Read this driller's Q3 if you want to feel bullish about mining

Major Drilling, which reported that its quarterly revenue was up 22%, reported lots of green sprouts in the mining industry.

Denis Larocque, President and CEO of the company, said that activity levels have been improving month by month, and growth is coming from all regions.

"Although we are still very early in the cyclical recovery, it has been a steady climb over the last 18 months," says Larocque,

The company said gold projects have been driving most of the growth. More equipment spending is planned.

“During the quarter, we continued to see activity levels improve month by month, with growth coming from all regions,” said Denis Larocque, President and CEO of Major Drilling Group International Inc. “Although we are still very early in the cyclical recovery, it has been a steady climb over the last 18 months. Margins continue to be affected by transitional issues such as recruiting, training and repair costs, and due to competitive pressures, we have some low-margin contracts we are still working through.”

“This year, growth has been driven primarily by gold projects as senior gold companies have increased their exploration budgets, on average, by more than 20%. As we proceed through the year, gold activity levels are stabilizing as companies are following their original plans. We are starting to get more inquiries for base metal projects as prices for those commodities continue to recover indicating we could see an increase in exploration budgets from base metal companies for calendar 2018.”

“The Company’s net cash position (net of debt) continues to be strong at $18.9 million. Capital expenditures were $4.3 million this quarter, as we added four rigs to our fleet as part of our specialized and diversification strategies. Two of the additional rigs are suited for surface drill and blast/grade control work, one is a mobile underground rig and one is an ultra-deep diamond rig capable of reaching depths of over 4,000 metres. As resources continue to be discovered in areas difficult to access, we continue to invest to consolidate our position as the leader in specialized drilling,” added Mr. Larocque.

“In anticipation of a recovery in demand for our services, we have made investments in mobile solutions in the field, providing tools to our crews in order to improve safety and productivity. This falls in line with the enhancement of our recruiting and training systems as we bring in a new generation of employees.”

“We believe that most commodities will face an imbalance between supply and demand as mining reserves continue to decrease due to the lack of exploration. Typically, gold and copper projects represent over 70% of the Company’s activity. Mineral reserves of ten of the top senior gold mining companies have decreased by almost 15% over the last two years. As well, many industry experts expect the copper market will face a deficit position in the next few years, due to the continued production and high grading of mines, combined with the lack of exploration work conducted to replace reserves. Therefore, it is expected that at some point in the near future, the need to develop resources in areas that are increasingly difficult to access will significantly increase, at which time we expect to see a resurgence in demand for specialized drilling,” said Mr. Larocque.

Creative Commons image by Michael Brown

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