Geodrill Limited

Good morning everyone and welcome to Geodrill's third quarter 2025 financial 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 that time for you to queue up for questions. If anyone has difficulties hearing the conference, please press star zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded today, November 13, 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 Q3 conference call. Joining me on today's call is Greg Borsk, our CFO. I'll begin. Fiscal 2025 is playing out to be a year of two halves. Our first half was evidently solid. Quarter 3 2025 reflects the complex realities of strategic expansion. While our financial results show short-term cost absorption, they also highlight the strength of our long-term vision. We are executing a deliberate strategy to build a resilient, geographically diversified platform capable of delivering consistent performance across seasonal and regional cycles. South America presents challenges but also opportunity. It is a market that demands upfront investment, operational discipline and patience. We have doubled our rig count in the region supporting major multi-phase drilling contracts. This expansion is not just about growth. It's about positioning Jidrel where we see long-term failure. Jidrel has always operated where there is opportunity and risk. This is how the company started 25 years ago. With risk comes reward. The higher the risk, the higher the reward. We don't chase crowded competitive markets. We never have. We go where opportunity lies. One of our key advantages is our proximity to operations. We live and work close to our drollery fleet, boots on the ground. I live in West Africa, and we've now established hubs in South America and in Egypt that are treated with the same level of commitment. Despite these headwinds, we remain focused. Our platform in Chile is growing. Our West African operations continue to show strong post-wet season demand. Surface draw programs in Egypt are restarting, and our multi-year, multi-rig contracts provide a solid foundation for sustained performance. We have achieved 7.8 million man-hours LTI-free. Our bidding pipeline is highly active. Commodity prices remain favorable, and our team continues to deliver with discipline and resilience. I'll now turn the call item to our CFO, who will review our financial performance in business.

Thank you, Dave. As Dave mentioned, in Q3, we faced significant headwinds. However, we still delivered revenue of $39 million. an increase of $4.9 million, or 14%, when compared to $34.1 million for Q3 2024. The increase in revenue was a result of the company's strategy to diversify its operations to South America and to operate in a geographic region that is not impacted by wet season. The increase in revenue was predominantly the result of an increase in revenue in South America of $5.8 million, partially offset by a decrease in revenue in West Africa and Egypt. The gross profit for Q3 2025 was $2.4 million, being 6% of revenue compared to a gross profit of $8.4 million, being 24% of revenue for Q3 2024. The decline in the gross profit margin this quarter can be summarized regionally as follows. West Africa contributed to 66% of the decline. The decline in the region was driven by the wet season slowdown. The drilling mix, wage inflation, and the Ghana CD appreciation. We expect improvements in Q4 in Ghana, Cote d'Ivoire, and steady performance in Senegal. Egypt contributed to 17% of the gross profit decline. This was due to lower revenue and lower drilling activity. Q4 recovery is expected from restarting surface drill programs in Egypt. Lastly, South America contributed to 17% of the decline. Rapid rig expansion in the region led to upfront costs and operational delays, especially in Chile. Q4 improvements are expected with stabilized operations and new job starts. EBITDA was $4.3 million or 11% of revenue compared to $7.6 million or 22% of revenue for Q3 2024. We reported a net loss for Q3 2025 of $1.5 million or a loss of $0.03 per share compared to net income of $2.6 million EBITDA and net loss were favorably impacted by the expected lifetime credit recovery of $100,000, a foreign exchange gain of $800,000, and the $1.8 million gain on equity investments. Despite operational challenges this quarter, our year-to-date performance reflects the underlying strength and resilience of our business. Over the first nine months, we have delivered solid financial results, maintained financial discipline, and reinforced our strategic positioning for long-term growth. We ended the quarter with shareholders' equity of 129 million, including net cash of 11.1 million. We remain confident in our ability to navigate the expansion in South America, leveraging our core capabilities and disciplined execution to optimize margins and capital efficiency. At this point, I will turn the call back to Dave.

