Major Drilling Group Intl Stock

Good day, and thank you for standing by. Welcome to the Major Drilling First Quarter 2027 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Ryan Hanley, Director of Capital Markets. Sir, please go ahead.

Thank you. Good morning, everyone. As mentioned, we would like to welcome you to Major Drilling's conference call for the first quarter of fiscal 2027. With me on the call today are Denis Larocque, President and CEO; and Ian Ross, CFO. Our results were released yesterday after market hours and can be found on our website at www.majordrilling.com. We also invite you to visit our website for further information.

Before we get started, we'd like to caution you that during this conference call, we will be making forward-looking statements about future events or the future financial performance of the company. These statements are forward-looking in nature, and actual events or results may differ materially from those currently anticipated in such statements.

I'll now turn the presentation over to Denis Larocque, President and CEO.

Thanks, Ryan, and good morning, everyone, and thank you for joining us today. We had a strong start to our new fiscal year with quarterly revenue of $277.3 million, representing a 22% increase over the prior year period and setting a new quarterly record for the company. This new record was the result of each region delivering meaningful year-over-year revenue growth as we continue to deploy rigs in the field in order to meet the growing needs of our customers. The bulk of the growth continues to be driven by increasing activity levels in Canada and U.S., where we saw new contract wins and the addition of rigs to existing projects.

While seniors continue to execute on their expanded programs, we're seeing juniors becoming increasingly more impactful as they look to deploy larger amounts of capital that flowed through the significant increase in financing activity we saw earlier in the year. As a result, revenue in Canada and U.S. region increased by over 31% when compared to the prior year period. In South and Central America, we saw a strong 18% year-over-year increase, led by continued growth in Peru and increasing activity levels in Mexico and Brazil. In the Australasian and Africa region, revenue increased by nearly 14% when compared to the prior year period, driven by new contract wins and project expansions with seniors in Australia.

With the strong revenue increase in each region and ongoing efforts to manage cost pressures, the company generated EBITDA of $37.2 million in the quarter, a 16% increase over the prior year period, while net earnings increased by nearly 44%, further demonstrating our operational leverage.

I'll discuss more of the outlook after Ian walks us through the quarter's financials. Ian?

Thanks, Denis. Revenue for the quarter was $277.3 million, up 22.4% from the $226.6 million recorded for the same period last year, driven by strength in each region, led by Canada and the U.S. The favorable foreign exchange translation impact on revenue when compared to the effective rates for the same period last year was approximately $8 million, while the impact on net earnings was minimal. The overall adjusted gross margin percentage, excluding depreciation, was 24% for the quarter compared to 25.2% for the same period last year. While margins improved from the 22% realized in the last quarter, reflecting ongoing pricing improvements, this was partially offset by ramp-up costs associated with new contracts as well as higher labor and consumable costs and investments in workforce training and development.

G&A costs was $23.8 million, an increase of $2.4 million compared to the same quarter last year. The increase is attributable to annual wage adjustments and additional costs to address rapid growth in our busiest regions. Other expenses were $6 million, up from $3.3 million in the same quarter last year due to increased incentive compensation resulting from improved profitability and higher stock-based compensation costs tied to the company's share price performance.

The income tax provision for the quarter was an expense of $4.6 million compared to an expense of $3.9 million in the prior year period. The increase reflects the overall improvement in profitability, while the lower effective rate is attributable to the utilization of previously unrecognized losses. The company generated EBITDA of $37.2 million in the quarter, an increase of 15.9% from the $32.1 million recorded for the prior year period. Net earnings of $14.5 million, or $0.18 per share, increased from $10.1 million, or $0.12 per share, in the same period last year, demonstrating our operational leverage.

The company ended the quarter with $15.7 million in net cash, a decrease from the $20.6 million at the end of the prior quarter as higher rig utilization resulted in a temporary increase in working capital requirements. With total available liquidity of approximately $160 million and cash flow projected to increase, the company remains very well positioned as we move through the new fiscal year.

In line with our ongoing fleet optimization initiatives, the company spent $13.5 million on capital expenditures in the quarter, adding 5 new drill rigs and support equipment while disposing of 10 older, less efficient rigs, bringing the total rig count at quarter end to 683. Effective this quarter, we are consolidating fleet utilization into 2 categories: surface and underground, with the surface component combining what was previously split into specialized and conventional categories. This adjustment was made as it better reflects how management views the business and better aligns with our internal reporting and forecasting standards.

As a reminder, specialized work is defined by job characteristics, including technical complexity, remote site access and/or elevated safety requirements and not by rig type, as in many cases, a conventional rig is fully capable of performing specialized work. Therefore, the new breakdown of our utilization in the quarter is as follows: 455 surface rigs at 57% utilization, 228 underground drills at 59% utilization for a total of 683 drills at 58% utilization. In the first quarter, specialized work accounted for 59% of our total revenue. We continue to see high levels of demand for our specialized services and expect this trend to continue as deposits become increasingly more challenging to find with discoveries continuing to be made in remote locations.

