Canadian driller Major Drilling International is in a “Goldilocks’ zone” for mining services companies of its type ahead of an expected upward climb in global mineral exploration expenditure.
That’s the view of Toronto-based Red Cloud Securities, which has initiated coverage of Major, “the largest, publicly listed, pure-play drilling services provider in the world”.
“We believe that we are in the early stages of an expansion in global exploration,” the financial services firm says in a note. “Signs of this include acquisitions that resemble a scramble for copper deposits following a decade-long lull in exploration and ahead of projected supply-demand gaps in commodities critical for the energy transition. Given the need to establish regional critical supply chains and ongoing tariff wars, we also expect duplication of exploration efforts as governments and companies try to establish resources, setting up Major Drilling for growth in the medium to long-term.”
Major, which has seen flat share-price performance over the past month and in the year to date, has a current market value around C$680 million.
The company reported net earnings of $24.9 million and $80.8m EBITDA on $540m of revenue for the nine months to January 31, 2025, when it had $11.4m of net cash. Copper (41%) and gold (34%) drilling are generating most of its revenue. Major said in March its circa-705-strong drill fleet, bolstered by last year’s US$63m acquisition of Peru’s Explomin Perforaciones, was deployed in more than 20 countries across North and South America, Asia, Africa and Australia.
“With gold and copper prices up 25% and 15% year-to-date, respectively, we view Major Drilling as an excellent vehicle for growth as it should benefit from increased revenues on the back of increased exploration activity that we expect will follow,” Red Cloud said.
“If historical trends hold, the rise in metal prices so far in FY25 bodes very well for FY26 drilling demand, for which its c15% rig expansion [via Explomin acquisition] was well timed. The underground drilling segment offers a steady revenue stream, less influenced by swings in commodity prices and exploration budgets.
“The company is the largest provider of specialised drilling services in the world and operates in a Goldilocks’ zone of performance metrics and well diversified sources of revenue vis à vis geography, commodities and customers.
“Its low leverage offers great optionality to expand in case of high demand for its services and to weather downturns. Its revenues have tracked commodity price changes with a 12-month lag, and with recent commodity price increases, several of its customers have announced larger exploration budgets, setting it up to deliver higher revenues this financial year.”
Red Cloud also noted Major’s c45% drill fleet utilisation rate was low compared with its historical average of about 70% and versus peers.
“This does signal to us that the company has the capacity to quickly deploy rigs in the case of an upswing without experiencing any delays resulting from acquiring rigs,” it said.
