Major Drilling Reports Fourth Quarter Results



    MONCTON, NB, June 8 /CNW/ - Major Drilling Group International Inc. (TSX:
MDI) today reported results for its fourth quarter of fiscal year 2009, ended
April 30, 2009.

    
    Financial Highlights

    -------------------------------------------------------------------------
    $ millions (except          Q4-09        Q4-08  Fiscal 2009  Fiscal 2008
     earnings per share)  ------------ ------------ ------------ ------------
    -------------------------------------------------------------------------
    Revenue                     $66.4       $170.0       $523.0       $590.3
    -------------------------------------------------------------------------
    Gross profit                 17.8         59.4        175.6        195.4
      As percentage of
       sales                     26.8%        35.0%        33.6%        33.1%
    -------------------------------------------------------------------------
    Net (loss) earnings          (4.6)        25.4         45.9         74.1
    -------------------------------------------------------------------------
    Earnings (loss) per
     share                      (0.19)        1.07         1.94         3.14
    -------------------------------------------------------------------------
    Cash flow from
     continuing
     operations ((*))             2.8         35.3         87.7        109.1
    -------------------------------------------------------------------------
    ((*)) before changes in non-cash working capital items


    - Major Drilling posted quarterly revenue of $66.4 million, down
      60.9 percent from the $170.0 million recorded for the same quarter last
      year.

    - Gross margin percentage for the quarter was 26.8 percent compared to
      35.0 percent for the corresponding period last year.

    - The Company posted a restructuring charge of $2.1 million consisting
      primarily of retrenchment costs in the quarter.

    - Net loss (including restructuring charge) was $4.6 million or $0.19 per
      share for the quarter, compared to earnings of $25.4 million or
      $1.07 per share for the prior year quarter.

    - The Company is debt-free, net of cash. Cash on hand at quarter-end was
      $58.0 million while total debt was $38.6 million, for a net cash
      position of $19.4 million.
    

    The Company cautions that broad volatility in all aspects of its business
continues and, accordingly, actual results may vary substantially from all
forward-looking information in this press release.
    "In January, due to the uncertainty in the economy, many customers
delayed or cancelled their exploration drilling plans, and continued to be
cautious through February, March and April. In addition, lower levels of
demand have significantly increased competitive pressures, which has impacted
pricing. Pricing has dropped by more than 20 percent overall but we have been
able to offset some of this loss through productivity gains and cost cutting.
Furthermore, restructuring charges of $2.1 million and tax and legal
settlements of $1.1 million resulted in non-recurring charges in the quarter",
said Francis McGuire, President and CEO of Major Drilling.
    "As stated in our press release dated May 18, 2009, the current economic
environment continues to impact drilling in the short to medium-term,
particularly on base metal projects where the Company is seeing a significant
slowdown in activity in calendar 2009. 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. Senior and
intermediate base metal companies that are leveraged have also reduced their
exploration spending for 2009 in order to conserve cash and many gold
producers have delayed exploration plans. 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 revenue 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", said Mr.
McGuire.
    "In May, we started to see marginal increases in demand for drilling
services. If customers move forward with their stated plans, we should see
gradual small gains as each month goes by. While we expect some continued
improvements as the year goes on, calendar 2009 will remain difficult."
    "In the current environment, the Company continued to take actions to
reduce its costs. In February, the Company implemented further reductions of
salaried employees across the operation. During the quarter, a decision was
also made that directors' fees and salaries of the Company's top 40 executives
would be reduced by 10 percent. With these steps, general and administrative
expenses in fiscal 2010 should be down by 25 percent as compared to fiscal
2009. Furthermore, the Company continues to have a variable cost structure
whereby most of its direct costs, including field staff, go up or down with
contract revenue and a large part of the Company's other expenses relates to
variable incentive compensation based on the Company's profitability. At the
same time, the Company's financial strength allows it to continue to carry
certain costs relating to ongoing investments in safety, maintaining its
equipment in excellent condition, and retaining the core people, all of which
are essential to quickly react when the industry recovers."
    "As noted earlier, we believe that in calendar 2009, demand for drilling
services will grow month by month but at a slow pace. We expect pricing to
remain competitive until utilization rates pick up significantly. Over time we
expect many of the supply issues that face most commodities to come back into
focus and that even with moderate growth in the world economy, the need to
explore and develop mines will increase. We believe that at that point, the
need to develop resources in areas that are increasingly difficult to access
will return, which should increase demand for specialized drilling."
    "The Company remains in an excellent financial position remaining
debt-free, net of cash, during the quarter. Total cash level, net of long-term
debt, stood at $19.4 million at quarter-end. Despite the difficult
environment, we expect operations to generate positive cash flow in fiscal
2010. The Company will continue to focus on cash management by limiting
capital expenditures to approximately $25 million, by reducing inventory and
by closely monitoring costs", stated Mr. McGuire.