Conventional drilling, which is mostly driven by juniors, contributed 17% of revenue, while underground drilling accounted for 24% of total revenue as the company continues to look for diversity in its revenue streams. Seniors continue to account for the bulk of our revenue, representing 85% of activity in the quarter as they continue their efforts to address the reserves, while juniors are beginning to have a more meaningful impact. Following the acceleration of junior financing activity over the last year, this segment grew to represent 15% of revenue in the quarter compared to 13% in the prior quarter and 8% in the same period last year.

In terms of commodities, gold represented 46% of revenue in the quarter, driven by continued strength in gold price and related junior financing activity, while copper accounted for 28% of revenue with activity levels at copper mines and projects expected to grow as we move through the year. Iron ore continues to make a meaningful contribution at 9%, driven by continued strength for our Australian operations and demonstrating the diversity in the commodities for which we drill for around the world.

With that overview of our financial results, I'll now turn the presentation back to Denis to discuss the outlook.

Thanks, Ian. Looking ahead to the next quarter, rigs are expected to continue to gradually be deployed into the field at incrementally higher prices as we strive to meet the demands of our senior customers who continue to expand their exploration programs while juniors continue to deploy the capital that they've raised over the past year. Demand remains strong, and the primary constraint across the industry continues to be the availability of experienced drillers.

We remain focused on recruitment and retention while also expanding our pipeline of future talent by increasing the number of training drillers in the field. As expected, there is a learning curve associated with bringing new people into the workforce, which has a temporary impact on productivity, but it positions us well to support future growth.

As we noted last quarter, margin expansion typically trails revenue growth during periods of rapid activity growth. We're still absorbing labor, training and ramp-up costs, but price increases are taking hold and progressively offsetting those pressures. As a result, we expect margins to continue improving, albeit at a slower pace than revenue growth.

So in closing, we're optimistic. Gold is holding up, which keeps senior budgets and junior financing going. Copper just hit an all-time high, and everyone is talking about critical minerals. We've got the global experience, the expertise and the best balance sheet in the industry, and we intend to be the driller people call and the company drillers want to work for in every country where we operate.

Finally, please don't forget to join us for our AGM, which will be held in person and virtually today at 3:30 p.m. Eastern Time. All of the details related to the AGM can be found on our website.

With that, we can open the question -- we can open the call to questions. Operator?

[Operator Instructions] Our first question is going to come from the line of James Vail with Arcadia Advisors.

Not much to say, guys, great quarter. One thing got my attention that the gain on disposal of property of $573,000, I guess, versus last year suggests you're selling those older rigs at a pretty nice price. Is that -- I've never seen anything like that before. Is that just an indication of how strong the market is?

No. We don't look to sell rigs in the market. That's not our business. The odd time we'll get rid of some old gear to help fund, kind of, new purchases. But a lot of it, it's not selling rigs to the market, that's for sure.

Rigs that we announce as disposed, usually, we cut them up and they're retired. They're at the end of their life, and we don't put them back in the market.

Okay. Because I was wondering if someone could buy them and undercut you in very simple drilling projects and, kind of, make things a little difficult. But okay, other than that, this is great how things are coming together.

I'm showing no further questions at this time, and I would like to hand the conference back over to Denis Larocque, CEO, for closing remarks.

Well, thank you. Pretty slow on the questions, but I guess right before a long weekend, we're -- hopefully, people are going to listen to the call at a later date. We're -- it's our AGM. So if you are around or online, please join us today. And again, we remain very optimistic on the future. Thank you for listening.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Good day and welcome to the Major Drilling Fourth Quarter Results 2026. [Operator Instructions]. Please note this call is being recorded.

I would like to turn the call over to Ryan Hanley, Director of Capital Markets. Please go ahead.

Thank you, and good morning, everyone. As mentioned, we would like to welcome you to Major Drilling's conference call for the fourth quarter of fiscal 2026.

With me on the call today are Denis Larocque, President and CEO; and Ian Ross, CFO. Our results were released last night and can be found on our website at www.majordrilling.com. We also invite you to visit our website for further information.

Before we get started, we'd like to caution you that during this conference call, we'll be making forward-looking statements about future events or the future financial performance of the company. These statements are forward-looking in nature, and actual events or results may differ materially from those currently anticipated in such statements.

I'll now turn the presentation over to Denis Larocque, President and CEO.

Thanks, Ryan, and good morning, everyone, and thank you for joining us today. As we close fiscal 2026, I'm very proud of our top-tier safety record as we achieved a total recordable incident frequency rate, TRIFR, of 0.85 in fiscal 2026. I'd like to once again thank our employees for their dedication in maintaining such a strong safety culture. That safety culture, along with our well-maintained fleet of rigs, optimal levels of inventory and dedicated crews continue to solidify our position as industry leader.

