Geodrill Limited

Good morning, ladies and gentlemen, and welcome to Geodrill's fiscal 2024 results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at time for queue up for questions. If anyone has difficulties here in the conference, please press star zero for operator assistance at any time. I would like to remind everyone that this conference call has been recorded today, March 3, 2025. Before we begin, certain statements made on today's call by management may be forward-looking in nature and, as such, are subject to various risks and uncertainties. Please refer to the company's press release and MD&A for more details on these risks and uncertainties. I will now turn the call over to Mr. Dave Harper, President and CEO of Geodrill. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Geodrill's fiscal 2024 conference call. Joining me on the call today is Greg Borsk, our Chief Financial Officer. Let me begin. 2024 was a transformative year for Geodrill in which we strategically pivoted into new high potential markets with lower risk jurisdictions. This approach has mitigated risks but also allowing us to tap into new opportunities with the ultimate aim of driving growth for our shareholders. In 2024, we achieved several significant milestones. We have effectively mitigated risk by building a diverse client portfolio of well-funded, top-tier mining companies in safe jurisdictions. This strategic move has fortified our position in the industry and enhanced our resilience. Despite operating in a highly inflationary period with rising costs, we've achieved record revenues, strengthened our balance sheet and remained highly profitable. These accomplishments underscore our financial discipline and our operational excellence. One of our most significant achievements has been securing multi-REIT contracts across both of our core markets in West Africa and our expanded markets, namely Egypt. and South America. These contracts have substantially boosted our revenue visibility for the next three to five years, demonstrating our commitment to financial stability. Futurals always thrive by operating where opportunities exist. Our track record of balancing opportunity and risk has been validated by today's results. Going forward, We remain confident in our ability to deliver value to our shareholders by establishing a strong platform for future growth. Our commitment to excellence and strategic foresight will continue to drive general success in the years ahead. I'll now turn the call over to Greg Borsk, our CFO, who will review our financial performance in detail.

Thank you, Greg. Thank you, Dave.

I am pleased to report the financial performance for fiscal 2024. The company generated revenue of $143.1 million for 2024, an increase of $12.5 million or 10% when compared to $130.5 million for 2023. The increase in revenue is the result of the increase in demand for Geodrill's drilling services and a robust gold price with the majority of our clients mining for gold. The gross profit for 2024 was $34.7 million being 24% of revenue compared to a gross profit of $30.6 million or 23% of revenue for 2023. The gross profit increase is a result of the increase in revenue and, as Dave mentioned, despite inflationary pressures facing the mining sector and mining services providers, Geodrill has been able to increase its gross profit margin for 2024 compared to 2023. EBITDA for 2024 was 31.1 million or 22% of revenue. This compares to 20.6 million or only 16% of revenue for 2023. The net income for 2024 was 9.1 million or 20 cents per share. compared to net income of $3.8 million, or $0.08 per share for 2023. We ended the year with net cash, excluding right-of-use liabilities, of $2.8 million. In 2024, we generated $21 million in cash flow from operations, and we invested almost this entire amount back into property, plant, and equipment as we expect an extremely busy 2025 and have scaled up our fleet. We ended the year with 95 drill rigs. Building on Dave's comments, the record high revenue is fundamentally driven by two key drivers. one the newly secured multi-rig multi-year contracts and the sustained record high gold prices the tier one contracts have been instrumental in boosting our financial performance throughout the year and the robust global exploration spending driven by high gold prices further underscores the strong fundamentals and positive outlook for the mineral drilling industry moving forward. At this point, I will turn the call back to Dave.

Thank you, Greg. As we look to the future, we recognize the importance of staying agile and adaptable. The mining industry is continually evolving, and we must stand ready to navigate new challenges and seize emerging opportunities. Our outlook remains strong and promising. We are actively attending new contracts in emerging regions to set ourselves up for the next phase of growth. The synergy between our strategic long-term contracts and the robust gold market positions us exceptionally well for continued growth and operational success. With 2024 a wrap, I take this opportunity to extend my gratitude to all feudal stakeholders including our hardworking team, our patient shareholders, and our loyal customers. Our unwavering support has been integral to our success. We remain committed to maintaining our high standard of service while furthering our position as an industry leader in the mineral drilling services sector. And with this, this concludes our prepared remarks on our financial results. I'll now pass back to the operator for the Q&A session if anyone has a call. Thank you.