Thank you, Greg. So let me jump straight to it. The drilling market is strong, and we are positioned to outperform. The global mining and drilling sector is entering a multi-year expansion recycle, driven by a number of factors. For example, rising commodity demand, governments doubling down on strategic resource security, and increased capital deployment across exploration and development drilling. This is translating into real activity on the ground, and Geodrill is uniquely positioned to capture outsized value through its disciplined execution, operational leverage, and strategic footprint. At Geodrill, we don't chase volume for volume's sake. We focus on disciplined growth, margin integrity, and operational excellence. That is what drives shareholder value. So in closing, to recap, here's what sets us apart. Global rig utilization is climbing, and journals is the highest in the industry. Our rigs are working, our teams are delivering, and our clients are expanding contracts. This is not a theory. This is happening, real time, boots on the ground. Our margins will return. We are seeing pricing power across key markets. And as we work through operational challenges in South America, we remain confident in our ability to deliver the improved returns we have achieved in prior cycles. Our balance sheet is clean. We are not over-leveraged and we are not over-extended. We have the flexibility to grow and the discipline to protect returns. And finally, our work pipeline is real. We have contracts in hand, mobilizations are done, and new tenders are in advanced stages. We are building a geographically diversified, operationally resilient business. And from here, it's head down, execution, eyes on the prize, and we are confident in the path ahead. This concludes our prepared remarks. do a nice session over to the operator. Thank you very much.

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 the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Don Angelo with Beacon Securities. Your line is now open.

Hey, guys. Good morning. Just looking for some clarification on the gross margin shortfall with the focus on Africa and South America. So I guess related to Africa, like was there an earlier shutdown and kind of later resumption of activity in the wet season or is like most of the impact through the currency appreciation of the SETI?

Hi Donny, it's Greg. Yeah, it was actually, it was a combination of really three items there. We had the wet season, so the slowdown impacted us in the three countries in West Africa. It hit us in Ghana, it hit us in Cote d'Ivoire and also Senegal. So you had lower drilling activity and then we also had two other items that contributed to that. We had Significantly higher salaries in West Africa. These are salary increases that we put in at the start of the year. So on a quarter over quarter basis, they're really amplified in Q3 2025. So that led to a part of the gross margin decline. And then lastly, in West Africa, the CD appreciated considerably. Q3 2024, the CD was about 15, 16 to 1, and what we experienced in Q3 this year was about an 11 to 12 to 1 CD. So it's a significant increase when we convert the CD to U.S. dollars for reporting, significant increase in our salaries. So that's the West Africa. In South America, the gross margin, we had a negative gross margin and we were just significantly ramping up operations in South America. And I made a note on that in the revenue. And what's happening when you're ramping up as quickly as we are with significant jobs and significant rigs in the On the continent, the costs are well ahead of the revenue. So we hope to catch that up in Q4. And also, we just didn't get the drill time that we needed in Q3. So that kind of explains West Africa and South America.

Okay, I appreciate the color there. Just a follow-up on South America. I was going through the MD&A, and I kind of saw there were onboarding delays coupled with operational issues. I'm just kind of curious on what some of those operational issues were. Was it trying to ramp up the new – the new employees that were brought on? Like, were there any delays coming from the customer themselves? Like, can you just provide any more color on what was happening there? And if we're expecting, if we're kind of expecting a drag on gross margins to persist out of South America as you guys are starting new projects?

It's safe, Johnny. Yeah, but it was basically onboarding. The The solid ramp up, you know, we went quarter three last year. We generated about $2 million from revenue. This time it was significantly higher. So we've doubled the rig fleet. And basically what happens with all of that is the training and the preparation before going to a Tier 1 mining site, it begins about two or three months before you actually arrive at site. And so we had a solid, you know, as one rig would go out into the field, another one, you know, would come in and we'd have to go through the cycle again. So it was basically just onboarding. There is light at the end of the tunnel, I should add, and that is that the rigs are actually now in the field and they are drilling and they're producing. And so we're expecting a pretty solid turnaround from South America in quarter four. So, you know, it was a tough quarter. But, you know, we're confident that the hard yards are done. All of the costs are pre-financed and up front. And revenue is the laggard. And so the rigs are in the field. They're turning, they're earning, and the heavy up front costs are pretty much absorbed now. So from here, it's, you know, it should be a bit of a turnaround story for sure.

