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Who’s the Mining Co. with the Right Business Model & the Right Geographic Focus for Growth?

Dave Jackson Dave Jackson, Stockhouse
2 Comments| June 15, 2021

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When we last met up with Geodrill Ltd. (TSX.GEO, OTCMKTS: GDLLF, Forum) and their President, CEO and Director Dave Harper back in March we introduced our Stockhouse audience to a very profitable drill operator in a very busy mining part of the world – West Africa. Geodrill is an exploration drilling company with 25 years of operating history in the mining-friendly region. It mainly operates a fleet of multi-purpose, core, air-core, and grade control drill rigs. The company provides reverse circulation, diamond core, air core, grade control, geo-tech, and water-bore drilling services to major, intermediate, and junior mining companies mainly in Ghana. Most of its revenues are derived from its drilling services across multiple regions on the African continent.

Stockhouse Media’s Dave Jackson was joined again by Mr. Harper to get caught up on all of the latest news and investment opportunities from this unique company and unique investment opportunity.


SH: So first off, Dave, can you give us a general update on what’s been happening at Geodrill since we last talked?

DH: Well gold is obviously in the news again. So as you can imagine, we're very, very busy. We just released our Q1 results which was a record quarter. It was our strongest ever quarter signaling a clear indication that there's a bull thesis building in the resource drilling space especially for gold.

SH: For our investor audience that might be unfamiliar with the West African mining jurisdictions can you tell us a bit about them and some of the inherent advantages to drilling in that part of the world?

DH: Well, the short answer is elephants. Okay. You know, West Africa missed 50 years of modern expiration and as global reserves continue to deplete, it's becoming increasingly harder in places like Australia and North America. So mining companies in search of those elusive 2 million ounce ore bodies will soon have no choice, but to explore in places like west Africa. You know, exploration by its very nature means traveling to far away places down bumpy tracks in search of those big ones, what the geologists call figuratively elephants. So if you want big elephants, you're going to find them in Africa. Now to be fair Africa has suffered an image problem, but I think it's time investors reassessed that narrative, you know, things are changing here. Africa has the youngest population in the world. Ghana where I'm speaking to you from today is now the largest gold producer in Africa.

It took those bragging rights from South Africa a couple of years ago. Pre-COVID Ghana had GDP growth of 6.5%. Now I recently read somewhere that west Africa as a region is the second largest gold producer in the world and it makes sense, all the big guns are here, Barrick’s here, Newmont's here, Kinross is here, Anglo, Endeavour. They're all here, but not only mining companies. There's also big tech coming. Google set up here a while ago, Uber, Domino's, Kentucky Fried Chicken. They're all here. Twitter's coming too, Jack Dorsey was here last year and he's making a return visit this year we hear, Amazon too apparently. So, you know, they say the difference between being wrong and being too soon is often indistinguishable and Africa is changing evidently and so, you know, Ghana and Geodrill has the first mover advantage here. Myself, I've lived here for 28 years. I hold dual citizenship. My kids were born here. I love this place and that's why Geodrill is successful because I drive the business from here at the real place.

SH: Can you discuss recent drilling activity in the region and what it means for investors?

DH: Well, we ended 2021 with strong market fundamentals, robust demand for drilling and strong tailwinds to drive our strong utilization of our drills and I believe we're at the precipice of something big here, a supercycle perhaps.

SH: With the price of gold currently hovering around the U-S 19-hundred-dollar mark, how does this price affect Geodrill?

DH: Strong utilization, transcends into strong revenues and margin grows, but also rig count growth. We're currently expanding the rig fleet by 15% and we're also increasing our geographical footprint too. We're currently expanding into Egypt and we're expanding into South America through Peru. So there's lots going on at Geodrill.

SH: Can you elaborate on your positive Q1 financial results that you just reported in mid-May?

DH: In Q1 we exceeded all previous company records, we recorded our strongest ever quarterly revenue in the history of this company. We also have recorded our strongest EBITDA very strong net earnings and production in the way of meters drilled. Those headline numbers were revenues of 30.7 million USD. That was up 70% year over year. EBITDA, 10 million US dollars or 33% of revenue and that was up 350% year over year. Net income, $5.7 million and that was 13 US cents per share not Canadian. Remember our share price is quoted in Canadian. So, and for passive investors, those that you know, monitor the algos. We generated an ROC at 22% and an ROE of 17%. These are outstanding results. So we were very happy with the quarter.

SH: Your share price has also had a very nice bump since early May. To what do attribute this?

Click to enlargeDH: Well, to be fair, we were coming off a pretty low base. Being small cap, we tend to fly under the radar. Prior to the results, we were actually trading at well under our peers. WE were trading at about two and a half times, TTM EBITDA. Post bump, we were still only trading at three and a half times TTM EBIDTA. So, you know, basically we were trading it our book value. Meanwhile, our peers have all risen, Major and the others have all more or less doubled in recent times and they're trading at between seven to ten times. So you know, while it was a defining quarter for Geodrill. I'm sure in the forefront of investor's minds will be whether or not it was a post pandemic bump or lucky quarter, if you like and the answer to that question is no. We are now in the closing stages of quarter two and I'm pleased to say, it has been a very busy quarter actually slightly busier than quarter one. So for value investors, Geodrill is still a deep value play on the back of a very strong earnings story. Historically, if we look at the cycles in, we've traded up to six, seven times, and we're entering that cycle now, We're trading at three and a half times. So, you know, there's still a lot of room to go on the share price I believe.

SH: You also have a very robust balance sheet to fund growth. How have you managed to accomplish this despite the problems many mining companies have incurred during the COVID pandemic?

DH: Well, in some ways pandemic was actually good to us. We got better at operating it on work from home programs like Zoom. I think everybody did, but you know, specific to us stimulus relief which was good for gold and most importantly it gave us the time to catch up on maintenance in readiness for the post pandemic uptick which has begun in earnest, evidently.

SH: We talked about this a bit last time, but can you explain to our investors how Geodrill’s business model is different from most traditional mining companies and how you’re able to mitigate a lot of risk?

DH: Well, Geodrill’s model is predicated on being a best-in-class high service this high-performance driller which has served us very well, enabling us to stay busy and remain cashflow positive throughout the cycles. Over 25 years, we've grown from one rig and one contract to become the largest, most recognized exploration drilling brand in Africa and all that growth has been organic.

SH: For company shareholders and potential investors, what kind of future development and progress can we expect at your various projects throughout West Africa?

DH: Growth, growth, and more growth, but not all from West Africa. We're upsizing the fleet 15% and we're expanding beyond the shores of West Africa into Egypt and North Africa and also Peru in South America. We also got some new verticals we're looking at, for example we’re looking at expanding into mine blast hole drilling, and this will signal our intention to enter the production drilling space. We also recently became a dividend paying company so for those that like dividends there's going to be more to come. So, yeah, there's lots of going on at Geodrill. There's always lots going on around here.

SH: And finally, Dave, if there’s anything else that I’ve overlooked and you’d like to add, the floor is all yours.

DH: Well, thank you again for having me on the show. It'd be remiss of me not to mention our ESG commitment at Geodrill. We think we do a lot. Well, we do a lot of things perhaps very well we think but there's nothing we take more seriously than our ESG commitment. We believe in doing what is right and not as what is just required and at the core of our ESG vision and values is our commitment to the communities and the environment in which we operate. The Geodrill corporate responsibility managers running our business with honesty and integrity and Geodrill is an equal opportunity employer. We proudly advocate for gender diversity and inclusion across all facets of our business. So yeah.

To find out more, visit

FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.

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