Rebounding exploration activity has propelled Major Drilling's (TSX: MDI) revenues and earnings to a nine-year high.
In the company's first quarter of fiscal 2022, ended July 31, the Moncton-based drilling company reported revenues of $151 million - up 69% from the same period last year - and net earnings of $11.1 million, or $0.14 per share.
In Canada and the U.S., the company saw revenue growth of 84.5% to $84.9 million, driven by gold exploration by junior, intermediate and senior miners.
Along with strong momentum in the mining industry, however, Major Drilling also flagged emerging cost inflation and productivity pressures.
"During the quarter, we renegotiated several of our contracts in North America, with more favourable terms and prices. We expect this to improve margins going forward, although it will be somewhat offset by cost inflation for supplies and labour," said Denis Larocque, Major Drilling's president and CEO. "Availability of skilled labour continues to be extremely challenging for everyone in the most operationally intense markets, putting pressure on costs and productivity. Major Drilling's training and retention efforts have allowed us to support our rapid growth and deliver value to our customers, despite the fierce competition for drillers."
The company says that it expects industry rig and labour shortages costs, as well as higher utilization rates, to continue, driving "a more positive price environment" and "margin recovery" - that is, higher prices for its services.
In South and Central America, Major Drilling's revenue grew by 80.5% to $35.2 million, while revenue from Australasia and Africa grew by 29.8% to $30.9 million.
This quarter saw the first revenue from Major Drilling's $75 million acquisition of Australia-based McKay Drilling, which close on June 1. The McKay Drilling acquisition marks a reentry into Australia for Major Drilling, which operated there for 17 years until closing up shop in 2014.