Turning to the fourth quarter. With continued improvements in activity levels, we ended the quarter on a strong note with each region recording year-over-year growth and growing our fourth quarter revenue by 25% over last year. This boosted our total fiscal 2026 revenue by 22% to $889 million, setting a new record in the company's 46-year history.

Similar to the beginning of prior cycles, revenue growth was driven primarily by stronger activity in Canada and the U.S., with both countries seeing a sharp ramp-up in activity following the previously announced expansion of senior exploration budgets as well as the continued acceleration of junior financing activity.

As a result, revenue in Canada and U.S. increased by nearly 67% when compared to the prior year period. Activity levels in other regions also increased as South and Central America was driven largely by continued growth in Peru, while Australasian and Africa segment saw increased demand from seniors in Australia.

Given the strong revenue increase, along with continued efforts to mitigate cost pressures, the company generated EBITDA of $28 million in the fourth quarter of fiscal 2026, a 37% increase from $20.5 million generated in the prior year period.

I'll discuss more the outlook and the labor situation after Ian walks us through the quarter's financials.

Thanks, Denis. Revenue for the fourth quarter was $233.7 million, up 24.6% from the $187.5 million recorded over the same period last year, driven by strength in each region, led by Canada and the U.S.

The favorable foreign exchange translation impact on revenue when compared to the effective rates for the previous year was approximately $1 million, while the impact on net earnings was minimal. The overall adjusted gross margin percentage, excluding depreciation, was 22% for the quarter compared to 22.8% for the same period last year.

Margins were broadly in line with the prior year period as the impact of higher labor, ramp-up and consumable costs, particularly in North America, was offset by operational leverage and improved pricing.

G&A costs were $21.2 million, an increase of $300,000 compared to the same quarter last year. A slight increase was attributable to annual wage adjustments. The income tax provision for the quarter was an expense of $2 million compared to an expense of $700,000 for the prior year period, with the increase driven by the overall improvement in profitability.

The company generated EBITDA of $28 million in the quarter, an increase of 37% when compared to the $20.5 million recorded in the prior year period, while net earnings of $8.2 million or $0.10 per share increased from $1 million or $0.01 per share in the prior year period.

The company ended the quarter with $20.6 million in net cash, an increase from $3.9 million in net debt at the end of the prior year. With total available liquidity of approximately $155 million and cash flow projected to increase, the company remains very well positioned heading into the new fiscal year.

In line with our preparations for growing levels of activity, the company spent $24.5 million on capital expenditures in the quarter, adding one new drill rig and substantial support equipment while disposing of 10 older, less efficient rigs as part of our ongoing fleet optimization program, bringing the total rig count at quarter end to 688.

CapEx for fiscal 2026 totaled $61 million, below initial guidance of $70 million, largely due to the timing of orders for rigs and support equipment. As a result, we expect to spend approximately $75 million on CapEx in fiscal 2027, in line with the CapEx guidance provided in prior years as we continue to modernize our fleet.

The breakdown of our fleet utilization in the quarter is as follows: 305 specialized drills at 48% utilization, 156 conventional drills at 60% utilization, 227 underground drills at 57% utilization for a total of 688 drills at 53% utilization.

As we previously noted, we define specialized work not necessarily by the use of a specialized drill, but by work requiring a higher degree of technical expertise, access to remote locations, stringent safety standards and other operational complexities.

In the fourth quarter, specialized work accounted for 59% of our total revenue. We continue to see high levels of demand for our specialized services and expect this trend to continue as deposits become increasingly more challenging to find with discoveries continuing to be made in remote locations.

Conventional drilling, which is mostly driven by juniors, contributed 13% of revenue, while underground drilling accounted for 28% of total revenue as the company continues to look for diversity in its revenue streams. While we continue to see the bulk of our revenue driven by seniors and intermediates, representing 87% of our activity in the quarter as they continue their efforts to address depleting reserves, juniors are beginning to have a more meaningful impact.

Following the prior acceleration of junior financing activity, this segment grew to represent 13% of revenue in the quarter compared to 10% in the prior quarter and 8% in the same period last year.

In terms of commodities, gold represented 44% of revenue in the quarter, driven by continued strength in the gold price and the related increase in junior financing activity, while copper accounted for 28% of revenue with activity levels at copper mines and projects expected to grow as we move through the year.

Iron ore continues to make a meaningful contribution at 9%, driven by continued strength from our Australian operations and demonstrating the diversity in the commodities, for which we drill for around the world. Also of note in the fourth quarter was silver, which grew to represent 8% of revenue following the sharp increase in silver price over the last year.

With that overview of our financial results, I'll now turn the presentation back to Denis to discuss the outlook.

Thanks, Ian. With the activity ramping up in the fourth quarter, we expect this momentum to continue to build throughout fiscal 2027, with rigs expected to gradually be deployed in the field at incrementally higher prices following the release of expanded senior exploration budgets and the ramp-up of junior activity.

Labor is expected to be the largest industry challenge as we continue -- and we continue to take proactive measures with respect to the hiring and retention of drill crews as we move through the new year. With the pool of experienced drillers drying up, we have increased the number of trainee drillers in the field, which has and will continue to temporarily affect productivity as they gain experience.

