Major Drilling Group International (TSE:MDI) reported record annual revenue for fiscal 2026, as higher drilling activity across all regions helped lift fourth-quarter sales and profitability, executives said on the company’s earnings call.
President and CEO Denis Larocque said the company ended fiscal 2026 with revenue of CAD 889 million, up 22% from the prior year and the highest annual total in Major Drilling’s 46-year history. Fourth-quarter revenue rose 25% year over year, supported by broad regional growth and a sharp increase in North American activity.
Fourth-Quarter Revenue Rises Across Regions
Chief Financial Officer Ian Ross said fourth-quarter revenue totaled CAD 233.7 million, up 24.6% from CAD 187.5 million in the same period last year. The gains were led by Canada and the United States, where revenue increased nearly 67% year over year.
Larocque said the improvement reflected stronger activity following expanded exploration budgets from senior mining companies and a continued acceleration in financing activity among junior miners. He added that activity also increased in South and Central America, driven largely by growth in Peru, while the Australasian and Africa segment benefited from increased demand from senior miners in Australia.
Ross said foreign exchange translation had a favorable impact of approximately CAD 1 million on revenue compared with the prior year’s effective rates, while the impact on net earnings was minimal.
Earnings Improve as Pricing Offsets Cost Pressure
Major Drilling generated EBITDA of CAD 28 million in the fourth quarter, up 37% from CAD 20.5 million in the prior-year period. Net earnings rose to CAD 8.2 million, or CAD 0.10 per share, compared with CAD 1 million, or CAD 0.01 per share, a year earlier.
The company’s adjusted gross margin, excluding depreciation, was 22% in the quarter, compared with 22.8% in the same period last year. Ross said margins were broadly in line with the prior year as higher labor ramp-up costs and consumable costs, particularly in North America, were offset by operational leverage and improved pricing.
General and administrative costs were CAD 21.2 million, up CAD 300,000 from the prior-year quarter, with the increase attributed to annual wage adjustments. The income tax provision was CAD 2 million, compared with CAD 700,000 a year earlier, reflecting improved profitability.
Balance Sheet and Capital Spending
Major Drilling ended the quarter with CAD 20.6 million in net cash, compared with CAD 3.9 million in net debt at the end of the prior year. Ross said the company had total available liquidity of approximately CAD 155 million and remains “very well-positioned” heading into the new fiscal year.
The company spent CAD 24.5 million on capital expenditures during the fourth quarter, adding one new drill rig and substantial support equipment while disposing of 10 older, less efficient rigs as part of its fleet optimization program. Major Drilling ended the quarter with 688 rigs.
Fiscal 2026 capital expenditures totaled CAD 61 million, below the company’s initial guidance of CAD 70 million. Ross said the shortfall was largely due to the timing of orders for rigs and support equipment. For fiscal 2027, Major Drilling expects to spend approximately CAD 75 million on capital expenditures as it continues to modernize its fleet.
During the question-and-answer portion of the call, Ross said the CAD 75 million budget is expected to be “somewhat evenly distributed” through the year, rather than following the prior year’s cadence, which was affected by a slower start and timing of deliveries.
Fleet Utilization and Revenue Mix
Ross provided the following breakdown of the company’s fleet and utilization in the quarter:
- 305 specialized drills at 48% utilization;
- 156 conventional drills at 60% utilization;
- 227 underground drills at 57% utilization;
- Total fleet of 688 drills at 53% utilization.
Specialized work accounted for 59% of total revenue in the fourth quarter. Ross said the company continues to see strong demand for specialized services as mineral deposits become more difficult to find and discoveries are made in more remote locations. Conventional drilling accounted for 13% of revenue, while underground drilling represented 28%.
Senior and intermediate mining companies remained the largest source of activity, representing 87% of revenue in the quarter. Juniors accounted for 13% of revenue, up from 10% in the prior quarter and 8% in the same period last year, following increased junior financing activity.
By commodity, gold represented 44% of fourth-quarter revenue, supported by higher gold prices and related junior financing activity. Copper accounted for 28%, with Ross saying activity at copper mines and projects is expected to grow through the year. Iron ore contributed 9%, driven by Australian operations, while silver increased to 8% of revenue following a sharp rise in silver prices over the past year.
Fiscal 2027 Outlook Focuses on Demand and Labor
Larocque said Major Drilling expects momentum from the fourth quarter to continue building through fiscal 2027, with rigs gradually deployed at incrementally higher prices as senior exploration budgets expand and junior activity ramps up.
However, he said labor is expected to be the largest challenge for the industry. The company has increased the number of trainee drillers in the field, which Larocque said has temporarily affected productivity as new workers gain experience. Major Drilling has also expanded efforts at training centers in key regions where labor shortages are most pronounced.
“While we expect to pass on increased training, labor, and consumable costs as contracts are renewed throughout the year, the immediate impact is expected to result in margin improvement lagging revenue growth through the beginning of the fiscal year,” Larocque said.
In response to an analyst question about North America, Larocque said activity in Canada is increasing month by month and the market is becoming tight in terms of labor availability. He said pricing is being influenced by those conditions and that the company is able to recover cost increases, with margins in the region already starting to improve. He said Major Drilling expects pricing to be in place by the second quarter.
Asked about the learning curve for new drillers and utilization levels, Larocque said labor remains a challenge, particularly in North America, but the company is making progress through its training schools. He said utilization rates are expected to move up month by month, assuming demand continues at current levels.
Larocque also said the company remains optimistic about the broader market, noting that global exploration spending remains below 60% of the peak levels seen in 2012, before accounting for inflation. He said strong commodity prices and a healthy junior financing market should support continued demand in the years ahead.
About Major Drilling Group International (TSE:MDI)
Major Drilling Group International Inc is engaged in the business of contract drilling, and it provides services to companies that are involved in mining and mineral exploration. It offers surface and underground coring, directional, reverse circulation, sonic, geotechnical, environmental, water-well, coal-bed methane, shallow gas, and underground percussive/long-hole drilling services, as well as various drilling-related mine services. Its geographical segments are Canada – the United States; South and Central America; and Asia and Africa, of which most of its revenue comes from Canada – the United States.
