November Industry leadership through continuous innovation

Transcription

1 November 2017 Industry leadership through continuous innovation

2 Forward-Looking Information Certain statements contained herein constitute forward-looking statements which reflect the current expectations of management regarding the Company s future growth, results of operations, performance, business prospects and opportunities based on information currently available to it. Wherever possible, words such as may, would, could, will, anticipate, believe, plan, expect, intend, estimate, aim, endeavor and similar expressions have been used to identify these forward-looking statements. These statements reflect management s current beliefs with respect to future events and are based on information currently available to management. Forward-looking statements involve significant known and unknown risks, uncertainties and assumptions. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, without limitation, those listed in the Risk Factors section of the company s public filings. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking statements. These factors should be considered carefully and prospective investors should not place undue reliance on the forward-looking statements. Although the forward-looking statements contained herein are based upon what management currently believes to be reasonable assumptions, there can be no assurance that actual results, performance or achievements will be consistent with the forwardlooking statements. Forward-looking statements are made as of the date hereof and Orbit Garant may not, and does not assume any obligation to, update or revise these forward-looking statements other than as specifically required by applicable law. 2

3 Capital Market Profile Analyst Coverage: Recent close (Nov. 9, 2017): $ week high / low: $2.21 / $1.61 Market Cap: ~$77 million Shares Outstanding: 36,096,919 Fully Diluted: 38,327,619 Institutional / retail: ~ 40% / 60% (float) Insiders own approximately 30% of shares outstanding 3

4 Company Overview Long-established, leading Canadian-based mineral driller Focus on continuous innovation Expertise in specialized drilling / senior management field experience Vertically-integrated manufacturing subsidiary Strong health & safety / driller training programs Long-standing customer relationships Expanding international market presence Sound balance sheet Positioned to outperform as market conditions improve 4

5 Company Overview 1,300 employees / 220 drill rigs Head office: Val-d Or, QC Regional offices: Sudbury, ON, Moncton, NB, Chile, Ghana, Burkina Faso, Peru & Guyana Field operations: Canada, Burkina Faso, Chile, Ghana & Guyana Val-d Or LEGEND Head Office Regional Offices Field Operations 5

6 Market Position (by % of revenue*) Drilling Activity Customers Regions 60% 40% Underground Surface 79% 21% Juniors Majors & Intermediates 79% 21% International Canada Resource Exposure Drilling Services 75% 25% Base Metals / Other Gold 47% 53% Specialized Conventional Diversified revenue mix *For the 12 months ended June 30,

7 Core Strengths Specialized Drilling Drilling team expertise Continuous Innovation Health & Safety Vertical Integration Extensive Driller Training 7

8 Drilling Services & Expertise Surface Underground Specialized Drilling Standard diamond coring / core rod Standard / reverse circulation (deep hole) AWL - PWL calibre Geotechnical drilling Directional core drilling Standard rod / core rod AWL - HWL calibre Geotechnical drilling Directional core drilling Drilling projects that are in remote locations or, because of the scope, complexity or technical nature of the work, cannot be undertaken by smaller conventional drilling companies. Expertise in specialized drilling 8

9 Vertical Integration Ability to design and rapidly manufacture custom drill rigs at competitive cost Drill rig maintenance supports optimum utilization rates Health and Safety / Driller Training Focus on consistency, quality control, high performance and safety Ongoing training for new technologies, techniques and environmental standards 9

10 Continuous Innovation Computerized Monitoring and Control Technology Performance Highlights Greater accuracy Improved productivity (+30%) Fewer consumables Rig components last longer Easier to train personnel Additional Feature Benefits for Customers Real-time, remote monitoring of drilling progress Ability to view core samples remotely Competitive differentiation through innovation 10

11 Continuous Innovation Responding to customer needs Computerized underground drill rigs o YU 615 (first generation) o YU 1800 (second generation) o YU 1000 (next generation) YU 1800 custom designed and manufactured for specialized drilling project with Anglo American in Chile o YU 1800 can drill deeper, with larger diameters and perform up holes YU 1000 includes next generation mobile handling system YU 1000 Specialized drilling contracts are typically higher margin and for longer terms Competitive differentiation through innovation 11