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift a handset before pressing any keys. Your first question comes from Gordon Lawson with Paradigm Capital. Your line is now open.

Hey, good morning, everyone, and congratulations on your performance. Thank you. Are you able to elaborate on which segments are seeing the highest growth in terms of Chile versus Egypt and where your margin improvement is seeing the highest boost?

Yeah, where we're actually seeing the highest growth is in our primary countries, Gordon. So that's West Africa. There's the three countries that We're operating in West Africa, being Ghana, Cote d'Ivoire, and recently we're in Senegal. So we've done extremely well in those three countries. Continuing with Africa, Egypt, we're also doing extremely well and we're seeing continued growth in Egypt. Again, that's backed by we have a large... multi-rig multi-year contract there and we've been able to leverage that with um probably about five or six additional clients so we're we're doing well in egypt also in terms of um south america i think we we put out our press release i think it was in q3 with the new uh we signed a new multi-year multi-rig client in chile so we're going to be extremely busy in Chile in 2025 and we have our the other existing clients are continuing to drill also in South America so we're fortunate what we're seeing is we're seeing actually growth in all areas each each of the countries when Dave and I do our forecast and budgets for 2025 we're expecting increases not only in every region, but in each and every country. So that's kind of where we're seeing the growth. And I think that the key also will be just keeping up with our clients and continuing to add new rigs in those areas. So Q1 2025, we're starting that has been off to a very good start, so we're pretty excited about 2025.

Yes, your outlook for 2025 does look promising. I realize that you won't be able to break this down as much as I'd like, but are you able to disclose what level of growth rate you're modeling, either by segment or just in general, for 2025?

Yeah, we don't disclose that, but I think if you look at last year, last year we were able to grow the top line by about 10%. So again, Geodrill, Dave started with one rig. We've only grown organically. So I think if we're able to get it at another 10%, 10% to 15%, we'd be doing well. If you look at some of our competitors, and I don't want to name names, but, you know, some of the competitors are actually having their revenues declining year over year. And here's Geodrill, you know, 23 to 24. We were able to increase our top line by 12.5 million or 10%. And one thing we pointed out is we've decided in 23 and 24 to pull out a two- high-risk, unsafe countries in West Africa. In 2023, we pulled out of Burkina, and in 2024, we've pulled out of Mali. So not only have we been able to have a record year, so those rigs that were in Burkina and Mali, they've all since been redeployed, and they're in our primary countries, and they're actually drilling. So we've done a better job on drilling risk-profiling geodrill, and it hasn't cost us any revenue. We were able to increase revenue by 10%, and we're also expecting a good 2025.

Gordon, if I may just jump in just quickly just to add to Greg's comments there. You know, as he was saying, we don't like to guide, but I think if you just look at historically... where we've come from. We tend to put on about 10% year over year, each year. And I will tell you that we will do that in 2025. Very comfortable to sit here right now and say that we should achieve at least that, okay? It's going to be a really solid 2025. And actually, what's more interesting, I think, is that we're actually just entering the four most interesting years in the company's history. Now, if we just take 2024 as the benchmark, okay, fiscal 2024, Greg and I were discussing this as we'd just come from a board meeting, and I put a slide up where we basically, if we look at our growth, things don't go up in a straight line, right? Not all years go up. But if we look at it, for the last four years, if we go from 2024 and then we go back to, what was that, 2021, we did average revenue of $130 million. If we go back to the four-year period before that, we did averagely $80 million. If we go back to the four-year period before that, we did averagely $50 million. So I call that affectionately the 50s, the 80s, and the 130s. You don't need to be Nostradamus to work out, you know, a mathematician to work out that this thing's going to keep moving north and it's going to keep moving north, averagely at about 10% per annum. So if you just want to, you know, we'll have, you know, trials and tribulations in the next four years, no doubt about it. But from what we're seeing right now, I've never been more bullish. Never been more bullish. Never been more bullish. We've got 3,000 gold or we're knocking on the door of 3,000 gold and copper's in big demand. And we're in the places. where all this stuff is being mined and we're in the markets where it's easy to mine. You know, with the drilling company that operates in the places where other folks don't want to, in Australia these days, it's very challenging to drill. It's very challenging to drill because of a thing called the Heritage Act. So the drillers that I'm talking to back home, you know, back in where I come from in Australia, they can't get their rigs on, they can't drill. Mining companies can't get access to the ground. Similar things going on in North America, or at least in Canada as well. And so I think you're going to find that you're really going to shine over the next four years. This will become a cash cow, mark my words.