Additionally, in key areas where the labor shortage is the most problematic, we have scaled up efforts at our training centers with a goal of improving retention while also accelerating the learning curve of rookie drillers without compromising safety.

While we expect to pass on increased training, labor and consumable costs as contracts are renewed throughout the year, the immediate impact is expected to result in margin improvement lagging revenue growth through the beginning of the fiscal year.

As we close out fiscal 2022, we remain optimistic about the future as despite recording as the record annual revenue, global exploration spending is still below 60% of the peak levels we saw in 2012 without factoring inflation. With strong commodity prices continuing to support growing senior exploration budgets and the junior financing market remaining healthy, we expect to continue using our industry-leading balance sheet to ensure that we remain ready for the increasing demand in the years ahead.

I'd like to once again thank our nearly 6,000 employees around the world for their continued enthusiasm, dedication, loyalty and most of all, great ideas, all of which are qualities that make us such a successful and productive company.

With that, we can open the call to questions. Operator?

[Operator Instructions]. Our first question comes from Gordon Lawson with Paradigm.

Congratulations on the beat. Could you please talk more about the contracts in North America and your expectations of ramping up and timing costs?

Well, what's your question -- you say I want to know about contracts in what sense?

Well, ramping up expenses are understandably higher, but the growth in that sector is well ahead of expectations. So what should we expect, particularly in the first half of fiscal 2027?

Yes. Well, like you said, there's been a lot of money raised by juniors and a lot of that has been for North America. So we are definitely seeing a pickup in activity in Canada and things are going up month by month. And it's getting very tight in the market in terms of availability of people and everything, and that's influencing pricing as well.

So we are able to recuperate the cost increases and also margin is improving in that region. And like we said, we expect to see growth over the next few quarters, and then the margin is going to basically follow -- it's going to be lagging a bit because of the cost increases, but it's already starting to catch up. And so by the time we get to second quarter, we expect to have those pricing in place.

[Operator Instructions]. Our next question comes from Donangelo Volpe with Beacon Securities.

Congratulations on the results. Just focusing on the CapEx budget for this year of $75 million. Just wondering if we should be expecting kind of a similar cadence to last year or if we should be looking at this more of kind of a heavier weight in the first half of the year?

Well, when you look at -- we're budgeting $75 million last year, we said $70 million. And as you saw, we came in quite under that. And really, what happened there is everything the year got off to a bit of a slower start last year. And the same thing happened with CapEx and ordering and delivery, and that's why we ended up at a lower level. So some of that has trickled in into this year.

So yes, the cadence is probably going to be somewhat evenly distributed during the year as things are growing. But I wouldn't say it's going to replicate last year. It's going to be probably more evenly distributed this year than it was last year.

Okay. And then just pivoting over to labor. Just kind of curious on what the typical time line is on the learning curve for these new drillers. And I'm just curious on how the current labor -- how your current labor looks in terms of achieving a 60% utilization rate?

Yes. We -- on the labor front, it is definitely a challenge, but we are making some good progress on that front with all the training schools we have and everything, but there is definitely a limit to how many crews we can effectively put in the field and safely put in the field. But we are making good progress.

And here, I'm talking about North America, where we are seeing the biggest part of growth. Other regions, they're all facing some labor challenges, but not as, I would say, not as significant as it is in North America. But we are making good progress. And we think we will see utilization rates moving up month by month with -- assuming the demand continues to be what we're seeing, we expect to see -- we expect to be able to meet that demand as we go.

Our next question is a follow-up from Gordon Lawson with Paradigm.

Sorry, I'm not sure how I got disconnected. I have to dial into the replay to hear your response. But looking at the Australasia segment, what are some of the primary commodities and regions that are driving growth there beyond Pilbara, obviously, got iron ore there at 9%. But what exactly are we looking for here?

Yes. Gold and copper are what's driving. I mean that region, Australasia, I would call that region a lot more stable. We've got a less volatility in the region because we have some long-standing contract with seniors. And so as you said, there is iron ore contracts in place, but there's also -- we do have good contracts on the copper and the gold side.

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Denis Larocque, CEO, for closing remarks.

Well, thanks, everyone, and again, thank you to our employees for a great year and looking forward to an even greater year coming up with everything that we're seeing in our industry. Thank you.

Thank you for your participation. This does conclude the program. You may now disconnect. Everyone, have a great day.

Good day, ladies and gentlemen, and welcome to the Third Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, this call may be recorded.

I would now like to turn the call over to Ryan Hanley. You may begin.

Thank you. Good morning, everyone. As mentioned, we'd like to welcome you to Major Drilling's Conference Call for the Third Quarter of Fiscal 2026. With me on the call today are Denis Larocque, President and CEO; and Ian Ross, CFO. Our results were released last night and can be found on our website at www.majordrilling.com. We also invite you to visit our website for further information.