12 Strong Customer Relationships Core strengths support long-term customer relationships 12

13 Strengthened International Growth Platform Chile Largest producer of copper in the world and 5 th largest producer of non-ferrous metals Commenced first project in Q2 FY2015 (copper, underground and surface drilling). Initiated two new projects in Q2 FY2017 Acquisition of Captagua in Chile strengthens growth platform across South America Regional offices established in Guyana and Peru; current field operations in Guyana West Africa Active in Ghana and Burkina Faso (2 nd and 4 th largest producers of gold in Africa) Regional hubs to pursue further business opportunities throughout West Africa A highly prospective, historically under-explored region currently receiving significant investment from the gold mining sector New projects commenced in Q3 FY2016 in Ghana / Q3 FY2017 in Burkina Faso Orbit Garant generated ~25% of its overall revenue from international projects in Q1 FY2018, in line with its long-term target 13

14 OGD: Historical proxy for mining sector recovery 76.00% 56.00% 36.00% 16.00% -4.00% % % % % % S&P/TSX Global Mining Index - Index Value OGD S&P/TSX Orbit Garant Drilling Inc. Global (TSX:OGD) - Share Pricing Mining Index Source: Google Finance Source Capital IQ Orbit Garant s historical share performance has reflected that of the global mining sector Mining sector recovery that began in early 2016 has triggered substantive improvement in market conditions for mineral drilling sector Strengthening mining sector drives higher pricing, demand and utilization rates across the mineral drilling sector 13

15 (millions of ounces) Declining Global Gold Discoveries Global Gold Production vs. Global Discovery Rate Global Gold Production (Moz) Global Gold Discoveries (Moz) The discovery rate of gold (per ounce) relative to the production rate of gold (per ounce): : 1.4 oz to 1.0 oz : 0.7 oz to 1.0 oz : 0.3 oz to 1.0 oz Source: S&P Metals & Mining, GFMS, Paradigm Capital 14

16 Global Senior Gold Producers Declining Reserves (Contained gold, millions of ounces) Component companies: African Barrick Gold PLC, AngloGold, Ashanti Ltd., Barrick Gold Corp., Cia de Minas Buenaventura SAA, Gold Fields Ltd., Goldcorp Inc., Harmony Gold Mining Co. LTD., IAMGOLD Corp., Kinross Gold Corp., Newcrest Mining Ltd., Newmont Mining Corp., Nord Gold NV, Polyus Gold, OJSC, and Yamana Gold Inc. Declining reserves is expected to result in increased exploration activity and development of early-stage gold projects Source: Publicly available data 16

17 TSX / TSX-V Mining Financings Y/Y Number of Financings in the Mining Sector 2,500 2,000 1,500 2,110 1, ,567 1,803 1,450 1,207 1, , YTD TSX TSXV Source: TMX Group Ltd. 1) For the nine months ended September 30, 2017 Demand for drilling services is rising following a rebound in mining finance activity, particularly among junior issuers 16

18 Improving Industry Conditions 5 Years - S&P/TSX Global Mining Index - Index Value Source Capital IQ 5 Years Gold Price 5 Years Copper Price 1,774 $ 1,674 $ 1,574 $ 1,474 $ 1,374 $ 1,274 $ 1,174 $ 1,074 $ 974 $ 4.00 $ 3.50 $ 3.00 $ 2.50 $ 2.00 $ 1.50 $ Source Capital IQ Source Capital IQ 17

19 Global Exploration Budgets GLOBAL EXPLORATION BUDGETS INCREASE FOR FIRST TIME IN FIVE YEARS, LED BY GOLD 2017 exploration budgets increased more than 14% to US$7.95 billion Gold exploration budgets up 22% from 2016 Juniors increased their aggregate exploration budget by 23% from 2016, including a 41% increase in gold-only allocations Latin America experienced the greatest regional growth in 2017 with its aggregate exploration budget increasing 20% to almost US$2.4 billion. Chile is the most significant market in the region Canada remains one of the top mining jurisdictions in terms of annual global exploration spending S&P expects budgets to increase again in 2018 at approximately the same rate as 2017 Source: October 10, 2017 news release summary of Corporate Exploration Strategies by S&P Global Market Intelligence