Sounds great. Okay. Thank you very much.

Thanks, Gordon. Cheers.

Thanks, Gordon.

Your next question comes from Don Angelo Volp with Beacon Securities. Your line is now open.

Hello. Hey, good morning, guys, and thanks for taking my question. Hey, good morning. First, looking at PP&E or CapEx, we saw a little bit of an uptick in Q4. Are we expecting these numbers to kind of normalize in fiscal year 2025? Should we model an uptick compared to historical levels, or are we holding it relatively in line with about $4 million per quarter?

Yeah, that's a great question, Donnie. If you look at the Just look at the cash flow. As I said earlier, our geodrill success is organic and what we make in cash flow from operations, we've been able to reinvest in the business. So if you look at 2024, cash flow from operations was just over $21 million and we were able to invest almost all of that. I think it was $20.5 or $20.6 back into property plant and equipment so that's just that that's that's the proof that you know we are going to be extremely busy in 2025. now um we've we've set this up we talked about the multi-rig multi-year contracts uh that we secured in 2024 and a lot of this cap x that the 20 point um uh 20.7 million uh that we invested in 2024 will go to support those contracts so what we will do uh as as we get through um 2025 we will continue to you know we keep our clients happy so we will continue to add rigs um hopefully for existing clients potentially new clients in in some of the jurisdictions we're we're working on because Right now, there's a big demand and we have the ability through our credit lines, we have the ability through our term loans, and we have the ability through the cash flow that we generate from operations to actually continue to increase the fleet.

Okay, thanks for the color on that one. And then just moving over to, I guess, Saudi Arabia, can you talk on the pipeline of activity you guys are seeing there and kind of what other factors help drive expansion in this region?

Honey just registered, and so it's early days. Can't really say a lot more other than we're receiving inquiries, and we will, you know, we'll answer those inquiries and proceed with circumspect. We love that region. We love Egypt. We particularly are interested in the Saudi region. And I guess we'll just go with the inquiries.

Lead us, Dan.

Okay. And then final question for me. Can you guys touch on just revenue by commodity mix, Purpose Theory 24? Yes, so currently it's about 80% gold and about 20% copper. Okay, perfect. Thank you. I'll hop back in the queue. Thank you.

Thanks, Donnie.

Your next question comes from Jesus Sanchez with Castanar Investment. Your line is now open.

Hello. Hi, how are you? Good, thank you.

Speaking about getting on the last question, Should we expect that all cash flow from operations go to CAPEX to increase the number of rigs? That's what I take from your comments. At what point should we expect some return to shareholders? At what point do you expect that the cash flow from operations will be bigger than the CAPEX required to keep growing?