    Fourth quarter ended April 30, 2009

    Total revenue for the fourth quarter was $66.4 million, down 60.9 percent
from the $170.0 million recorded for the prior year period. Cancellations or
delays of drilling programs, combined with price reductions, significantly
affected revenue in all three regions.
    Revenue from Canada-U.S. drilling operations was down $32.9 million or 63
percent to $19.6 million for the quarter compared to $52.5 million for the
same period last year. Cancellations and decreased pricing impacted both
countries.
    In South and Central America, revenue for the quarter was $22.1 million,
down 63 percent from the $60.4 million recorded in the prior year quarter.
Revenue decreases in Mexico, Chile and Argentina accounted for approximately
90 percent of the drop. A complete halt of operations in Venezuela and Ecuador
due to political issues also impacted revenue in the region. The situation in
Ecuador has improved and the Company expects to resume operations in that
country in the coming months.
    Australian, Asian and African drilling operations reported revenue of
$24.7 million, down some 57 percent from the $57.1 million reported in the
same period last year. Every country was impacted relatively the same but for
various reasons. Cancellation of drilling programs and weather issues impacted
revenue in Australia while Indonesian revenue was mostly impacted by price
reductions. Mongolian revenue continued to be down compared to last year as
the mining industry in that country continues to struggle with uncertainty
relating to government mining policies. Finally, in Africa, the Company scaled
down operations in Botswana and transferred assets to neighboring countries.
    The overall gross margin percentage for the quarter was 26.8 percent,
down from 35.0 percent for the same period last year. Reduced pricing due to
increased competitive pressures and delays significantly impacted margins.
Pricing dropped by more than 20 percent overall since October 2008 but the
Company has been able to recapture some of this loss through productivity
gains and cost cutting. Finally, weather issues in Australia in February and
March impacted margins, especially in the energy sector.
    General and administrative costs were $9.4 million for the quarter, down
26 percent compared to the $12.7 million for the prior year period. The
decrease was due to cost cutting initiatives implemented in November and
February.
    Other expenses were $1.8 million for the quarter compared to $3.2 million
for the same period last year. This year's other expenses includes legal and
input tax settlements whereas last year's other expenses were mainly composed
of incentive compensation expenses given the Company's profitability in that
quarter.
    Foreign exchange loss was $0.5 million for the quarter compared to nil
for the prior year period. This year's loss was due to exchange rate
variations on monetary working capital items.
    Short-term interest expense was nil for the quarter compared to revenue
of $0.2 million last year, while interest on long-term debt was $0.4 million
compared to $0.5 million for the prior year quarter.
    Amortization expense increased to $8.0 million for the quarter compared
to $7.5 million for the same quarter last year, as a result of increased
investment in equipment and intangibles.
    During the quarter, the Company recorded a restructuring charge of $2.1
million consisting primarily of retrenchment costs following staff reduction
initiatives implemented in February.
    The Company's tax expense was $0.2 million for the quarter compared to
$10.1 million for the same period last year. The tax expense for the quarter
was impacted by the non-recognition or reversal of tax losses in Venezuela and
Botswana where the Company has ceased operations and a tax settlement in
Tanzania.
    Net loss for the quarter, after restructuring charge, was $4.6 million or
$0.19 per share ($0.19 per share diluted) compared to net earnings of $25.4
million or $1.07 per share ($1.05 per share diluted) in the prior year period.

    Year ended April 30, 2009

    Revenue for the fiscal year ended April 30, 2009 decreased 11.4 percent
to $523.0 million from $590.3 million for the corresponding period last year.
The first six months were marked by strong growth followed by contract
cancellations and delays in the second half of the year due to the prevailing
economic situation. Revenue growth was affected by the strengthening U.S.
dollar against the Canadian dollar as compared to the same period last year.
The favourable foreign exchange translation impact for the year, when
comparing to the effective rates for the same period last year, is estimated
at $20 million on revenue.
    Canada-U.S. revenue decreased by 11.5 percent to $167.2 million compared
to $189.0 million last year. Additional equipment and improved pricing
contributed to the growth in the first half while cancellations and delays of
contracts impacted revenue in the second half in both countries.
    Revenue in South and Central America decreased by 16.8 percent to $155.2
million, compared to $186.5 million in fiscal 2008. A complete halt of
operations in Venezuela and Ecuador due to political issues, and a slowdown in
Mexico due to cancellations or delays in contracts impacted revenue in that
region.
    Revenue in Australia, Asia and Africa decreased 6.6 percent to $200.6
million from $214.8 million in fiscal 2008. A slowdown in Australia due to
cancellations or delays in contracts and the shutdown of operations in Armenia
earlier in the year impacted revenue in that region.
    Gross margin for the year was up to 33.6 percent compared to 33.1 percent
last year, due mainly to an improved pricing environment in the first half of
the year mitigated by reduced pricing due to increased competitive pressures
and delays in the second half.
    General and administrative expenses increased to $46.9 million compared
to $44.8 million for the same period last year. In the first half of the year,
these expenses increased primarily due to additions to the management team to
accommodate growth, additional safety and training efforts, the African,
Ecuadorian and Chilean acquisitions, and overall cost increases due to
increased volume. In the second half of the year, the Company implemented
initiatives in order to reduce general and administrative expenses. With these
steps, the Company expects general and administrative expenses in fiscal 2010
to be down by 25 percent as compared to fiscal 2009.
    Other expenses were $12.5 million for the year compared to $13.6 million
for the same period last year. Lower incentive compensation expenses given the
Company's lower profitability in the current year was partially offset by an
increase in the provision for doubtful accounts.
    Foreign exchange loss was $1.4 million compared to $2.1 million in the
prior year period as a result of exchange rate variations on monetary working
capital items.
    Short-term interest expense was $0.2 million for the year compared to
revenue of $0.2 million last year, while interest on long-term debt decreased
to $1.8 million in fiscal 2009 compared to $2.4 million last year due to
reduced long-term debt levels.
    Amortization expense increased to $32.2 million compared to $27.0 million
last year, as a result of increased investment in equipment and intangibles.
    The Company recorded a restructuring charge of $9.0 million including
asset write downs of $5.2 million and mostly retrenchment costs for the
remaining amount. Also, the Company recorded a non-cash goodwill and
intangible assets impairment charge of $0.7 million.
    The provision for income tax for the year was $24.8 million compared to
$31.1 million for the prior year reflecting the increase in pre-tax earnings.
The effective tax rate for the year was impacted by the non-recognition or
reversal of tax losses in Venezuela and Botswana where the Company has ceased
operations.
    Net earnings were $45.9 million or $1.94 per share ($1.92 per share
diluted) compared to $74.1 million or $3.14 per share ($3.10 per share
diluted) for last year.