Before we get started, we'd like to caution you that during this conference call, we will be making forward-looking statements about future events or the future financial performance of the company. These statements are forward-looking in nature, and actual events or results may differ materially from those currently anticipated in such statements.

I'll now turn the presentation over to Denis Larocque, President and CEO.

Thank you, Ryan, and good morning, everyone, and thank you for joining us today to discuss our third quarter results. While the third quarter is typically the weakest of our fiscal year as customers pause operations for the holiday period, we began aggressively preparing for what is shaping up to be a very busy year.

Over the last several weeks, many of our senior mining customers have released their exploration budgets with some pointing to increases of 30-plus percent, while others look to almost double their budgets when compared to last year. Meanwhile, the juniors remain well supported, having raised substantial capital for exploration in the second half of 2025 and continuing into 2026.

In preparation for a much busier year, we leveraged our industry-leading balance sheet to ensure that we are as ready as possible, completing additional maintenance above and beyond what we would normally look to do in the quarter to maximize the availability of rigs and support equipment. We also proactively ordered additional supply to reduce the potential impact of any future supplier delays as demand for these items increases. Lastly, we retained and hired additional crews despite the slowdown in activity during the holiday season as the industry is already beginning to experience labor challenges in some regions.

With larger exploration budgets and record high commodity prices, we experienced a busier start to the year with a much busier January when compared to last year. While the associated start-up and mobilization costs also had a negative impact on margins, our revenue increased by 15% compared to the same quarter last year, driven mostly by much higher activity levels in Canada and the U.S. With activity levels expected to continue to ramp up over the coming months as a result of significantly higher exploration budgets and a healthy financing market for juniors, we remain very optimistic heading into 2026.

I'll discuss more of the outlook once Ian has taken us through the financials. Ian?

Thanks, Denis. Revenue for the third quarter was $184.6 million, up 14.9% from the same period last year, driven primarily by Canada and the U.S. and to a lesser extent, by further growth in Peru. This was partially offset by Australasia and the African region, which continued to be impacted by a slowdown of drilling operations with the company's largest customer in Indonesia, as discussed last quarter. The unfavorable foreign exchange translation impact on revenue when compared to the effective rates for the same period last year was approximately $1 million, while the impact on net earnings was minimal as expenditures in foreign jurisdictions tend to be in the same currency as revenue.

The overall adjusted gross margin percentage, excluding depreciation, was 14.3% for the quarter compared to 19.5% for the same period last year. The decrease in margins was attributable to strategic steps taken to prepare for what is expected to be a much busier year, increased start-up and mobilization costs resulting from a busier January and the termination of underperforming contracts in South America to better position the region for improved profitability going forward.

G&A costs of $21.6 million were flat when compared to the prior year period as annual wage adjustments were offset by reduced Explomin integration costs, which impacted results last year. The company generated EBITDA of $5.1 million in the quarter compared to $7.8 million in the prior year period, with a net loss of $10.8 million or $0.13 per share compared to a net loss of $9.1 million or $0.11 per share for the prior year period. Despite the seasonally slow quarter and additional preparation costs, the company increased its net cash position by over $25 million to $39.6 million at quarter end, while total available liquidity increased to $177.1 million.

CapEx in the quarter totaled $10.3 million compared to $12.6 million in the same period last year, with the addition of 3 new drill rigs and support equipment. The company also ramped up its fleet optimization and modernization efforts in preparation for a busier year, which resulted in the disposal of 13 older, less efficient rigs, bringing the total rig count to 697 rigs at quarter end. The breakdown of our fleet utilization in the quarter is as follows: 306 specialized drills at 49% utilization, 158 conventional drills at 53% utilization, 233 underground drills at 55% utilization for a total of 697 drills at 52% utilization.

As we previously noted, we define specialized work not necessarily by the use of a specialized drill, but by work requiring a higher degree of technical expertise, access to remote locations, stringent safety standards and other operational complexities. In the third quarter, specialized work accounted for 59% of our total revenue. We continue to see high levels of demand for our specialized services and expect this trend to continue as deposits become increasingly more challenging to find with discoveries continuing to be made in remote locations.

Conventional drilling declined to 12% of revenue for the quarter, while underground drilling contributed 29% of total revenue, providing a stable base of work largely in operating mines. We continue to see the bulk of our revenue driven by seniors intermediates, representing 90% of revenue this quarter as they continue their elevated efforts to address depleting reserves. With financing activity beginning to increase, juniors group represent 10% of revenue in the quarter, an increase from the 8% recorded in the prior quarter and 6% in the same period last year.

In terms of commodities, gold represented 39% of revenue in the quarter, while copper accounted for 32%. Iron ore continues to make meaningful contribution at 8%, aided by our Australian operations and demonstrating the diversity in the commodities for which we drill for around the world. Also of note in the third quarter was silver, which continued to represent 6% of revenue.

With that overview of our financial results, I'll now turn the presentation back to Denis to discuss the outlook.