20 Historical Metres Drilled and Utilization Rates (in thousands of metres and average annual utilization percentage) 69% 58% 61% 43% 35% 40% 45% 1, ,152 1, * 404 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Q1 FY2018 Q1 Orbit Garant s utilization rate has exceeded 60% for three straight quarters for the first time since the peak of the last cycle in Fiscal

21 Historical Pricing Revenue per metre drilled ($/m)* * Q Q Q Q Q Q Q4 Q Q1 Q Q Q Q Q Q Q Q * Figures are rounded to the nearest dollar. 21

22 Positive Business Momentum Revenue Growth Momentum ($millions) (% calculations based on numbers in financial statements) * F14 F15 F14 F15 F15 F16 F15 F16 F15 F16 F15 F16 F16 F17 F16 F17 F16 F17 F16 F17 F17 F18 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Eleven straight quarters of year-over-year revenue growth 22

23 Fiscal 2017 Financial Review Revenue¹ ($ millions) EBITDA¹ ² ($ millions) Adjusted Gross Margin¹ % 18.5% 15.2% 18.1% 13.4% FY2017 G&A Expense: $14.7 million (11.8% of revenue) FY2016 G&A Expense: $14.3 million (13.3% of revenue) FY2017 Net loss per share: ($0.17) FY2016 Net loss per share: ($0.01) ) Fiscal years ended June 30. 2) EBITDA and net loss for Fiscal 2016 includes a $5.0 million one-time gain related to negative goodwill and $0.8 million in acquisition and integration costs. Margins and earnings in Fiscal 2017 reflect higher employee training and project mobilization costs as OGD ramped up operations to meet demand 23

24 Q1 FY2018 Financial Review Revenue ($ millions) EBITDA ($ millions) 5.1 Adjusted Gross Margin 20.5% % 13.6% 10.7% 11.8% 0.0 (0.5) 0.7 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q1 FY2018 G&A Expense: $3.7 million (8.8% of revenue) Q1 FY2017 G&A Expense: $3.4 million (11.1% of revenue) Q1 FY2018 Net earnings per share: $0.05 Q1 FY2017 Net loss per share: ($0.01) Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 1) EBITDA and net loss in Q4 FY2016 includes a $5.0 million one-time gain from negative goodwill and $0.1 million of acquisition and integration costs. Profitability improved significantly in Q1 FY2018 due to increased drilling activity, pricing, productivity and diversified project mix 24

25 Sound Balance Sheet ($ millions) As at September 30, 2017 As at June 30, 2017 Cash Total current assets Total assets Total current liabilities Long-term debt 1, Total shareholder equity Working capital ) As at September 30, 2017, Orbit Garant had drawn $15.1 million under a credit facility with its lender National Bank of Canada Inc., compared to $13.6 million as at June 30, During Fiscal 2017, drawdowns from this facility were re-classified from long-term debt to current debt as the facility was due to mature on December 19, Subsequent to Q1 FY2018, the Company entered an amended and restarted credit agreement with its lender. As a result, the Company s $15.1 million of current debt will be reclassified as long-term debt (subject to any interim draws or repayments) at the end of Q2 FY2018. Working capital will increase accordingly. 2) Long-term debt includes finance leases assumed in the Captagua acquisition. 25

26 Strategic Direction Focus on conventional, specialized and geotechnical drilling services Leverage vertical integration by manufacturing custom drill rigs and equipment to meet each customer s needs Maintain commitment to R&D, continuous innovation and advanced drilling technologies Foster continuous improvement in skills & productivity and high standards of health & safety / environmental protection Strengthen Canadian leadership position, while continuing to grow international business Current market environment presents attractive tuck-in acquisition opportunities Protect and build market share 26

27 Investment Highlights Industry leader in innovation and specialized drilling High exposure to gold-related projects Drill utilization rates increasing due to strengthening customer demand Eleven consecutive quarters of year-over-year revenue growth Profitability improved significantly in Q1 FY2018 Strengthened international growth platform Low-risk, diversified exposure to mining sector recovery Sound balance sheet Positioned to outperform as market conditions continue to improve 27