Mr. Denis Larocque reports

MAJOR DRILLING ACHIEVES HIGHEST REVENUE IN MORE THAN TEN YEARS; STRONG CASH GENERATION DRIVES SHARE REPURCHASES

Major Drilling Group International Inc. has released results for the second quarter of fiscal 2024, ended Oct. 31, 2023.

Quarterly highlights:

• Revenue of $207-million, highest revenue since July, 2012;
• EBITDA (earnings before interest, taxes, depreciation and amortization) of $43.6-million (or 53 cents per share), up from $43-million (or 52 cents per share) for the same period last year;
• Net earnings of $23.7-million (or 29 cents per share), up from $23.6-million (or 29 cents per share) for the same period last year;
• Spent $7.3-million repurchasing 875,268 shares;
• Net cash position increased $23.4-million during the quarter to $84.2-million.

"We continued to see strength in our business as the increase in demand from copper and battery metal customers more than offset the slowdown in exploration from junior gold companies," said Denis Larocque, president and chief executive officer of Major Drilling. "During the quarter, we saw our combined revenue from copper and lithium increase by 40 per cent as compared to last year, now representing over 30 per cent of our activity, while gold represented approximately 40 per cent. In addition, growth from our South American operations outweighed a decline in North American revenue, showcasing the effectiveness of our global diversification strategy."

"The company delivered excellent financial results in the quarter with EBITDA of $43.6-million amidst a backdrop of challenging macroeconomic factors. Our lean structure and debt free balance sheet drove strong cash flow generation of $23.4-million, growing our net cash position to $84.2-million," said Ian Ross, chief financial officer of Major Drilling. "Our robust cash generation provides the opportunity to modernize and optimize our fleet and support equipment to differentiate ourselves in an industry that has seen a lack of investment over the years. We spent $17.4-million on capital expenditures in the quarter, including six new drills while disposing of five older, less efficient drills, bringing the total fleet count to 602.

"Providing returns to shareholders remains Major Drilling's priority and with challenging capital markets negatively impacting company valuations across the mining sector, we took the opportunity to allocate capital to our share buyback efforts. In total, we spent $7.3-million in the quarter acquiring and cancelling 875,268 shares at a weighted average price of $8.31 per share. The company continues to view investment in the normal course issuer bid (NCIB) program as an effective method to deliver shareholder value while maintaining a financially prudent capital structure," said Mr. Ross.

"Looking at calendar 2024, customer demand is expected to remain strong as the growing supply shortfall in most mineral commodities should continue to drive demand for our services for several years," said Mr. Larocque. "The growing global demand for electrification will only increase the need for metals like copper, nickel and lithium. The enormous volume of copper, battery metals and likely uranium required will further increase pressure on the existing supply/demand dynamic. We expect all of this to continue to drive substantial additional investments in copper and other base metal exploration projects as we help our customers discover the metals that will allow the world to accelerate its efforts toward decarbonization. With gold prices recently reaching record highs, this could have a positive impact on funding for junior mining companies. In the short term, it is important to note that we are now in our third quarter, traditionally the weakest quarter of our fiscal year, as mining and exploration companies pause their drilling programs, often for extended periods over the holiday season. While conversations remain encouraging heading into calendar 2024, we have started to see several projects slowing down earlier than the previous year.

"Major Drilling is committed to invest in its fleet and support equipment, innovation in the field, and Tier 1 safety standards. Coupled with our industry-leading balance sheet, we are extremely well positioned to support our customers in their efforts to supply the world with minerals needed to transition to a more sustainable future. Driven by a diversified commodity mix, the company has focused operations on strategic mining geographies and stable jurisdictions. We believe that this provides our shareholders and potential new investors an opportunity to invest in the mining industry with growing exposure to precious metals, battery metals and critical minerals, while limiting mine or country exposure."

Second quarter ended Oct. 31, 2023

Total revenue for the quarter was $207-million, up 2.6 per cent from revenue of $201.7-million recorded in the same quarter last year. The favourable foreign exchange translation impact on revenue and net earnings for the quarter, when comparing with the effective rates for the same period last year, was approximately $3-million and $1-million, respectively. Mining companies continued elevated spending on exploration and resource definition as reserves are depleting, and the need for battery metals drives exploration.

Revenue for the quarter from Canada-United States drilling operations decreased by 5.7 per cent to $106.7-million, compared with the same period last year. Canada continues to be negatively impacted by financing constraints for the junior miners, which has caused a slowdown in this region compared with the same quarter last year.

South and Central American revenue increased by 25.9 per cent to $52.5-million for the quarter, compared with the same quarter last year. The demand for battery metals is driving activity levels in both Chile and Argentina as operations have seen positive impacts from these commodities.

Australasian and African revenue increased by 1.9 per cent to $47.8-million, compared with the same period last year. Demand for the company's specialized services in Australia continues to drive growth in this region.

Gross margin percentage for the quarter was 25.3 per cent, compared with 26.3 per cent for the same period last year. Depreciation expense totalling $11.8-million is included in direct costs for the current quarter, versus $11.2-million in the same quarter last year. Adjusted gross margin, which excludes depreciation expense, was 31 per cent for the quarter, compared with 31.8 per cent for the same period last year. Margins held relatively steady year-over-year as inflationary headwinds have been mainly offset by modest price improvements.

General and administrative costs were $17.6-million, an increase of $1.5-million compared with the same quarter last year. The increase from the prior year was driven by annual inflationary wage increases and higher travel costs associated with elevated business activity levels.

Other expenses were $3.2-million, down from $4.7-million in the prior-year quarter, primarily due to a decrease in the annual allowance for doubtful accounts as compared with the prior-year quarter.

Foreign exchange loss was $900,000, compared with a loss of $1.1-million for the same quarter last year. While the company's reporting currency is the Canadian dollar, various jurisdictions have net monetary assets or liabilities exposed to various other currencies.

The income tax provision for the quarter was an expense of $7.4-million, compared with an expense of $7.5-million for the prior-year period. The tax provision was flat compared with the prior year as profit levels were consistent year-over-year.

Net earnings were $23.7-million or 29 cents per share (29 cents per share diluted) for the quarter, compared with net earnings of $23.6-million or 29 cents per share (28 cents per share diluted) for the prior-year quarter.

About Major Drilling Group International Inc.

Major Drilling is one of the world's largest drilling services companies primarily serving the mining industry. Established in 1980, Major Drilling has over 1,000 years of combined experience and expertise within its management team. The company maintains field operations and offices in Canada, the United States, Mexico, South America, Asia, Africa and Australia. Major Drilling provides a complete suite of drilling services, including surface and underground coring, directional, reverse circulation, sonic, geotechnical, environmental, water-well, coal-bed methane, shallow gas, underground percussive/longhole drilling, surface drill and blast, and a variety of mine services.

Webcast/conference call information

Major Drilling will provide a simultaneous webcast and conference call to discuss its quarterly results on Friday, Dec. 8, 2023, at 8 a.m. EST. To access the webcast, which includes a slide presentation, please go to the investors/webcasts section of Major Drilling's website. Please note that this is listen-only mode.

To participate in the conference call, please dial 416-340-2217, participant passcode 6861492 followed by the pound key, and ask for Major Drilling's second 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 Monday, Jan. 8, 2024. To access the rebroadcast, dial 905-694-9451 and enter the passcode 2298856 followed by the pound key. The webcast will also be archived for one year and can be accessed on the Major Drilling website.

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