Tuesday, March 7, 2017

Geodrill Delivers Excellent 2016 Results

Geodrill (GEO.TO), a mineral drilling company operating in West Africa, released its 2016 results. I was expecting really good figures and I am not disappointed. Contrary to other drilling companies, Geodrill looks as if there was no industry slump at all:

As the table shows, in 2016 Geodrill showed improvement across the board. In my opinion, the most important measures are operating ones:
  • In 2016 the company drilled above 1 million meters (an increase of 37.2%, compared to 2015)
  • Drilling prices went up by 11.6% - I think that higher prices are a strong indication that an industry slump is probably over, at least in West Africa (Ghana, Burkina Faso, Mali or the Ivory Coast)
  • Another positive - drilling cost per meter drilled went up less than prices. As a result, a gross margin per meter drilled went by 36.2%!
The above listed positives make me optimistic about Geodrill and the drilling sector in Africa (yes, it is an excellent place to be now). Interestingly, despite the nice share prices run over last year, the company's current market valuation measures are not elevated. For example, a popular ratio of enterprise value / EBITDA stands at a mere 4.4 which, in my opinion, is funny valuation (very low). 


  1. Hi Simple, any thoughts on EXK after the sharp run down ?

    1. Roger,
      I am changing my positive opinion on this miner. It does not look too good, even at lower share prices (I realize I am enigmatic - I will try to discuss EXK soon)

    2. Wow, looking forward to a great piece from you :)

  2. It looks as though drillers as well as miners in Africa incur a
    heavy "African Discount" by the markets ... TGZ is a prime example trading at around 5 EV/EBITDA.

    1. Blue,
      Generally yes but there are some exceptions as Randgold or Endeavour Mining, for instance