It's a very good question, Aziz, and I would just point out to you that I am the largest shareholder and I'm very keen to reinstitute the dividend program. And it will happen imminently, but not immediately. You'll note that all of our free cash in 2024 went to growth. And so I've always had a firm position on dividends and that is dividends are great, but not at the expense of opportunity. At the moment, we're absolutely inundated with inquiries and work programs and we need to keep our customers satisfied. So it's as much defensive as it is anything else at the moment. We need to keep those customers serviced. When we reach a situation where we have managed to satisfy this rather large slew of inbound work programs. We'll look at it and it's actually something that constantly comes up at every board meeting. I can only assure you that it will happen imminently. It just won't happen. It won't happen today. And probably in the back half of this year, we'll reinstitute something. That's what's being discussed at the moment, but yet to be approved by board. And then next year, I think you can see something a little bit more substantial. But I would like to get through 2025 and tick the box. Okay? And it might just be... might just be something nominal for 2025. 2026 is probably going to be more substantial, assuming all things being equal, and there's no black swan event. And I hope that answers your question.

And Jesus, just in terms of what we're using the cash flow, the 21 million reinvesting, that's to keep the client happy. And that is benefiting the shareholders. If you look at the The stock price at Geodrill, the appreciation over the last year, we're getting credit for this. Continuing to increase top line, we did over $30 million in EBITDA. 22% of our revenue EBITDA percentage. So the strategy that Dave and I have in place, it's always to keep our clients happy, but I think it is also bearing fruit for shareholders, not in a direct dividend right now, but surely in the appreciation of Geodrill share prices.

Just to make it clear, I am 100% on board with reinvesting all the cash flow from operations into new rigs and growth. That's the best return on capital and we should keep doing that while we can get higher return on investments. Totally not interested in dividend while we can keep growing the company and making more returns on our gas flows by reinvesting on your rigs. But thank you for all the color. My second question is, you mentioned that you have never been more bullish, and we have seen a lot of junior miners coming back to the market. That somehow indicates that we are very advanced in the cycle, but gold has been extremely, if not the best active, the best asset this year. Gold has been extremely bullish this year. What's your perspective on the cycle of the gold? Is it sustainable? How do you see more junior miners coming to you, approaching to you?

It's a good question. The gold market moves in cycles. every five or so years it has a run and then it goes up and then it goes down again. We haven't actually had a bull run in gold, probably been a part of 10 years. And so the longer that it takes for the ensuing run to come, the longer it usually remains. And it's driven by a number of factors. There's a lot of big geopolitical things going on around the world at the moment. Rich nations are all raising money. their gold holdings, central bank net purchases have increased. I'm seeing numbers like they're doubling and tripling at the moment. There's just so much going on around the world at the moment and gold is something which is a commodity and it's mined at the rate of 4,000 tonne per annum. So for the last 20 years, we've been pulling 4,000 tonne out of the ground but we haven't been replacing it. So that replenishment drilling or exploration has not kept pace with depletion for the last 20 years. Now, those two things just can't keep diverging. And so what we're seeing now is it's all coming back. And I think that if there's one thing that we can trust at the moment, it's gold. If you're believing in some of this crypto talk and all this sort of stuff, you're crazy. Let me tell you, with everything that's going on in the world, people are buying gold. Kudos to companies like Costco in the US of A, where you can actually go down to a thing that looks like a chocolate. And you can actually buy an ounce or a quarter of an ounce or 10 grams of gold. And you can just put your debit card in and take the gold out, take it home, put it in the safe. This is what people are doing these days. This is not well advertised, you know. and uh gold is starting to have its moment and we drill mainly for gold effectively what we are is we are a gold derivative now how do investors invest in gold well you can buy it by the gold index you can buy gld you can buy a gold company you can buy an exploration companies and you should that's good because they're our customers we like that but the other thing that you can do If you want direct exposure to gold, you know, there's an old saying, as in a gold rush, you buy the guy who is the picks and shovels. Okay? So the driller is the proverbial picks and shovels. Why is that so? Well, that's because drillers speak for the largesse of the exploration budgets. All that money that's being raised by junior exploration companies and spent by senior mining companies that are doing depletion drilling, 50% of it is going to a drilling company. be it us or be it another drilling company somewhere. So drillers are a great way, a great derivative story when it comes to gold or copper or whatever takes your fancy. In our case, we just happen to drill mainly for gold because we operate in what was once known as the gold coast, and that is West Africa. And we also operate in other key markets around the world where gold exists, Egypt, for example. And, you know, we have exposure to copper as well because, you know, the world's not going to stop needing copper. You know, all this electrification that's going on around the world, wherever it exists, whether it's existing in the US of A or whether it exists in China, you know, whoever gets the manufacturing has the tariff problems. It's not our problem. We just drill the holes. We're just the piano player, you know. We're just the derivative. And what I can tell you in my space, in my world, It's very, very busy at the moment. So that old saying that the driller is the canary in the coal mine, when the drillers are busy, things are happening.

