Geodrill Sees Gold, Copper Drilling Boom as Pricing Actions Target Margin Recovery

Key Points

• Strong gold and copper demand is driving high rig utilization at Geodrill, which operates more than 100 rigs across Africa and South America and has grown revenue organically through fleet expansion and repeat customer contracts.
• Higher diesel and operating costs from an oil shock pressured margins, but Geodrill is raising prices on new work and repricing underperforming contracts to restore its historical approximately 20% EBITDA margin.
• Second-quarter revenue reached a record $55 million, while EBITDA rose 35% sequentially to $8 million. The company also maintains a relatively conservative balance sheet, with $12 million of debt and $11 million of cash as of June.

Geodrill TSE: GEO President and CEO Dave Harper told attendees at the LD Micro conference that the mineral exploration drilling contractor is benefiting from strong demand for gold and copper drilling, while working to restore margins affected by higher costs tied to an oil shock.

Harper described Geodrill as a “picks and shovels” provider rather than a mining company. The company supplies drilling rigs, personnel and expertise to produce geological samples for mining and exploration customers in Africa and South America.

Founded in 1998 with one rig and one contract, Geodrill now operates more than 100 rigs across five countries on two continents, Harper said. He characterized the company as the third-largest pure-play exploration mineral driller and said it has built its growth organically rather than through acquisitions.

Focus on repeat business and operating infrastructure

Geodrill’s customers include Tier-1 mining companies and exploration firms, according to Harper. He said the company’s contract extensions and renewals support recurring revenue and more predictable revenue streams.

The company operates in West Africa, Egypt and Chile. Harper said Geodrill has focused on regions with high-value opportunities and barriers to entry, including West Africa, where it built its own support infrastructure because of limited local infrastructure.

Its operations base in Kumasi, Ghana, includes a workshop and manufacturing facility that Harper described as the largest support facility operated by a drilling company worldwide. The company’s vertical integration is intended to reduce equipment downtime and improve service to customers, he said.

“Keep them turning, keep them earning” is the company’s operating motto, Harper said, referring to the importance of continuous drilling activity and equipment availability.

Organic fleet expansion drives revenue growth

Harper said Geodrill has continued to expand through reinvestment of its profits into additional rigs. Between 2014 and 2025, revenue increased at a 15% compound annual growth rate, compared with a 9% growth rate in the rig fleet, he said.

Each additional rig has added an average of approximately $2.2 million to the company’s revenue base over the 12-year period, according to Harper. He said that figure is increasing as demand strengthens.

He attributed the company’s performance through commodity cycles to maintaining customer relationships, sustaining high equipment utilization and limiting debt. In response to an analyst question about lower gold prices, Harper said many Geodrill customers mine gold at roughly $2,000 per ounce, compared with the $4,200 per ounce gold price he cited during the presentation.

Harper also pointed to the company’s operations during the COVID period as evidence of its resilience, saying Geodrill’s revenue rose while other companies’ declined. He said the company has historically prioritized modern, high-performance equipment and customer service rather than aggressive borrowing to accelerate fleet expansion.

Margins pressured by oil shock, but pricing actions underway

While demand and utilization have remained strong, Harper said an oil shock connected to the Iran situation increased diesel and other operating costs. Because drilling contracts do not necessarily account for such unexpected cost events, gross profit margins were squeezed even as revenue increased, he said.

Geodrill is responding by raising prices on new contracts and renegotiating or repricing contracts that are underperforming, according to Harper. He said the company has pricing leverage because of record utilization across its fleet and a broader bull market for commodities.

For the second quarter, Geodrill reported record quarterly revenue of $55 million, up 10% from a year earlier and 14% sequentially. Gross profit was $9 million, representing a 16% margin and a 22% increase from the first quarter. EBITDA was $8 million, or a 14% margin, and increased 35% sequentially.

Harper said the company was in a blackout period ahead of its third-quarter release, expected in the first week of November. He said analysts were forecasting third-quarter revenue of $51 million, compared with $39 million a year earlier, and added that management was comfortable with that estimate.

He said Geodrill’s goal is to return to the approximately 20% EBITDA margins for which it has been known as higher pricing takes effect.

Gold, copper demand and balance sheet

Harper said global demand for rigs is currently strong, describing the market as having an “insatiable appetite” for equipment. He identified gold and copper as the company’s preferred commodity exposures. Geodrill entered the copper market four years ago, he said, and has been expanding in that area despite operational challenges in South America.

As of the June quarter, the company had $60 million in working capital, $118 million in shareholder equity, $12 million in debt and $11 million in cash, leaving it with roughly $1 million in net debt, Harper said. He cited book value of $2.48 per share, or C$3.52.

Harper also said he owns approximately 40% of Geodrill’s shares and had exercised 420,000 options earlier in the year at a total cost of C$815,000. He said he intended to continue purchasing shares after the blackout period ends.

About Geodrill (TSE:GEO)

Geodrill has been successful in establishing a leading market position in Ghana and Cote d'Ivoire. The Company also operates in other African jurisdictions including Egypt and Senegal and is focusing its South America operations on Chile. With the large fleet of multi-purpose rigs, Geodrill provides a broad selection of diverse drilling services, including exploration, delineation, underground and grade control drilling, to meet the specific needs of its clients. The Company's client mix is made up of senior mining, intermediate and junior exploration companies.

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