    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.

    Financial statements are attached.

    Major Drilling will provide a simultaneous webcast of its quarterly
conference call on Tuesday, June 9, 2009 at 9:00 AM (EDT). To access the
webcast please go to the webcast section of Major Drilling's website at
www.majordrilling.com and click the attached link, or go directly to the CNW
Group website at www.newswire.ca for directions. Participants will require
Windows MediaPlayer, which can be downloaded prior to accessing the call.
Please note that this is listen only mode.

    
                   Major Drilling Group International Inc.
                    Consolidated Statements of Operations
      (in thousands of Canadian dollars, except per share information)
                                 (unaudited)

                                 Twelve months ended      Three months ended
                                        April 30               April 30

                                    2009        2008        2009        2008
                               ----------  ----------  ----------  ----------

    TOTAL REVENUE              $ 522,986   $ 590,309   $  66,400   $ 169,995

    DIRECT COSTS                 347,352     394,868      48,594     110,575
                               ----------  ----------  ----------  ----------
    GROSS PROFIT                 175,634     195,441      17,806      59,420
                               ----------  ----------  ----------  ----------
    OPERATING EXPENSES
      General and
       administrative             46,866      44,813       9,394      12,719
      Other expenses              12,508      13,606       1,769       3,182
      Foreign exchange
       loss (gain)                 1,441       2,142         487         (12)
      Interest expense
       (revenue)                     224        (153)          4         225
      Interest expense on
       long-term debt              1,833       2,403         418         481
      Amortization                32,235      26,962       8,019       7,451
      Restructuring
       charge (note 5)             9,043           -       2,124           -
      Goodwill and
       intangible assets
       impairment (note 6)           732           -           -           -
                               ----------  ----------  ----------------------
                                 104,882      89,773      22,215      24,046
                               ----------  ----------  ----------  ----------

    EARNINGS (LOSS)
     BEFORE INCOME TAX AND
     DISCONTINUED OPERATIONS      70,752     105,668      (4,409)     35,374
                               ----------  ----------  ----------  ----------

    INCOME TAX -
     PROVISION (RECOVERY)
      Current                     23,489      27,315         812       8,047
      Future                       1,328       3,758        (620)      2,041
                               ----------  ----------  ----------  ----------
                                  24,817      31,073         192      10,088
                               ----------  ----------  ----------  ----------

    EARNINGS (LOSS) FROM
     CONTINUING OPERATIONS        45,935      74,595      (4,601)     25,286

    (LOSS) GAIN FROM
     DISCONTINUED OPERATIONS           -        (500)          -          75
                               ----------  ----------  ----------  ----------

    NET EARNINGS (LOSS)        $  45,935   $  74,095   $  (4,601)  $  25,361
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    EARNINGS (LOSS) PER
    -------------------
     SHARE FROM CONTINUING
     ---------------------
     OPERATIONS
     ----------
    Basic (*)                  $    1.94   $    3.16   $   (0.19)  $    1.07
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------
    Diluted (xx)               $    1.92   $    3.12   $   (0.19)  $    1.05
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    EARNINGS (LOSS) PER SHARE
    -------------------------
    Basic (*)                  $    1.94   $    3.14   $   (0.19)  $    1.07
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------
    Diluted (xx)               $    1.92   $    3.10   $   (0.19)  $    1.05
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    (*)  Based on 23,710,649 and 23,576,973 daily weighted average shares
         outstanding for the fiscal year to date 2009 and 2008, respectively
         and on 23,715,343 and 23,684,754 daily weighted average shares for
         the quarter ended April 30, 2009 and 2008, respectively. The total
         number of shares outstanding on April 30, 2009 was 23,716,073.

    (xx) Based on 23,917,678 and 23,899,983 daily weighted average shares
         outstanding for the fiscal year to date 2009 and 2008, respectively
         and on 23,820,756 and 24,061,576 daily weighted average shares
         outstanding for the quarter ended April 30, 2009 and 2008,
         respectively.