Perfect.

That will be all my questions. And thank you very much for taking my questions. And please keep compounding our cash flow from operations by reinvesting in our company.

Thank you.

Ladies and gentlemen, as a reminder, should you have a question, please press star 1. Your next question comes from Dave Kegler. Your line is now open.

Good morning. Congratulations on the results. They look really good. My question originally was on the dividend, but it's been answered. I've been a holder of your stock that was recommended by Keystone Financial, probably at the $0.80 level, so I'm a pretty happy investor. As far as the dividend goes, it sounds like to me that you're considering maybe a little bit of a special dividend by the end of the year and then a dividend sometime after that. Is that what I've caught from the conversation?

I don't want to talk too much about it at this point. It's just that Jesus on the call was pushing and I didn't want to walk away by saying, without giving some sort of an indication. It is being discussed at this point in time, but it's not on the table for the first half. It's something that could, with a high degree of probability, happen in the back half of the year, but it won't be substantial. It might be a couple of pennies or something like that. I can't even speak at this point in time because it will need... It will need board approval. But as I was saying, I am the largest shareholder and I'd very much be pushing to get that dividend program back on track at least this year so I can tick this box. And then as we move into 2026, well, you know, as I alluded to on the call with the other callers, this is not just a 2025 story. We've got three years of work, three or four, five years of work programs ahead of us at this point in time. And so the numbers that you're seeing today for 2024, okay, I think they're good numbers, but you know, the best of our work is actually yet to come. If we look at 2024 in, you know, the after analogy we have within that, you know, there was a couple of borders that were just okay. Well, I can tell you that's, you know, I'm looking at the beginning of 2025 at this point in time, utilization of our fleet is the highest it's ever been. And that's the enlarged fleet. We're actually currently looking at, and utilization straight out the gate. The beginning of the year is 70 plus percent. There's not a drilling company in the world that's looking at that. I saw some numbers the other day from one of our competitors that are in the 30 or 40 percent. So, you know, we're doing as, you know, almost, we're doing much better than anyone else out there. Now, what does that all mean? It basically means that we're going straight into work programs that are going to generate recurring revenues, that are going to generate free cash. We still have some rig requirements, but at a point in time, I, as the larger shareholder, would really like to see this company back off on the rigged numbers and start returning some cash to the shareholders.

It will happen. Believe me. My last question would be on some of your long-term debt.

Just wondering if you've been able to collect any more on that from previous... Is that on the receivables on the balance sheet?

Correct.

Yes. Yeah, no, we put a note in there so you can see the significant improvement on collections. And that comes from now more of a focus on the Tier 1, the senior miners and the intermediate miners. So our expected credit loss, we actually had a recovery in Q4. So we actually had a pickup. So what we had provided for... mainly in 2023, we were able to work with some clients and get some shares. So we're extremely comfortable with kind of our receivable balance and the provisions now. It's a function of different clientele, less juniors. And when we have juniors, they're required to make an upfront deposit, et cetera. It's just... The nature of the industry now with, you know, with gold at almost 3,000, there's a strong demand for our services. So, you know, we've kind of went up the food chain in terms of who we're drilling for and making sure they have strong financial covenants.

Thanks, Jeff. Appreciate you taking my questions. Cheers. Thank you. Thanks, Dave.

Ladies and gentlemen. There are no further questions at this time. This concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Thank you. Thank you, Oprah.