Thanks, Ian. Looking ahead, having now completed a significant amount of prep work, we entered the fourth quarter of our fiscal year with a strong foundation in place to support many of our clients around the world with their larger exploration budgets and resource expansion goals. Aside from our well-maintained fleet of nearly 700 rigs, our optimal levels of inventory and our experienced crews, we also remain well supported by our industry-leading balance sheet as despite the additional preparation work, which was completed in the quarter, we still increased our net cash position by over $25 million.

As activity levels ramp up through our fiscal fourth quarter and into fiscal 2027, we expect to gradually deploy additional rigs at incrementally higher pricing, driving steady revenue growth. While labor availability is expected to remain a near-term challenge and will continue to pressure margins, we anticipate that improving pricing will progressively offset these costs. As a result, margins are expected to improve over time, but at a slower pace than revenue growth.

Overall, we remain very optimistic heading into 2026, given our level of preparedness combined with record high commodity prices, leading to significant increases in exploration budgets as well as significant increases in the amount of capital raised by junior mining companies.

In closing, I'd like to invite any customers or investors that will be attending the PDAC conference in Toronto next week to visit our booth. With record high commodity prices and a strong mining market, we're looking forward to a busy and very productive conference.

With that, we can open the call to questions. Operator?

[Operator Instructions] And our first question comes from Gordon Lawson of Paradigm Capital.

Can you elaborate on some of the strategic initiatives you mentioned being implemented in North America? Just want some color on that.

Yes. Well, I mean, basically, it's just on the hiring and the retention of people. Typically, the way it works in our industry when you get to Christmas, you don't know what's coming around after Christmas and you let people go home and then you call them back when you get to January. And this time around, we didn't run that chance. We held on to people during the Christmas break.

And also, we also ramped up ahead of -- even as we entered the third quarter in November, we ramped up our efforts on training because we were anticipating 2026 to be busier. So therefore, we ramped up our recruitment, our training to make sure that we would be able to increase our labor force and be able to put more rigs to work in 2026.

So -- and then on top of that, we spent -- we took more rigs out of the yard to basically get ready again, to make sure that we were ready for an uptick in activity.

Okay. That's great. Looking at South America, are you able to comment on revenue synergies from Explomin as well as your expectations on cost cutting in the region, specifically Peru?

Yes. Explomin has been a great addition. But as a reminder, when we made this acquisition, we specifically pointed to the fact that it's a slightly different business model. It's more a volume play because it has more underground than our typical operation. So therefore, slightly lower margins by definition, but also lower CapEx or -- so therefore, the return on capital is similar to the rest of our operation, but just the mix or the revenue margin mix is a bit different. So it's been good for us.

Now the region in general, we -- as we mentioned, we repositioned. We had a few contracts, not just in Peru, but in other areas as well where we terminated underperforming contracts and moved on rigs, and that had an impact on the performance of the region. So yes.

And our next question comes from Donangelo Volpe of Beacon Securities.

Just regarding the termination of the underperforming contracts in South America, just curious if new work has been sourced for these rigs or if some of these rigs were included in the disposal of those 13 older rigs you guys discussed?

Yes. No, it didn't have any connection to disposal of rigs. That's basically globally. We -- when we do -- in the third quarter, typically, that's where we bring rigs back in the shop, and that's where we make decisions on if we should repair or basically dispose. So -- but on the contracts, basically, we did replace some of those contracts with better contracts. And so we expect to the performance of the region to improve in 2026.

Okay. And then just moving over to CapEx. CapEx is currently trending a little bit below guidance. Just wondering if we should be expecting an uptick in CapEx for Q4?

Yes. There is some timing related to the lower CapEx in Q3, and we will see an uptick on the run rate we've had here going into Q4, but we will be below the $70 million guidance we had for fiscal '26. And then we're just entering the budget season right now internally, and we'll be giving guidance on our fiscal '27 CapEx amounts next quarter.

Okay. And then final one for me. Just wanted to see if I can kind of quantify Canada, U.S. because it was phenomenal growth year-over-year. So just wondering how much of the year-over-year growth was due to kind of the extension of programs through January, making it a strong year-over-year comparison versus actually taking on new work?

The extension was not too dissimilar to last year or in terms of -- really, we had contracts that started earlier in. And this is typical when we are in this environment where commodity prices are good and where mining companies are eager to get out in the field. In years where things are slow, they usually -- we're usually calling to get a start date and then things get pushed to February and then things drag. And this year, it was the opposite. It was customers calling saying, "Well, can you get there by this date?" And we want to get going because we got -- they've got a budget and they want to make sure that they're going to be able to get through all the work that they have to do. So there was -- it was more related to the January start-ups -- earlier start-ups really.

[Operator Instructions] And our next question comes from Brett Kearney of American Rebirth Opportunity Partners.