                   Major Drilling Group International Inc.
              Consolidated Statements of Comprehensive Earnings
                     (in thousands of Canadian dollars)
                                 (unaudited)

                                 Twelve months ended      Three months ended
                                        April 30               April 30

                                    2009        2008        2009        2008
                               ----------  ----------  ----------  ----------

    NET EARNINGS (LOSS)        $  45,935   $  74,095   $  (4,601)  $  25,361

    OTHER COMPREHENSIVE
     EARNINGS (LOSS)
      Unrealized gains (losses)
       on translating financial
       statements of self-
       sustaining foreign
       operations                 39,473     (14,169)        997       5,260
                               ----------  ----------  ----------  ----------

    COMPREHENSIVE
     EARNINGS (LOSS)           $  85,408   $  59,926   $  (3,604)  $  30,621
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------


                 Consolidated Statements of Retained Earnings
                     (in thousands of Canadian dollars)

                                                         Twelve months ended
                                                               April 30

                                                            2009        2008
                                                       ----------  ----------

    RETAINED EARNINGS, BEGINNING OF THE YEAR           $ 182,533   $ 108,438

      Net earnings                                        45,935      74,095
      Dividends                                           (9,485)          -
                                                       ----------  ----------

    RETAINED EARNINGS, END OF THE YEAR                 $ 218,983   $ 182,533
                                                       ----------  ----------
                                                       ----------  ----------


                 Consolidated Statements of Accumulated Other
                             Comprehensive Loss
                     (in thousands of Canadian dollars)

                                                         Twelve months ended
                                                               April 30

                                                            2009        2008
                                                       ----------  ----------

    ACCUMULATED OTHER COMPREHENSIVE LOSS, BEGINNING
     OF THE YEAR                                       $ (44,552)  $ (30,383)

      Unrealized gains (losses) on translating
       financial statements of self-sustaining
       foreign operations                                 39,473     (14,169)
                                                       ----------  ----------

    ACCUMULATED OTHER COMPREHENSIVE LOSS, END OF
     THE YEAR                                          $  (5,079)  $ (44,552)
                                                       ----------  ----------
                                                       ----------  ----------


                   Major Drilling Group International Inc.
                    Consolidated Statements of Cash Flows
                     (in thousands of Canadian dollars)
                                 (unaudited)

                                 Twelve months ended      Three months ended
                                        April 30               April 30

                                    2009        2008        2009        2008
                               ----------  ----------  ----------  ----------

    OPERATING ACTIVITIES
    Earnings (loss) from
     continuing operations     $  45,935   $  74,595   $  (4,601)  $  25,286
    Operating items not
     involving cash
      Amortization                32,235      26,962       8,019       7,451
      Restructuring
       charge (note 5)             5,194           -           -           -
      Loss (gain) on disposal
       of capital assets             832       1,218        (129)        (50)
      Future income tax
       (recovery)                  1,328       3,758        (620)      2,041
      Stock-based compensation     1,424       2,556         151         601
      Goodwill and
       intangible assets
       impairment (note 6)           732           -           -           -
                               ----------  ----------  ----------  ----------
                                  87,680     109,089       2,820      35,329
    Changes in non-cash
     operating working
     capital items                28,944     (28,483)     (2,208)    (11,726)
                               ----------  ----------  ----------  ----------
                                 116,624      80,606         612      23,603

    (Loss) gain from
     discontinued operations,
     adjusted for non-cash
     items                             -        (614)          -          75
    Changes in non-cash
     operating working capital
     items from discontinued
     operations                   (1,898)       (917)          -        (114)
                               ----------  ----------  ----------  ----------
    Cash flow from operating
     activities                  114,726      79,075         612      23,564
                               ----------  ----------  ----------  ----------

    FINANCING ACTIVITIES
    Repayment of long-term
     debt                        (14,457)    (14,080)     (5,363)     (3,164)
    Additional long-term debt     10,000      20,000           -      10,000
    (Repayment of) increase in
     demand loans                 (2,179)      2,179           -      (6,310)
    Issuance of common shares         94       4,437          66         608
    Issuance of dividend          (4,742)          -           -           -
    Discontinued operations            -      (3,061)          -           3
                               ----------  ----------  ----------  ----------
    Cash flow (used in) from
     financing activities        (11,284)      9,475      (5,297)      1,137
                               ----------  ----------  ----------  ----------

    INVESTING ACTIVITIES
    Business acquisitions, net
     of cash acquired (note 7)   (21,867)    (27,925)          -        (496)
    Acquisition of capital
     assets, net of direct
     financing                   (54,698)    (68,101)     (6,410)    (22,700)
    Proceeds from disposal of
     capital assets                4,800       3,647       1,760       1,137
                               ----------  ----------  ----------  ----------
    Cash flow used in
     investing activities        (71,765)    (92,379)     (4,650)    (22,059)
                               ----------  ----------  ----------  ----------

    OTHER ACTIVITIES
    Foreign exchange
     translation adjustment        5,663        (498)        611        (200)
                               ----------  ----------  ----------  ----------

    INCREASE (DECREASE) IN
     CASH                         37,340      (4,327)     (8,724)      2,442

    CASH POSITION, BEGINNING
     OF THE PERIOD                20,695      25,022      66,759      18,253
                               ----------  ----------  ----------  ----------

    CASH POSITION, END OF
     THE PERIOD                $  58,035   $  20,695   $  58,035   $  20,695
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------


                   Major Drilling Group International Inc.
                         Consolidated Balance Sheets
                   As at April 30, 2009 and April 30, 2008
                     (in thousands of Canadian dollars)

    ASSETS
                                                            2009        2008
                                                       ----------  ----------