Yeah, Donnie, one other thing just on South America, our high altitude job, we only got about two weeks of drilling in Q3, call it the second half of September. But that's going to be fully operational through Q4 for us through October, November, December. And then also in South America, we have another job starting, which started for us in October. So you'll see that in Q4. So we're expecting significant revenue increase in Q4 in South America.

Okay, but just size of that new project being started, or are we expecting like similar startup costs that we saw related to Q3, or we would anticipate a little bit of improvement on that front?

No, yeah, sorry, we had that in a bit in Q3. We did get started, but only for about two weeks, second half of September. So we were fully ramped up by the start of Q4.

The pain side of the price is essentially out of the way, and from here it's the gain that follows the pain. So we'll see improvement in quarter four for sure. But we've had a significant increase in activity levels in South America, and all of that was essentially pre-financed throughout. Some of it was quarter two, but the majority of it was quarter three.

Okay. Thanks, guys. I appreciate the cover. I'll pass the line.

Yeah. Thanks, Johnny. Thank you.

Ladies and gentlemen, as a reminder, should you have a question, please press star 1. Your next question comes from Vitaly Kononov with Freedom Broker. Your line is now open.

Hello. Thank you, operator, for taking my question. And hello, gentlemen. I have a question related to the gross margins that were just discussed. So, yeah, I could hear the reasons for the gross margin decrease. However, in the notes to the financial statements, I also come across the drill rig expense and the contractor services that were up nearly 30% and 60% year-on-year. Could you please give us a little comment on that, what goes into those line items?

Yeah, so what happens in the major components of our cost of goods sold are salaries and wages. And if you look at that, our salaries and wages increase significantly. Typically, when we're having our normal gross margin, we're able to recover those salary and wages through drilling performance. And in Q3, with a startup in South America, we didn't get the drilling performance to cover that, okay? And that's due to the rapid ramp-up. Also, I think you mentioned the drill rig expenses. Again, certain of those drill rig expenses are related to operations. And if we're not getting the – they're fixed – their rentals, their consumables, et cetera, and we just didn't get the revenue in the quarter in South America to capture those.

All right. Thank you. If I could hear you correctly, you mentioned that in South America the drills, the drill rigs were only in use for two weeks. So can you give me a little approximation? No, no, sorry.

No, no, no, no. So what we communicated was in South America we have a high-altitude job that is seasonal. So it only drilled in South America. We were only able to restart that job later in September. So that one job was only operational for two weeks in the quarter. We had other jobs in South America that operated throughout the quarter. And that's how we effectively, if you look in the MD&A, we disclosed the revenue from South America. The revenue in the quarter was approximately $6 million. I think it was about $5.8 million from South America. Okay.

Great, thank you for clarification. So since we're on the topic of South America, can you give a number estimate that you might have internally for the 19 rigs that are in use at the moment? How many are actually on site? Do you have a utilization rate that we could apply in our model?

This is specifically for South America or specifically, sorry, for the group.

Well, since South America is expanding at the moment, I'm more curious about it, but you can answer to both regions.

So, in terms of utilization in South America, utilization is 75%.

Okay, great. And so, are you moving operations from Paris to Chile? What are the reasons? Do you have a real backlog of waters coming from Chile? Is that so?

All our focus at the moment in South America is Chile. We are 100% focused on Chile. We had one rig operating in the quarter in Peru. We are now... have decided to focus on the Chile market. We'll actually be winding down the operations in Peru for now so that we can focus on our pipeline of work in Chile.

