5-million for the same quarter of 2016. The increase was mainly attributed to the strong demand for the company’s services and an enlarged rig fleet.
“The strong first quarter is very much an extension of the record 2016 the company has had, building on the back of a strong bidding season that yielded more multipurpose contracts. We are experiencing an improving market environment, and this can be seen from our increasing fleet utilisation rates,” 30-year industry veteran Harper told Mining Weekly Online in an interview on Monday.
According to him, Geodrill is a harbinger of market trends, being the first to feel the pinch of budget cuts or increased exploration demand. Should the strong start to 2017 persist, Harper believes the company is on trend to improve the top line by a further 15% to 20% this year.
Geodrill is aggressively expanding its capacity in West Africa because of strong demand, driving significant additions to property, plant and equipment over the last year that has resulted in more rigs being available. Since the first quarter of 2016, the company has invested about $8.9-million in property, plant and equipment and has increased its total rig fleet from 42 rigs to 56 rigs, as of Monday.
During the first quarter, Geodrill has invested a further $1.8-million in capital expenditures, bolstered by new contracts with Ashanti Gold, in Ghana, and with Guimbi Gold, in Mali. Geodrill also added several rigs to existing contracts including Newmont Mining, West African Resources, Newcrest Mining, Semafo and Centamin Ampella.
Harper said Geodrill’s fleet utilisation averages about 70%, compared with the industry average of 30%. The company owns a fleet of primarily multipurpose rigs that can offer customers a wider variety of services, thereby eliminating the number of contractors required on site to get the same results.
The company can generate more revenue per rig, largely because it owns a maintenance facility that is within a 12-hour drive of most of its drill sites, thus reducing the amount of downtime.
MORE METRES DRILLED
Harper explained that the overall improved company-wide performance was driven by more metres drilled and owing to a different mix of metres drilled, compared with a year earlier. The number of metres drilled increased 7% year-on-year from 240 426 m, to 257 091 m in the first quarter of 2017. The company recorded more core metres – the most expensive metres to drill – drilled in the first quarter this year, which helped push revenue per metre higher.
While the seniors have been keeping the company busy in recent months with their expanded drill programmes, Harper noted a marked return to activity among the juniors.
Importantly, the rise in drilling activity has once more cast the focus on skills and safety training, as the company’s ranks expand to keep up with expansion rates. “The first quarter has been very busy preparing and mobilising additional rigs and equipment, investing significantly in safety and skills training to meet the increased activity. As a result, costs increased in the early part of the quarter; however costs and margins normalised by quarter end,” Harper advised.
For the quarter, the cost of sales was $11.3-million, compared with $8.7-million a year earlier. The gross profit for the first quarter was $7.2-million, compared with a gross profit of $6.8-million a year earlier. The gross profit percentage for the first quarter was 39%, compared with 44% for the first quarter of 2016.
Net earnings was $300 000 for the first quarter, or $0.01 a share, compared with $1.6-million, or $0.04 a share, for the first quarter of 2016.
“Geodrill is continuing to see a recovery in the mineral drilling sector as evidenced by the increase in metres drilled and is optimistic that the recovery will continue throughout 2017. In addition, although metre pricing remains competitive in the industry, the company is witnessing prices beginning to stabilise. The company continues to see strong demand for its services and is continuing to invest in property, plant and equipment,” Harper stated, adding that Geodrill is now investigating the potential for offering underground services, which will open up a new untapped market for the company.
“With our increased rig fleet, we will maximise opportunities from additional new contracts, over and above recent contract wins, in response to customer demand allowing us to increase our geographical footprint in West Africa and potentially the African copper belt,” Harper said.