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Introduction & Market Context
Major Drilling Group International (TSX:MDI) presented its latest investor update on September 9, 2025, highlighting the company’s performance for the first quarter of fiscal year 2026. The drilling services provider reported mixed results, with strong revenue growth counterbalanced by margin pressures in a mining sector that continues to show signs of recovery.
The company’s stock closed at $9.42 on the presentation date, down 7.92% for the session, reflecting investor concerns despite the company’s emphasis on its diversified business model and growth opportunities. Major Drilling continues to position itself as a low-risk exposure to the mining space with substantial upside potential.
As shown in the following slide, Major Drilling emphasizes its value proposition through diversification, strong balance sheet, and operational leverage:
Quarterly Performance Highlights
Major Drilling reported Q1 2026 revenue of $226.6 million, representing a 19.3% increase compared to $190.0 million in Q1 2025. However, profitability metrics declined year-over-year, with gross margin falling to 18.6% from 22.1%, adjusted gross margin decreasing to 25.2% from 28.9%, and net earnings dropping to $10.1 million ($0.12 per share) from $15.9 million ($0.19 per share).
The financial results fell short of market expectations, with earnings per share missing the forecast of $0.22 by 45.45% and revenue coming in below the anticipated $234 million. Despite these challenges, the company maintains a strong liquidity position of $127.3 million and a minimal net debt of $2.8 million.
The company’s quarterly financial performance is summarized in the following slide:
Major Drilling’s balance sheet strength remains a key selling point for investors, as illustrated in this detailed breakdown:
Strategic Positioning & Diversification
A cornerstone of Major Drilling’s strategy is its diversification across commodities, customers, and geographies. The company operates in over 20 countries across six continents with more than 5,800 employees and 709 drilling rigs. This global footprint helps mitigate regional risks and provides exposure to various mining cycles.
The company’s revenue is well-diversified by commodity, with 41% from iron ore, 14% from copper, 11% from gold, and 34% from other minerals. Customer diversification is equally important, with 92% of revenue coming from senior and intermediate mining companies, including industry giants like Barrick, Rio Tinto, BHP, and Newmont.
The following map illustrates Major Drilling’s extensive global operations:
The company’s customer diversification strategy is highlighted in this slide, showing key clients and revenue distribution:
Major Drilling’s operational leverage is based on its extensive fleet of 709 rigs with a current utilization rate of 50%. The company maintains specialized (307 rigs, 46% utilization), conventional (163 rigs, 50% utilization), and underground (239 rigs, 54% utilization) drilling capabilities. This diversified fleet allows the company to service all stages of the mining lifecycle from early-stage exploration to steady-state operations.
The following slide details the company’s operational leverage and rig utilization:
Acquisition & Growth Strategy
A significant highlight of the presentation was Major Drilling’s strategic acquisition of Explomin Perforaciones, which expands the company’s footprint in South America by adding operations in Peru, Colombia, and the Dominican Republic. The acquisition adds 92 rigs (49 underground and 43 surface) to Major Drilling’s fleet and brings a strong customer base with approximately 90% of revenue derived from senior mining customers.
Over the trailing twelve months, Explomin generated revenue of US$95 million and EBITDA of US$16 million. The purchase price consists of a US$63 million upfront cash payment and an earnout payment of up to US$22 million, structured on a net-neutral basis.
The strategic benefits of the Explomin acquisition are detailed in the following slide:
Major Drilling also highlighted its technology investments through Drillside Geosolutions, which offers drilling analytics, borehole survey data acquisition, and AI imaging and logging capabilities. These technological advancements aim to improve drilling efficiency and provide additional value to customers.
Forward-Looking Statements
Looking ahead, Major Drilling remains optimistic about market conditions, noting that senior exploration budgets are projected to increase by 21% in 2025. The company cites depleted reserves and commodity price strength as key drivers, with gold prices exceeding $3,600/oz in September.
The following chart illustrates the projected increase in senior exploration budgets:
Equity capital raises are also beginning to increase, providing additional funding for exploration activities:
During the earnings call, CEO Denis Larocque acknowledged a slower start to the calendar year due to delayed mobilizations but expressed optimism about accelerating activity levels. He highlighted the positive outlook for commodities, noting record gold prices and strong prospects for copper and other base metals.
However, challenges remain, particularly in North American operations affected by forest fires and permitting delays. The company also faces softness in Australian and Australasian markets, which could impact near-term performance.
On the ESG front, Major Drilling has set a target to reduce scope 1 and scope 2 GHG emissions by 5% by 2030 and launched a Decarbonization Action Plan. The company also reported a 72% increase in women in field positions and noted that 63% of its Board of Directors is represented by women.
With its diversified business model, strong balance sheet, and strategic acquisition, Major Drilling aims to capitalize on the anticipated recovery in mining exploration while navigating near-term challenges in specific markets.
Full presentation:
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