    CURRENT ASSETS
      Cash                                             $  58,035   $  20,695
      Accounts receivable                                 52,538     103,555
      Income tax receivable                                6,014       3,218
      Inventories                                         72,764      75,094
      Prepaid expenses                                     3,478       6,280
      Future income tax assets                             2,644       3,948
                                                       ----------  ----------
                                                         195,473     212,790

    CAPITAL ASSETS                                       240,224     199,007

    FUTURE INCOME TAX ASSETS                               1,403         334

    GOODWILL AND INTANGIBLE ASSETS (note 9)               32,072      14,837
                                                       ----------  ----------

                                                       $ 469,172   $ 426,968
                                                       ----------  ----------
                                                       ----------  ----------

    LIABILITIES

    CURRENT LIABILITIES
      Demand loan                                      $       -   $   2,179
      Accounts payable and accrued charges                47,691      73,870
      Income tax payable                                   1,719      10,541
      Current portion of long-term debt                   15,049      11,798
      Future income tax liabilities                        1,071       1,177
      Liabilities of discontinued operations                   -       2,028
                                                       ----------  ----------
                                                          65,530     101,593

    LONG-TERM DEBT                                        23,507      28,317

    FUTURE INCOME TAX LIABILITIES                         14,789       9,152
                                                       ----------  ----------

                                                         103,826     139,062
                                                       ----------  ----------

    SHAREHOLDERS' EQUITY
      Share capital                                      142,233     142,140
      Contributed surplus                                  9,209       7,785
      Retained earnings                                  218,983     182,533
      Accumulated other comprehensive loss                (5,079)    (44,552)
                                                       ----------  ----------
                                                         365,346     287,906
                                                       ----------  ----------

                                                       $ 469,172   $ 426,968
                                                       ----------  ----------
                                                       ----------  ----------
    

    MAJOR DRILLING GROUP INTERNATIONAL INC.
    NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
    FOR THE PERIODS ENDED APRIL 30, 2009 AND 2008
    (in thousands of Canadian dollars)

    1.  BASIS OF PRESENTATION
    ---------------------

    These interim consolidated financial statements were prepared using
accounting policies and methods consistent with those used in the preparation
of the Company's audited consolidated financial statements for the year ended
April 30, 2008, except for the adoption of new accounting policies as
disclosed in Note 2 below. These interim consolidated financial statements
conform in all respects to the requirements of Canadian generally accepted
accounting principles for annual financial statements, with the exception of
certain note disclosures. As a result, these interim consolidated financial
statements should be read in conjunction with the Company's audited
consolidated financial statements and notes for the year ended April 30, 2008
contained in the Company's 2008 annual report.

    2.  CHANGES IN ACCOUNTING POLICIES
    ------------------------------

    Effective May 1, 2008, the Company adopted the Canadian Institute of
Chartered Accountants ("CICA") Handbook Section 3031, Inventories, replacing
Section 3030, Inventories, Section 3862, Financial Instruments - Disclosures,
Section 3863, Financial Instruments - Presentation, and Section 1535, Capital
Disclosures.
    Section 3031, Inventories, provides more guidance on the determination of
the cost of inventory and the subsequent recognition of inventory as an
expense, as well as requiring additional associated disclosures. The new
standard also allows for the reversal of any write downs previously
recognized. The adoption of this policy had no material effect on the
Company's consolidated financial statements. (see Note 8 - Inventory)
    Section 3862 on financial instruments disclosures requires the disclosure
of information about: a) the significance of financial instruments for the
entity's financial position and performance and b) the nature and extent of
risks arising from financial instruments to which the entity is exposed during
the period and at the balance sheet date, and how the entity manages those
risks. Section 3863 on the presentation of financial instruments is unchanged
from the presentation requirements included in Section 3861. Section 1535 on
capital disclosures requires the disclosure of information about an entity's
objectives, policies and processes for managing capital. As the standards
relate only to disclosure requirements, they have had no effect on financial
results. (see Note 10 - Capital Management and Note 11 - Financial
Instruments)

    3.  FUTURE ACCOUNTING CHANGES
    -------------------------

    Goodwill and Intangible Assets

    In February 2008, the CICA issued Section 3064, Goodwill and Intangible
Assets, replacing Section 3062, Goodwill and Other Intangible Assets and
Section 3450, Research and Development Costs. Various changes have been made
to other sections of the CICA Handbook for consistency purposes. The new
Sections will be applicable to financial statements relating to fiscal years
beginning on or after October 1, 2008. Accordingly, the Company will adopt the
new standards for its fiscal year beginning May 1, 2009. Section 3064
establishes standards for the recognition, measurement, presentation and
disclosure of goodwill subsequent to its initial recognition and of intangible
assets by profit-oriented enterprises. Standards concerning goodwill are
unchanged from the standards included in the previous Section 3062. The
Company is currently evaluating the impact of the adoption of this new Section
on its consolidated financial statements.

    International Financial Reporting Standards ("IFRS")

    In February 2008, the Accounting Standards Board ("AcSB") confirmed that
the use of IFRS will be required in 2011 for publicly accountable enterprises
in Canada. In April 2008, the AcSB issued an IFRS Omnibus Exposure draft
proposing that publicly accountable enterprises be required to apply IFRS, in
full and without modification, on January 1, 2011 for companies with a
calendar year end, therefore the transition date for the Company is May 1,
2011. This will require the restatement, for comparative purposes, of amounts
reported by the Company for its year ended April 30, 2011, and of the opening
balance sheet as at May 1, 2010. The Company is currently in the process of
developing a conversion implementation plan and assessing the impacts of the
conversion on the consolidated financial statements and disclosures of the
Company.

