The CEO of Major Drilling Group International, Denis Larocque, expects strong market demand to continue to put pressure on the company’s ability to recruit and train drillers as it looks to build on record first-quarter revenues and better margins.
“Demand remains strong and the primary constraint across the industry continues to be the availability of experienced drillers,” Larocque said after Major reported a 22.4% year-on-year increase in Q1 revenue to C$277.3 million and $37.2 million of EBITDA compared with $32.1 million in the same period last year.
Canada and the US contributed $110.7 million of revenue, up 31.6% yoy.
“We remain focused on recruitment and retention while also expanding our pipeline of future talent by increasing the number of training drillers in the field,” Larocque said. “As expected, there is a learning curve associated with bringing new people into the workforce which has a temporary impact on productivity, but it’s positioned us well to support future growth.
“We’re still absorbing labour training and ramp-up costs but price increases are taking hold and progressively offsetting those pressures. As a result we expect margins to continue improving, albeit at a slower pace than revenue growth.”
Major CFO Ian Ross said utilisation rates for the contractor’s 455 surface rigs and 228 underground drills were similar at 57% and 59% in the three months to the end of July. Larger mining clients accounted for 85% of activity in the quarter but juniors were at 15% versus 8% at the same time last year.
“Gold represented 46% of revenue in the quarter, driven by continued strength in gold price and related junior financing activity,” Ross said. “Copper accounted for 28% of revenue, with activity levels at copper mines and projects expected to grow as we move through the year. Iron ore continues to make a meaningful contribution at 9%, driven by continued strength for our Australian operations.”
Larocque said Major expected to deploy rigs into the field “at incrementally higher prices” this quarter.
Canadian investment firm Red Cloud Securities put most of Major’s Q1 revenue rise down to foreign exchange gains.
“What we have really been paying attention to is the margin recovery underneath and Q1 delivered the first real data point on the inflection we’ve been waiting on, though a single quarter does not make a trend,” it said.
“Looking ahead, management’s outlook remains unchanged: rigs will continue to be deployed gradually at incrementally higher prices as seniors grow their programs and juniors ramp up on stronger financing, with margins expected to improve through FY27.
“The critical question for FY27 is whether margin recovery broadens beyond North America, but for now we anticipate margins to remain under pressure through Q2/27, with margin expansion expected to take hold starting in H2/27.”
