Mr. Pierre Alexandre reports

ORBIT GARANT DRILLING REPORTS FISCAL 2024 SECOND QUARTER RESULTS

Orbit Garant Drilling Inc. has released its financial results for the three-month and six-month periods ended Dec. 31, 2023.

"Our second quarter results reflect customer decisions to temporarily suspend or reduce drilling activity on certain projects in Canada beginning in the fourth quarter of fiscal 2023," said Pierre Alexandre, president and chief executive officer of Orbit Garant. "This reduction in drilling activity impacted revenue while our labour costs remained stable as we retained key personnel given the competitive work force market and in expectation of these projects gradually resuming. We also incurred additional costs to ramp the projects back up, which further impacted profitability in the quarter. As expected, all these projects were fully resumed as of January, 2024.

"With this issue now behind us, we are well positioned to benefit from continued strong customer demand in Canada. Gold prices recently reached record levels above $2,100 (U.S.) per ounce, giving our senior and intermediate gold mining customers strong incentive to maintain or expand their exploration and development spending. We are also experiencing increased customer demand and improved performance in our Chilean operations.

"During the second quarter, we completed our final drilling projects in Burkina Faso and Guinea, and are currently in the process of exiting West Africa. We expect this decision will positively impact our future margins. We are now primarily focused on our core Canadian gold drilling operations while selectively pursuing attractive opportunities in South America."

Second quarter results

Revenue for Q2 2024 totalled $43.4-million, a decrease of 16.0 per cent, compared with $51.6-million for the three-month period ended Dec. 31, 2022. Canada revenue totalled $29.6-million in Q2 2024, a decline of 22.7 per cent, compared with $38.3-million in Q2 2023. The decline was primarily attributable to customer decisions to temporarily suspend or reduce drilling activity on certain projects during the first six months of fiscal 2024. These projects started to gradually resume in August, 2023, and were fully resumed by January, 2024. Orbit Garant elected to keep its drilling personnel employed in anticipation of the gradual resumption of these projects. International revenue increased 3.0 per cent to $13.8-million in Q2 2024 from $13.3-million in Q2 2023, reflecting increased drilling activity in Chile, partially offset by a reduction of drilling activity in Guyana and Burkina Faso.

Gross profit for Q2 2024 was $2.8-million, or 6.4 per cent of revenue, compared with $6.8-million, or 13.1 per cent of revenue, in Q2 2023. Depreciation expenses totalling $2.5-million are included in the cost of contract revenue for Q2 2024, compared with depreciation expenses of $2.6-million in Q2 2023. Adjusted gross margin, excluding depreciation expenses, was 12.2 per cent in Q2 2024, compared with adjusted gross margin of 18.1 per cent in Q2 2023. The decline in gross profit, gross margin and adjusted gross margin primarily reflects the reduction of drilling activity in Canada, as described above, but without a commensurate decline in labour costs as the company elected to keep its drilling personnel employed in anticipation of the gradual resumption of these projects. Orbit Garant also incurred additional ramp-up costs related to these temporarily suspended or reduced projects. The decline was partially offset by increased drilling activity in Chile.

General and administrative expenses were $4.1-million, or 9.5 per cent of revenue, in Q2 2024, compared with $3.9-million, or 7.5 per cent of revenue, in Q2 2023.

Earnings before interest, taxes, depreciation and amortization totalled $1.0-million in Q2 2024, compared with $6.9-million in Q2 2023. Net loss for Q2 2024 was $1.7-million, or five cents per share, compared with net earnings of $2.1-million, or six cents per share, in Q2 2023. The decrease in EBITDA and net earnings was primarily attributable to the reduction of drilling activity in Canada due to project suspensions or reductions, retaining key personnel on suspended or reduced drilling projects, additional costs incurred to ramp project backup, and a $1.6-million negative variance in foreign exchange, partially offset by increased drilling activity in Chile. Net loss in Q2 2024 was also partially offset by a $1.0-million income tax recovery in the quarter.

Liquidity and capital resources

The company repaid a net amount of $300,000 on its credit facility in Q2 2024, compared with a repayment of $2.9-million in Q2 2023. The company's long-term debt under the credit facility, including $2.0-million (U.S.) ($2.6-million) drawn from the $5.0-million (U.S.) revolving credit facility and the current portion, was $24.6-million as at Dec. 31, 2023, compared with $22.2-million as at June 30, 2023.

As at Dec. 31, 2023, the company's working capital totalled $48.8-million, compared with $50.4-million as at June 30, 2023. Orbit Garant's working capital requirements are primarily related to the financing of inventory and the financing of accounts receivable. As at Dec. 31, 2023, Orbit Garant had 37,372,756 common shares issued and outstanding.

Orbit Garant's unaudited interim consolidated financial statements and management's discussion and analysis for Q2 2024 are available on the company's website or SEDAR+.

Conference call

Mr. Alexandre, and Daniel Maheu, chief financial officer, will host a conference call for analysts and investors on Thursday, Feb. 8, 2024, at 10 a.m. ET. To join the conference call without operator assistance, you can register and enter your phone number to receive an instant automated callback. Alternatively, you can dial 416-764-8688 or 1-888-390-0546 to reach a live operator that will join you into the call.

A live webcast of the call will be available on Orbit Garant's website. The webcast will be archived following conclusion of the call. To listen to a replay of the conference call, dial 416-764-8677 or 1-888-390-0541, with passcode 842747 followed by the number sign. The replay will be available until Feb. 15, 2024.

About Orbit Garant Drilling Inc.

Headquartered in Val d'Or, Que., Orbit Garant is one of the largest Canadian-based mineral drilling companies, providing both underground and surface drilling services in Canada and internationally through its 208 drill rigs and approximately 1,300 employees. Orbit Garant provides services to major, intermediate and junior mining companies, through each stage of mining exploration, development and production. The company also provides geotechnical drilling services to mining or mineral exploration companies, engineering and environmental consultant firms, and government agencies.

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