    4.  SEASONALITY OF OPERATIONS
    -------------------------

    The Company's operations tended to exhibit a seasonal pattern whereby its
fourth quarter (February to April) was its strongest. With the exception of
the third quarter, the Company has, over the past several years, exhibited
comparatively less seasonality in quarterly revenue. The third quarter
(November to January) is normally the Company's weakest quarter due to the
shutdown of mining and exploration activities, often for extended periods,
over the holiday season, particularly in South and Central America. With the
current economic and industry downturn ongoing, it is not yet clear whether or
not the Company's revenue will return to more historical seasonal patterns, or
whether a recent lack of seasonality will continue.

    5.  RESTRUCTURING CHARGE
    --------------------

    During the third quarter of 2009, the Company initiated a restructuring
plan to standardize the drilling equipment fleet and reduce operating costs by
rationalizing the workforce and business locations. These initiatives
generated a total restructuring charge of $9,043 and $2,124 for the twelve and
three months ending April 30, 2009 respectively as detailed below.
    The current economic environment presented an opportunity to accomplish
significant progress in the rationalization of the Company's drilling
equipment fleet, which was initiated a number of years ago. In the third
quarter, the Company eliminated 55 drill rigs from its global fleet for a
non-cash charge of $5,194 with the objective of increasing the focus on
hydraulic drill rigs equipped with the latest safety features.
    Employee severance charges of $1,578 in the third quarter and $1,508 in
the fourth quarter have been incurred to rationalize the workforce and
centralize some administrative functions.
    Business relocation charges of $147 in the third quarter and $616 in the
fourth quarter were incurred for early termination of leases and other related
expenses.
    On April 30, 2009, accounts payable included $80 of restructuring charges
not paid.

    6.  GOODWILL AND INTANGIBLE ASSETS IMPAIRMENT
    -----------------------------------------

    In the third quarter, the Company recorded an impairment charge of $732.
Of this amount, $350 relates to the value attributed to the acquired
contracts, and recorded as intangible assets, from the Forage à Diamant Benoît
Ltée acquisition earlier this fiscal year. This impairment was required as the
majority of these contracts have been completed early due to the current
economic conditions. Goodwill of $382 from the Longstaff Group of Companies,
purchased in 2007, has also been impaired due to the economic downturn and the
inability of this region to generate the expected revenue.

    7.  BUSINESS ACQUISITIONS
    ---------------------

    Effective August 1, 2008 the Company acquired the assets of the
exploration drilling company Forage à Diamant Benoît Ltée ("Benoît") based in
Val-d'Or, Québec. Through this purchase, Major Drilling acquired 19 drill
rigs, support equipment and inventory, existing contracts and personnel. The
purchase price for the transaction was $23,117, including customary working
capital adjustments, financed by cash and debt.
    The net assets acquired at fair market value at acquisition are as
follows:

    
    Assets acquired and liabilities assumed
    Accounts receivable                                            $   5,055
    Prepaid expenses                                                     241
    Inventories                                                          533
    Capital assets                                                     7,489
    Intangible assets                                                  2,350
    Goodwill                                                          13,223
    Accounts payable                                                    (884)
    Income tax payable                                                (2,842)
    Future income tax liability                                       (2,048)
                                                                   ----------
    Net assets                                                     $  23,117
                                                                   ----------
                                                                   ----------

    Consideration
    Cash                                                           $  21,867
    Accounts payable                                                     500
    Long-term debt                                                       750
                                                                   ----------
                                                                   $  23,117
                                                                   ----------
                                                                   ----------


    Effective October 25, 2007 the Company acquired the assets of the
exploration drilling company Paragon del Ecuador S.A. ("Paragon") in Ecuador.
Through this purchase, Major Drilling acquired 7 drill rigs, support equipment
and inventory, existing contracts and personnel. The purchase price for the
transaction was US$5,999 (C$5,805), subject to various holdbacks, financed by
cash and debt.
    Net assets acquired at fair market value at acquisition are as follows:


    Assets acquired
    Inventories                                                    $     586
    Capital assets                                                     2,023
    Goodwill                                                           3,196
                                                                   ----------
    Net assets                                                     $   5,805
                                                                   ----------
                                                                   ----------

    Consideration
    Cash                                                           $   3,871
    Long-term debt                                                     1,934
                                                                   ----------
                                                                   $   5,805
                                                                   ----------
                                                                   ----------


    Effective September 1, 2007 the Company acquired the exploration drilling
company Harris y Cia Ltda. ("Harris") in Chile. Through this purchase, Major
Drilling acquired 11 drill rigs, support equipment, inventory, an office and
repair facilities. As part of this acquisition, the Company also acquired
Harris' existing contracts and retained key management personnel, as well as
the other employees, including a number of experienced drillers. The purchase
price for the transaction was US$23,934 (C$25,203), including customary
working capital adjustments, financed with cash.
    Net assets acquired at fair market value at acquisition are as follows:


    Assets & liabilities acquired
    Cash                                                           $   1,149
    Accounts receivable                                                  631
    Inventories                                                        1,060
    Capital assets                                                     9,621
    Future income tax assets                                           2,328
    Goodwill                                                          11,570
    Accounts payable                                                  (1,156)
                                                                   ----------
    Net assets                                                     $  25,203
                                                                   ----------
                                                                   ----------

    Consideration
    Cash                                                           $  25,203
                                                                   ----------
                                                                   ----------

    8.  INVENTORY
        ---------

    The cost of inventory recognized as an expense and included in direct cost
for the twelve and three months ended April 30, 2009 was $81,590 and $11,027
respectively. During the period, there were no significant write downs of
inventory as a result of net realizable value being lower than cost and no
inventory write downs recognized in previous periods were reversed.
    The Company's credit facility related to operations is in part secured by
a general assignment of the Company's inventory.