That's wonderful. Great news. Yeah, thank you for taking my questions, and I'll pass on the word. Thank you.

Thank you.

I don't know for the questions at this time. I will now turn the call over to Dave Harper for... for closing remarks. One moment, please. There is another question from John Sarts with Viking Capital.

Good morning. I noticed that despite the less than stellar results, you still can't avoid building cash positions. I'm wondering what plans you might have, and the suggestion on my part would be perhaps you might A, reintroduce your dividend, or B, buy your shares back.

Yeah, thanks, John. Thanks for the question. Yeah, I think you did notice we did have the balance sheet. Our balance sheet is extremely strong. If you look at we ended the quarter, we actually increased cash. Net cash at the end of the quarter was $11.1 million. So we're very happy with our total shareholders' equity. We have $129 million in shareholders' equity, ended the quarter with net cash of $11.1 million. So we're extremely happy with the increase in net cash, and we'll revisit the dividend. We'll look at a dividend when we return the profitability.

What about share buybacks?

Share buybacks and we look at in conjunction with the price of the share and our share buyback, our NCIB is in there to use it as a floor. So we'll monitor the price of the stock throughout the quarter, November, December. And if we need to get in and put the NCIB in place, we will. But again, that's more of just to put in a floor for the stock price. So it's hard to say, but we'll look at how the stock performs over Q4 and into Q1.

Okay, thank you.

Thanks, John.

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

Just a quick follow-up. Just looking for some quick facts here. Q3 utilization, or yeah, the utilization rates on a regional breakdown would be appreciated. And then on a consolidated basis, the commodity mix for the quarter, given the improved activity in South America.

So utilization currently is approaching – it's north of 70. It was 70, 72 a couple of days ago, and it continues to trend north. We're getting back to basically utilization that we saw in quarter one and quarter two. So north of 70, kind of hovering around 72 at the moment. We think we'll probably trend to about 75. five as we go through November. And then traditionally what happens is we have a solid first half of December and then we slow down for the Christmas shutdown. And that pretty much goes through to about the first or second week of January. So if we look at it on a semester basis between quarter four and quarter one, through that sort of growth period, if you will, coming off a low base, is things get really solid and continue through quarter one and quarter two, but we do get this culling out in the trajectory, if you will. And if you look at the history of the company, this has pretty much been the norm since, you know, I mean, every year is pretty much the same. We do our best work in quarter one and quarter two. Then come quarter three, which is essentially the quarter we've just come through, that we've just reported. That's the quarter that we see as the consolidation quarter. It's the quarter in which we literally sow for what we harvest through quarter four, quarter one and quarter two. Now, we begin that with actually seeing that harvest begin just now. We do get an interruption during the second half of December and the first half of January, and it normally flows into a very solid quarter one, which is usually followed by a very solid quarter two. So does that answer your question? North of 70 at the moment, probably going to trend to about 75, and I think once we hit our straps in quarter one, quarter two next year, we'll be basically... um possibly north of 80 you know last quarter one quarter two we there were times there where we hit 81 82 83 percent um i hope that answers your question johnny yep that answers the first part of it the second part was on the commodity mix for the quarter and how that compares to last year i would assume a little bit more copper exposure yeah so looking at it of the more or less 100 rigs. I think the rig count we closed the quarter was 98 rigs. We have 20-odd rigs in the South America, of which about 15 are currently drilling. So it's kind of, it's trending north and it's moving from what was about 15% of our business to, you know, I expect it's going to, probably in the year somewhere around 20% of our business. 80-20, gold, copper, nothing else at the moment. Not drilling for anything else, just gold and copper with an approximate split of about 80-20, I would say, in high-level terms.

Okay, thank you. I'll be back in the queue.

Thank you. Thanks, Donnie.

Now, no further questions at this time. I will now turn the call over to Dave Harper, CEO, for closing remarks.

And I'll just say thank you very much, everyone, for attending the call today, and thank you very much, operator. I'll say goodbye. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.