Topic: Mining Stocks

This driller taps rising demand for specialty services

Demand for the services of this specialized drilling contractor rises and falls with the cyclical mining industry.

Its results in the latest quarter reflect that relationship, with cash flow up 66% on increased global demand—especially in South and Central America.

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MAJOR DRILLING (Toronto symbol MDI; is a large contract driller that mainly serves the mining industry.

Major believes that mining activity continues to deplete the world’s more easily accessible mineral reserves. That means attractive deposits are increasingly in remote locations. Those areas are difficult to access or they’re where the mineral is deep in the ground. For this reason, Major’s strategy is to focus on its highly specialized drilling services.

Demand for that kind of assistance, especially from senior gold miners, is beginning to recover. In the three months ended October 31, 2018, the company’s revenue rose 19.9%, to $105.5 million from $88.0 million a year earlier.

More specifically, Major’s revenue in the Canada/U.S. region increased 7.2% to $56.5 million, while revenue in South and Central America jumped 50.4%, to $29.2 million (largely from Chilean copper projects). In addition, its revenue in Asia and Africa climbed 24.7%, to $19.8 million.

Mining Stocks: Cash flow rises as the balance sheet stays strong

The company continues to report positive cash flow: in the latest quarter, it rose 65.7%, to $12.9 million, or $0.16 a share, from $7.8 million, or $0.10, a year earlier.

The balance sheet remains strong, with cash of $33.0 million, or $0.41 a share; and debt of just $16.7 million.

As drilling activity picks up, the company should see an increase in the number of new contracts.

Recommendation in Stock Pickers Digest: Major Drilling is a buy.


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