    9.  GOODWILL AND INTANGIBLE ASSETS
        ------------------------------
                                                           April       April
                                                            2009        2008
                                                       ----------  ----------

    Goodwill                                           $  30,470   $  14,837
    Intangible assets                                      1,602           -
                                                       ----------  ----------
                                                       $  32,072   $  14,837
                                                       ----------  ----------

    Intangible assets include the carrying value of customer relationships and
a non-compete agreement, which are amortized on a straight-line basis over
four and three years respectively.
    Changes in the goodwill and intangible assets balance were as follows for
the twelve and three months ending April 30, 2009:


                                                        2009 YTD     2009 Q4
                                                       ----------  ----------

    Balance at beginning of the period                 $  14,837   $  32,087
    Goodwill acquired                                     13,223         642
    Intangible assets acquired                             2,350           -
    Amortization of intangible assets                       (398)       (368)
    Goodwill and intangible assets impairment               (732)          -
    Effect of foreign currency exchange rate changes       2,792        (289)
                                                       ----------  ----------
                                                       $  32,072   $  32,072
                                                       ----------  ----------

    10. CAPITAL MANAGEMENT
        ------------------

    The Company includes shareholders' equity (excluding accumulated other
comprehensive loss), long-term borrowings and demand loan net of cash in the
definition of capital.
    Total managed capital was as follows:

                                                           April       April
                                                            2009        2008
                                                       ----------  ----------

    Demand loan                                        $       -   $   2,179
    Long-term debt                                        38,556      40,115
    Share capital                                        142,233     142,140
    Contributed surplus                                    9,209       7,785
    Retained earnings                                    218,983     182,533
    Cash                                                 (58,035)    (20,695)
                                                       ----------  ----------
                                                       $ 350,946   $ 354,057
                                                       ----------  ----------

    The Company's objective when managing its capital structure is to maintain
financial flexibility in order to: i) preserve access to capital markets; ii)
meet financial obligations and iii) finance internally generated growth and
potential new acquisitions. To manage its capital structure, the Company may
adjust spending, issue new shares, issue new debt or repay existing debt.
    Under the terms of certain of the Company's debt agreements, the Company
must satisfy certain financial covenants. Such agreements also limit, among
other things, the Company's ability to incur additional indebtedness, create
liens, engage in mergers or acquisitions and make dividend and other payments.
During the period, the Company was, and continues to be, in compliance with
all covenants and other conditions imposed by its debt agreements.
    The Company's banking facilities have been renewed in November 2008 with
no material changes in the borrowing conditions of the facilities.
    In order to facilitate the management of its capital requirements, the
Company prepares annual budgets that are updated as necessary, dependent on
various factors.
    The Company's objectives with regards to capital management remain
unchanged from 2008.

    11. FINANCIAL INSTRUMENTS
        ---------------------

    Fair value

    The carrying values of cash, accounts receivable, demand loan and accounts
payable and accrued charges approximate their fair value due to the relatively
short period to maturity of the instruments. Long-term debt has a carrying
value of $38,556 as at April 30, 2009 (April 30, 2008 - $40,115) and also
approximates its fair market value.

    Risk management

    The Company is exposed to various risks related to its financial assets
and liabilities. There have been no substantive changes in the Company's
exposure to financial instrument risks, its objectives, policies and processes
for managing those risks, or the methods used to measure them, from previous
periods, unless otherwise stated in this note.

    Credit risk

    The Company is exposed to credit risk from its accounts receivable. The
Company has adopted a policy of dealing only with creditworthy counterparties
and obtaining sufficient collateral where appropriate, as a means of
mitigating the risk of financial loss from defaults. It carries out, on a
continuing basis, credit checks on its customers and maintains provisions for
contingent credit losses. The Company also diversifies its credit risk by
dealing with a large number of customers in various countries. Demand for the
Company's drilling services depends upon the level of mineral exploration and
development activities conducted by mining companies, particularly with
respect to gold, nickel and copper. The Company's five largest customers
account for 32% (23% in 2008) of total quarterly revenue, with no one customer
representing more than 10% of its revenue for 2009 or 2008.
    The carrying amounts for accounts receivable are net of allowances for
doubtful accounts, which are estimated based on aging analysis of receivables,
past experience, specific risks associated with the customer and other
relevant information. The maximum exposure to credit risk is the carrying
value of the financial assets.
    As at April 30, 2009, 74.8% of the Company's trade receivables are aged as
current (under 30 days) and 4.4% of the trade receivables are impaired.
    Credit risk also arises from cash and cash equivalents and deposits with
banks and financial institutions. This risk is limited because the
counterparties are banks with high credit ratings assigned by international
credit-rating agencies.
    The Company does not enter into derivatives to manage credit risk.

