MONCTON, NB, May 18 /CNW/ - Major Drilling Group International Inc. (TSX:
MDI) (the "Company") is confirming the disclosure it made in its third quarter
press release dated March 3, 2009.
In that press release, we stated:
"In January, due to the uncertainty in the economy, many customers
delayed or cancelled their exploration drilling plans, which impacted the
quarter's results compared to last year. Delays and cancellations will
continue to have an impact through at least the first half of calendar
2009. In addition, lower levels of demand have significantly increased
competitive pressures, which will impact pricing", said Francis McGuire,
President and CEO of Major Drilling.
"The current economic environment has impacted, and will continue to
impact, drilling in the short to medium-term, particularly on base metal
projects where the Company expects to see a significant slowdown in
activity in 2009. Senior and intermediate base metal companies that are
leveraged have also reduced their exploration spending for 2009, in order
to conserve cash. Many gold producers have delayed exploration plans due
to the uncertainty in the economy. Sources of funding for junior mining
companies are limited, and as such many junior projects, both in the base
metals and gold sectors, have been delayed or cancelled", said Mr.
"All of this uncertainty limits the Company's visibility for the short-
term. Fourth quarter revenue will be significantly impacted by
cancellations and delays, and revenue could potentially fall by more than
half as compared to the same quarter last year."
As expected, the fourth quarter of fiscal 2009 proved difficult as the
current economic environment impacted drilling worldwide, particularly on base
metal projects. Many of our largest senior customers cut their exploration
programs significantly to conserve cash. A large number of specialized
projects, which tend to be more costly for customers than conventional
projects, and where the Company has historically placed its main focus, have
either been cancelled or very heavily cut back. Five of our largest worldwide
customers alone have postponed various projects that generated revenues of
approximately $40 million in the second quarter of fiscal 2009. We also chose
not to retain some contracts where new pricing would have lowered margins to
the point that the contracts would not have been profitable.
As a result of these and other cancellations and delays, as well as
general pricing pressures created by the current environment and ongoing
geopolitical issues in some of our locations, revenues for the quarter will be
impacted slightly more than we had anticipated at the time of our March 3,
2009 press release, down approximately 60% when compared with Q4 of fiscal
2008. Due to this decrease in revenues, lower margins, and restructuring
charges the Company will record a moderate net loss for the quarter.
We believe that the current economic environment will continue to impact
drilling in the short to medium-term. Some of our large global competitors
have issued guidance making similar statements and predicting similar impacts
on results. However, the Company is beginning to see marginal increases in
demand for its drilling services. If customers move forward with their stated
plans, we should see gradual gains as each month goes by. While we expect some
continued improvements as the year goes on, calendar 2009 will remain
difficult. In calendar 2010, we expect many of the supply issues, which face
most commodities, to resurface and that even with moderate growth in the world
economy, the need to explore and develop mines will increase, which should
increase demand for specialized drilling.
The Company remains in an excellent financial position, being debt-free,
net of cash. Total cash level, net of long-term debt, stood at close to $20
million at quarter-end. Despite the difficult environment, the Company expects
operations to generate positive cash flow for the quarter ending April 2009
and for the fiscal year ended April 30, 2010.
Full financial results for the fourth quarter and 2009 fiscal year will
be released on June 8, 2009.
Some of the statements contained in this press release may be
forward-looking statements, such as, but not limited to, those relating to
worldwide demand for gold and base metals and overall commodity prices, the
level of activity in the minerals and metals industry and the demand for the
Company's services, the Canadian and international economic environments, the
Company's ability to attract and retain customers and to manage its assets and
operating costs, sources of funding for its clients, particularly for junior
mining companies, competitive pressures, currency movements, which can affect
the Company's revenue in Canadian dollars, the geographic distribution of the
Company's operations, the impact of operational changes, changes in
jurisdictions in which the Company operates (including changes in regulation),
failure by counterparties to fulfill contractual obligations, and other
factors as may be set forth, as well as objectives or goals, and including
words to the effect that the Company or management expects a stated condition
to exist or occur. Since forward-looking statements address future events and
conditions, by their very nature, they involve inherent risks and
uncertainties. Actual results in each case could differ materially from those
currently anticipated in such statements by reason of factors such as, but not
limited to, the factors set out in the discussion starting on pages 21 to 24
of the 2008 Annual Report entitled "General Risks and Uncertainties", as
updated by the section entitled "General Risks and Uncertainties" in the
discussion on pages 8, 9, 10 and 11 of the Company's third quarter 2009 MD&A,
and such other documents as available on SEDAR at www.sedar.com. All such
factors should be considered carefully when making decisions with respect to
the Company. The Company does not undertake to update any forward-looking
statements, including those statements that are incorporated by reference
herein, whether written or oral, that may be made from time to time by or on
its behalf, except in accordance with applicable securities laws.
Based in Moncton, New Brunswick, Major Drilling Group International Inc.
is one of the world's largest metals and minerals contract drilling service
companies. To support its customers' mining operations and mineral exploration
activities, Major Drilling maintains operations in Canada, the United States,
South and Central America, Australia, Indonesia, Mongolia, and Africa.
For further information:
For further information: Denis Larocque, Chief Financial Officer, (506)
857-8636, Fax: (506) 857-9211, firstname.lastname@example.org