|Delayed - 01/20 04:00:00 pm|
Major Drilling International : Reports Profitable First Quarter
|09/09/2020 | 10:22am|
Adjusted gross margin excludes depreciation expenses.
Earnings before interest, taxes, depreciation and amortization.
Quarterly revenue was
Net earnings at
Added 13 rigs this quarter, including 10 rigs to support
'I am pleased with the fact that despite reduced activity, the Company managed to be profitable this quarter. Some of our operations were able to grow their revenue as compared to last year while our larger operations, including
'The Company maintains a strong financial position with net debt (net of cash, excluding lease liabilities reported under IFRS 16) at
'During the quarter, the Company repaid
'As we look forward, the price of gold, which accounted for 63% of the Company's drilling activity this quarter, has increased to new historic highs, above the
'Many industry experts expect that copper, which typically accounts for 20-25% of the Company's drilling activity, 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. New infrastructure plans announced in
'With these signs pointing towards an increase in exploration spending, we are preparing for an increase in activity later in the fall and well into the 2021 calendar year and beyond. However, in the short-term, operations will continue to be somewhat affected by COVID-19 restrictions, which will slow down the ramp up of drilling programs.'
First Quarter Ended
Total revenue for the quarter was
Revenue for the quarter from
South and Central American revenue decreased by 40.4% to
Asian and African operations reported revenue of
Gross margin percentage for the quarter was 16.9%, compared to 18.2% for the same period last year. Depreciation expense totaling
General and administrative costs were
The income tax provision for the quarter was an expense of
Net earnings were
NON-IFRS FINANCIAL MEASURES
The Company's financial data has been prepared in accordance with IFRS, with the exception of certain financial measures detailed below. The Company believes these non-IFRS financial measures are key, for both management and investors, in evaluating performance at a consolidated level and are commonly reported and widely used by investors and lending institutions as indicators of a company's operating performance and ability to incur and service debt, and as a valuation metric. These measures do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, and should not be construed as an alternative to other financial measures determined in accordance with IFRS.
EBITDA - earnings before interest, taxes, depreciation and amortization.
This news release contains statements that constitute forward-looking statements about the Company's objectives, strategies, financial condition, results of operations, cash flows and businesses. All statements, other than historical facts, are 'forward-looking' because they are based on current expectations, estimates, assumptions, risks and uncertainties. These forward-looking statements are typically identified by future or conditional verbs such as 'outlook', 'believe', 'anticipate', 'estimate', 'project', 'expect', 'intend', 'plan', and terms and expressions of similar import.
Forward-looking statements include, but are not limited to: worldwide demand for gold and base metals and overall commodity prices; the level of activity in the mining industry and the demand for the Company's services; the Canadian and international economic environments; the Company's ability to attract and retain customers and to manage its assets and operating costs; sources of funding for its clients (particularly for junior mining companies); competitive pressures; currency movements (which can affect the Company's revenue in Canadian dollars); the geographic distribution of the Company's operations; the impact of operational changes; changes in jurisdictions in which the Company operates (including changes in regulation); failure by counterparties to fulfill contractual obligations and other factors as may be set forth as well as objectives or goals including words to the effect that the Company or management expects a stated condition to exist or occur. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ materially from those currently anticipated in such statements by reason of factors such as, but not limited to, the risks relating to the COVID-19 outbreak and the factors set out in the discussion on pages 15 to 19 of the 2020 Management's Discussion & Analysis entitled 'General Risks and Uncertainties', and such other documents as available on SEDAR at www.sedar.com. All such factors should be considered carefully when making decisions with respect to the Company. The Company does not undertake to update any forward-looking statements, including those statements that are incorporated by reference herein, whether written or oral, that may be made from time to time by or on its behalf, except in accordance with applicable securities laws. All of the forward-looking statements made in this news release are qualified by these cautionary statements.
About Major Drilling
Webcast Conference Call Information
To participate in the conference call, please dial 416-340-2217, participant passcode 7212240# and ask for Major Drilling's First Quarter Results Conference Call. To ensure your participation, please call in approximately five minutes prior to the scheduled start of the call.
For those unable to participate, a taped rebroadcast will be available approximately one hour after the completion of the call until midnight,
Tel: (506) 857-8636
Fax: (506) 857-9211
NATURE OF ACTIVITIES
BASIS OF PRESENTATION
Statement of compliance
These Interim Condensed Consolidated Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting ('IAS 34') as issued by the
Basis of consolidation
These Interim Condensed Consolidated Financial Statements incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved when the Company is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
The results of subsidiaries acquired or disposed of during the period are included in the Consolidated Statements of Operations from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Intra-group transactions, balances, income and expenses are eliminated on consolidation, where appropriate.
Basis of preparation
These Interim Condensed Consolidated Financial Statements have been prepared based on the historical cost basis except for certain financial instruments that are measured at fair value, using the same accounting policies and methods of computation as presented in the Company's annual Consolidated Financial Statements for the year ended
KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING JUDGMENTS
The preparation of financial statements, in conformity with International Financial Reporting Standards ('IFRS'), requires management to make judgments, estimates and assumptions that are not readily apparent from other sources, which affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Depending on the severity and duration of disruptions caused by the COVID-19 pandemic, results could be impacted in future periods. It is not possible at this time to estimate the magnitude of such potential future impacts.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods. Significant areas requiring the use of management estimates relate to the useful lives of property, plant and equipment for depreciation purposes, property, plant and equipment and inventory valuation, determination of income and other taxes, assumptions used in the compilation of share-based payments, fair value of assets acquired and liabilities assumed in business acquisitions, amounts recorded as accrued liabilities, contingent consideration and allowance for doubtful accounts, and impairment testing of goodwill and intangible assets.
The Company applied judgment in determining the functional currency of the Company and its subsidiaries, the determination of cash-generating units ('CGUs'), the degree of componentization of property, plant and equipment, the recognition of provisions and accrued liabilities, and the determination of the probability that deferred income tax assets will be realized from future taxable earnings.
SEASONALITY OF OPERATIONS
The third quarter (November to January) is normally the Company's weakest quarter due to the shutdown of mining and exploration activities, often for extended periods over the holiday season.
PROPERTY, PLANT AND EQUIPMENT
Capital expenditures for the three months ended
Depreciation expense recorded in the Interim Condensed Consolidated Statements of Operations in direct costs was
The Company periodically assesses its liabilities and contingencies for all tax years open to audit based upon the latest information available. For those matters where it is probable that an adjustment will be made, the Company records its best estimate of these tax liabilities, including related interest charges. Inherent uncertainties exist in estimates of tax contingencies due to changes in tax laws. While management believes they have adequately provided for the probable outcome of these matters, future results may include favourable or unfavourable adjustments to these estimated tax liabilities in the period the assessments are made, or resolved, or when the statutes of limitations lapse.
EARNINGS PER SHARE
The calculation of diluted earnings per share for the three months ended
The total number of shares outstanding on
The Company's operations are divided into the following three geographic segments, corresponding to its management structure:
The carrying values of cash, trade and other receivables, demand credit facilities and trade and other payables approximate their fair value due to the relatively short period to maturity of the instruments. The carrying value of long-term debt approximates its fair value.
Financial assets and liabilities measured at fair value are classified and disclosed in one of the following categories:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - inputs other than quoted prices included in level 1 that are observable for the assets or liabilities, either directly (i.e., as prices) or indirectly (i.e., derived from prices) and Level 3 - inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The Company's derivatives are classified as level 2 financial instruments. There were no transfers of amounts between level 1, level 2 and level 3 financial instruments for the quarter ended
The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value.
Foreign currency risk
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