    Interest rate risk

    The demand loan and long-term debt of the Company bears a floating rate of
interest, which exposes the Company to interest rate fluctuations.
    As at April 30, 2009 the Company has estimated that a one percentage point
increase in interest rates would have caused a quarterly decrease in net
income of approximately $70 and a 1% decrease in interest rates would have
caused a quarterly increase in net income of $70.

    Foreign currency risk

    Foreign currency risk arises as the Company has operations located
internationally where local operational currency is not the same as the
functional currency of the Company.
    A significant portion of the Company's operations are located outside of
Canada. The accounting impact of foreign currency exposure is minimized since
the operations are classified as self-sustaining operations. In certain
developing countries, the Company mitigates its risk of large exchange rate
fluctuations by conducting business primarily in U.S. dollars. U.S. dollar
revenue exposure is partially mitigated by offsetting U.S. dollar labour and
material expenses. Monetary assets denominated in foreign currencies are
exposed to foreign currency fluctuations.
    Based on the Company's foreign currency net monetary exposures as at April
30, 2009, and assuming that all other variables remain constant, a 10% rise or
fall in the Canadian dollar against the other foreign currencies would have
resulted in increases (decreases) in the net earnings and comprehensive
earnings as follows:

                                                      Increase (decrease) in
                                                      -----------------------
                                                           net earnings
                                                           ------------
                                                        Canadian    Canadian
                                                          dollar      dollar
                                                           appre-      depre-
                                                       ciates 10%  ciates 10%
                                                       ----------  ----------

    Chilean Peso                                       $    (278)  $     278
    Indonesian Rupiah                                       (222)        222
    Mexican Peso                                              75         (75)
    US Dollar                                                308        (308)


                                                      Increase (decrease) in
                                                      -----------------------
                                                      comprehensive earnings
                                                      -----------------------
                                                        Canadian    Canadian
                                                          dollar      dollar
                                                           appre-      depre-
                                                       ciates 10%  ciates 10%
                                                       ----------  ----------

    Australian Dollar                                   $ (3,353)  $   3,353
    US Dollar                                            (22,363)     22,363


    Liquidity risk

    Liquidity risk arises from the Company's management of working capital,
the finance charges and principal repayments on its debt instruments. The risk
is that the Company would not be able to meet its financial obligations as
they become due.
    The Company manages liquidity risk by maintaining adequate reserves,
banking facilities and reserve borrowing facilities, by continuously
monitoring forecast and actual cash flows and matching the maturity profiles
of financial assets and liabilities.
    Total financial liabilities, by due date, as at April 30, 2009 are as
follows:

                       Total      1 year   2-3 years   4-5 years    5+ years
                   ----------  ----------  ----------  ----------  ----------
    Accounts
     payable &
     accrued
     charges       $  47,691   $  47,691   $       -   $       -   $       -
    Long-term
     debt             38,556      15,049      15,609       7,898           -
                   ----------  ----------  ----------  ----------  ----------
                   $  86,247   $  62,740   $  15,609   $   7,898   $       -
                   ----------  ----------  ----------  ----------  ----------
                   ----------  ----------  ----------  ----------  ----------


    12. SEGMENTED INFORMATION
        ---------------------

                                2009 YTD    2008 YTD     2009 Q4     2008 Q4
                               ----------  ----------  ----------  ----------

    Revenue
      Canada - U.S.            $ 167,243   $ 189,018   $  19,596   $  52,542
      South and Central
       America                   155,182     186,491      22,063      60,398
      Australia, Asia and
       Africa                    200,561     214,800      24,741      57,055
                               ----------  ----------  ----------  ----------
                               $ 522,986   $ 590,309   $  66,400   $ 169,995
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    Earnings (loss) from
     operations
      Canada - U.S.            $  38,186   $  37,818   $      46   $  12,537
      South and Central
       America                    36,568      54,147       3,977      20,830
      Australia, Asia and
       Africa                     23,073      33,482      (4,489)      5,522
                               ----------  ----------  ----------  ----------
                                  97,827     125,447        (466)     38,889
    Eliminations                  (1,184)     (1,129)       (268)       (296)
                               ----------  ----------  ----------  ----------
                                  96,643     124,318        (734)     38,593
    Interest expense, net          2,057       2,250         422         706
    General corporate
     expenses                     14,059      16,400       1,129       2,513
    Restructuring charge           9,043           -       2,124           -
    Goodwill and intangible
     assets impairment               732           -           -           -
    Income tax                    24,817      31,073         192      10,088
                               ----------  ----------  ----------  ----------
    Earnings (loss) from
     continuing operations        45,935      74,595      (4,601)     25,286
    (Loss) gain from
     discontinued operations           -        (500)          -          75
                               ----------  ----------  ----------  ----------
    Net earnings (loss)        $  45,935   $  74,095   $  (4,601)  $  25,361
                               ----------  ----------  ----------  ----------
                               ----------  ----------  ----------  ----------

    Goodwill and intangible assets impairment includes $382 of goodwill
impairment relating to the Australia, Asia and Africa segment and $350 of
intangible assets impairment relating to the Canada - U.S. segment (see Note 6
- Goodwill and Intangible Assets Impairment).
    




For further information:

For further information: Denis Larocque, Chief Financial Officer, (506)
857-8636, Fax: (506) 857-9211, ir@majordrilling.com

Organization Profile

Major Drilling Group International Inc.

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