Major Drilling Group International (TSE:MDI) reported a record first quarter for fiscal 2027, with revenue rising 22% year over year as drilling activity increased across all operating regions and the company deployed additional rigs to meet customer demand.
Revenue reached CAD 277.3 million, compared with CAD 226.6 million in the prior-year period. President and CEO Denis Larocque said the quarterly result represented a new company record and reflected “meaningful year-over-year revenue growth” in every region. Favorable foreign-exchange translation contributed approximately CAD 8 million to revenue growth, according to CFO Ian Ross.
Regional Growth Led by Canada and U.S.
The Canada-U.S. region delivered the largest increase, with revenue up more than 31% from the prior-year quarter. Larocque attributed the growth to new contract wins and the addition of rigs to existing projects. He said senior mining companies continued to execute expanded exploration programs, while junior miners became more significant customers following increased financing activity earlier in the year.
Revenue in South and Central America increased 18% year over year, led by continued growth in Peru and increasing activity in Mexico and Brazil. Revenue in Australasia and Africa rose nearly 14%, driven by new contracts and project expansions with senior customers in Australia.
Seniors accounted for 85% of quarterly activity, while juniors represented 15%, compared with 13% in the preceding quarter and 8% in the first quarter of the prior fiscal year. Ross said the increased junior contribution followed an acceleration in financing activity over the past year.
Margins Improve Sequentially Amid Training and Ramp-Up Costs
Adjusted gross margin, excluding depreciation, was 24% in the quarter, down from 25.2% a year earlier but up from 22% in the prior quarter. Ross said ongoing pricing improvements supported the sequential gain, though those improvements were partially offset by costs associated with ramping up new contracts, higher labor and consumable costs, and investments in workforce training and development.
General and administrative expenses increased CAD 2.4 million from a year earlier to CAD 23.8 million, reflecting annual wage adjustments and added costs associated with rapid growth in the company’s busiest regions. Other expenses rose to CAD 6 million from CAD 3.3 million, primarily because of higher incentive compensation tied to profitability and increased stock-based compensation costs related to the company’s share-price performance.
Larocque said margin expansion generally trails revenue growth when activity rises quickly. The company continues to absorb training and ramp-up costs, he said, but expects pricing increases to increasingly offset those pressures. Management expects margins to continue improving, although at a slower rate than revenue growth.
Fleet Optimization and Demand Outlook
Major Drilling spent CAD 13.5 million on capital expenditures during the quarter, adding five new drill rigs and support equipment while disposing of 10 older, less efficient rigs. The company ended the period with 683 rigs.
Management has consolidated its utilization reporting into surface and underground categories. At quarter-end, the company had 455 surface rigs operating at 57% utilization and 228 underground drills operating at 59% utilization, for overall utilization of 58%.
- Specialized work represented 59% of total revenue.
- Conventional drilling, primarily driven by junior customers, accounted for 17% of revenue.
- Underground drilling represented 24% of revenue.
- Gold accounted for 46% of revenue, copper represented 28%, and iron ore contributed 9%.
Ross said demand for specialized services remained high as deposits become more difficult to locate and discoveries increasingly occur in remote areas. He also said copper-related activity at mines and projects is expected to grow through the year.
The company ended the quarter with CAD 15.7 million in net cash, down from CAD 20.6 million at the end of the previous quarter, as higher rig utilization temporarily increased working-capital requirements. Total available liquidity was approximately CAD 160 million.
Looking to the next quarter, Larocque said rigs are expected to be gradually deployed into the field at incrementally higher prices as senior customers expand exploration programs and juniors spend capital raised over the past year. He identified the availability of experienced drillers as the industry’s primary constraint. Major Drilling is focusing on recruitment, retention and expanding its training pipeline, although management said newer workers can temporarily affect productivity during the learning process.
During the question-and-answer session, management said the company does not generally sell older rigs into the market. Larocque said retired rigs are typically at the end of their useful lives and are often cut up rather than returned to the drilling market.
About Major Drilling Group International (TSE:MDI)
Major Drilling Group International Inc is the world’s largest provider of drilling services in the metals and mining industry. The diverse needs of the Company’s global clientele are met through field operations and registered offices that span across North America, South America, Australia, Asia, Africa, and Europe. Established in 1980, the Company has grown to become a global brand in the mining space, known for tackling many of the world’s most challenging drilling projects. Supported by a highly skilled workforce, Major Drilling is led by an experienced senior management team that has steered it through various economic and mining cycles, supported by regional managers known for delivering decades of superior project management.