You guys have continued to stay ahead of the curve in terms of preparing for the industry upturn. Your actions this most recent quarter consistent with that. I guess any color you can provide based on your experience in past cycles in terms of what you're seeing in overall tightness in the industry, both rigs available to customers from the rig owners such as yourselves as well as your ability to procure additional rigs and support equipment in terms of lead times from your suppliers?

Yes. It's already starting to get pretty tight on rigs. In fact, and this is particularly in Canada and U.S. When you talk to industry players, they're seeing it. In terms of the availability of rigs, it is I would say, probably taking a little bit longer, but still not necessarily a lot because there was still capacity. So it's not a rig issue. It's a people issue. And when I say things are getting tight, it's more on crews than rigs. We know competitors that basically are struggling even just to put additional rigs just because they don't have any crews. So it's more going to be a labor issue than a rig issue. So that's why I'm saying the orders of rig is not necessarily -- we're not seeing a lot more delays than usual on the rig side.

But I'll tell you, though, having said that, the place where there's going to be bottlenecks will be the supplies. That's the raws and the supplies and consumables because what happens is that with more rigs going out in the field, everybody is ordering at the same time because most companies have been basically running on just in time and just having enough supplies to have the rigs running. So when you have a whole bunch of rigs going out, you have all these orders. And that's why we placed orders and we kept inventory higher because we've seen before in previous cycles where you have real bottlenecks because suppliers, basically, they don't have enough on the shelf to supply all these -- all that demand that comes in all at once.

Very helpful. And Denis, with the incremental actions you've been taking, do you feel like labor is in okay-ish position now to meet the activity ramp-up you guys are expecting this year?

Yes. No, we feel pretty good. It's still -- our teams are still working hard and it's still not easy, but we are in good shape at this point.

And our next question comes from James Vail of Arcadia Advisors.

Just a very quick question. You suggest that margins were hurt by the incremental costs for future activity plus the cost to terminate the underperforming contracts. And can you put a number on those 2 so we can get an idea of what the real margin experience was in the quarter?

I mean, when you look at last year, really, the margins -- if those things hadn't been in place, the margins would probably be similar to last year. Really, the difference in the margins between years are attributable to these items.

Okay. Thank you. We'll looking forward to what's next.

Well, you've seen this in the previous cycle, right? So...

But it's been a long time coming.

I agree.

Thank you. I'm showing no further questions at this time. I'd like to turn it back to Denis Larocque for closing remarks.

Well, thank you. And as I said, for those of you in town in Toronto next week, please stop by our booth. Our teams are going to be around and looking to an exciting week and an exciting year for sure with everything that's happening in the mining world. We thank you for attending today.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Good day, ladies and gentlemen, and welcome to the Second Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, this call may be recorded.

I would now like to turn the call over to Ryan Hanley, Director of Capital Markets. You may begin.

Thank you, and good morning, everyone. As mentioned, we would like to welcome you to Major Drilling's conference call for the second quarter of fiscal 2026. With me on the call today are Denis Larocque, President and CEO; and Ian Ross, CFO. Our results were released last night can be found on our website at www.majordrilling.com. We also invite you to visit our website for further information.

Before we get started, we'd like to caution you that during this conference call, we will be making forward-looking statements about future events or the future financial performance of the company. These statements are forward-looking in nature, and actual events or results may differ materially from those currently anticipated in such statements.

I'll now turn the presentation over to Denis Larocque, President and CEO.

Thanks, Ryan, and good morning, everyone, and thank you for joining us today to discuss our second quarter results. I'd like to begin by highlighting what was a record-setting quarter, which resulted in quarterly revenue increasing by 29% to $244 million when compared to the same period last year. This represents the highest quarterly revenue generated in the company's 45-year history and a level that we hope to build upon. We are continuing our proactive efforts by leveraging our strong balance sheet to ensure that rates and inventory are ready for rapid deployment, which will position us to take on expected increased demand from mining customers in anticipation of what we believe will be a busier calendar 2026.

In the quarter, our Canadian operations saw a strong rebound in activity levels from -- with a 63% year-over-year increase in revenue. As strategic market positioning, drove results despite the continued competitive environment. While the majority of incremental demand continues to come from senior mining companies, the number of discussions with juniors has also begun to increase following the number of financing, which we're completing over the last few months.

In South America, we also saw further growth in the Peruvian market with Explomin's revenue run rate continuing to grow following the closing of the acquisition in November 24. Additionally, slowdowns in Argentina and Chile due to challenging economic conditions and customer delays were more than offset by growth in Brazil and Guiana Shield. Strength throughout the North and South American markets was partially offset by the Australian and African region, which was impacted by the company's largest customer in Indonesia, experiencing an operational incidents that resulted in the suspension of all mine site activity for the majority of the quarter. While some activity now gradually beginning to resume, drilling operations are expected to return to full capacity in our fourth fiscal quarter.

I'll discuss the rest of our outlook in more detail once Ian has taken us through the financials. Ian?

Thanks, Denis. Revenue for the second quarter was $244.1 million, up 7.8% from the prior quarter and 29% from $189.3 million recorded over the same period last year. Revenue growth was driven by operations in North and South America, particularly Canada and Peru, which was partially offset by the Australasian and African region, largely due to a pause in activity in Indonesia as previously discussed. Favorable foreign exchange translation impact on revenue when compared to the effective rates for the same period last year was approximately $2.7 million, while the impact on net earnings was minimal as expenditures in foreign jurisdictions tend to be in the same currency as revenue.

The overall adjusted gross margin percentage, excluding depreciation, was 26% for the quarter compared to 30.5% in the same period last year. Decreased margins was attributable to the continued competitive pricing environment in North America as well as ongoing training and maintenance programs at various branches around the world to ensure the company is well positioned for an increase in demand in calendar '26. Additionally, Explomin's margin profile also continues to have a moderate impact given its focus on longer-term contracts and a higher proportion of underground drilling. While these programs typically result in lower margins, they provide increased revenue diversification and stability.

G&A costs increased by $3.6 million to a total of $21.7 million compared to the same quarter last year due to the addition of the Explomin's operations. Company generated EBITDA of $37.7 million in the quarter compared to $38.7 million in the prior year period with net earnings of $13.9 million or $0.17 per share compared to net earnings of $18.2 million or $0.22 per share from the prior year period. Given prior investments in the fleet, CapEx in the quarter totaled $11.8 million compared to $20.1 million in the same period last year. With the addition of 2 new drill rigs and support equipment, while 4 older, less efficient rigs were disposed of, bringing the total rig count at quarter end to 707.

The company increased its cash position by over $17.6 million, ending the quarter with $14.3 million in net cash, while total available liquidity grew to over $149 million. While the company remains focused on balance sheet strength and being well positioned to take advantage of additional growth opportunities, it also continues to evaluate options to drive shareholder returns. So that effect during the quarter, the company announced a normal course issuer bid, whereby 5% of the issued and outstanding shares of Major Drilling may be repurchased over a 12-month period beginning October 21. The company intends to be opportunistic in the use of its NCIB, taking advantage of any potential share price weakness resulting in a valuation that we feel do not accurately reflect our strong financial position and underlying fundamentals.

The breakdown of our fleet and utilization in the quarter is as follows: 310 specialized drills at 47% utilization, 160 conventional drills at 54% utilization, 237 underground drills at 54% utilization for a total of 707 drills and 51% utilization. As we've mentioned before, specialized work in our definition is not necessarily conducted with a specialized drill. Rather, it is work that requires to meet the rigorous standards of our customers in terms of technical capabilities, operational and safety standards and other related factors. These standards are becoming increasingly important to our customers.

In the second quarter, specialized work accounted for 60% of our total revenue. We continue to see high levels of demand for our specialized services and expect this trend to continue as deposits become increasingly more challenging to find with discoveries continuing to be made in remote locations. Conventional drilling, which is mostly driven by juniors, increased slightly to 16% of revenue for the quarter, while underground drilling contributed 24% of total revenue, aided by the contribution of [ Explomin ].

We continue to see the bulk of our revenue driven by senior intermediates, representing 92% of revenue this quarter as they continue their elevated efforts to address depleting reserves. While junior financing has begun to increase, there's usually a 6-month lag between an increase in financing activity and increased activity levels in the field. As a result, juniors continue to represent approximately 8% of our revenue in the second quarter.

In terms of commodities, gold represented 39% of revenue in the second quarter, while copper accounted for 31% of revenue, driven primarily by strength in the South and Central American region. Iron ore continues to make a meaningful contribution at 10%, aided by our Australian operations and demonstrating the diversity in the commodities for which we drill for around the world. Also of note in the second quarter was silver, which represented 6% of revenue, driven by record high silver prices.

With that overview of our financial results, I'll now turn the presentation back to Denis to discuss the outlook.

Thanks, Ian. As we head into our seasonally weaker fiscal third quarter, we expect to see the usual pause in activity as programs shut down over the holiday period. Also, as Ian mentioned, we continue to move through training and maintenance programs in order to ensure that we're well prepared for what we expect to be a busier calendar year. These preparation initiatives are expected to have a slight impact on third quarter margins.

While challenging to forecast, numerous data points continue to influence our positive outlook for calendar 2026. As seniors move through the budgeting period, the gold price continues to trade near record highs, remaining above $4,200 an ounce level. This represents an increase of over $1,600 an ounce when compared to the same time last year when seniors were compiling their budgets. Higher gold prices have led to substantially higher levels of free cash flow generation and stronger balance sheet for senior mining companies as they assess depleting reserves following a long period of subdued exploration.

Also, we've seen that the current gold price environment has led to a sharp increase in the number and size of junior financings over the last few months. Copper prices have also more than doubled over the last 2 years, recently reaching an all-time high, while the world continues to working towards increased electrification and decarbonization, both of which are expected to require enormous amounts of copper. Recent supply disruption are only expected to further exacerbate the projected supply deficit. Lastly, critical minerals continue to move increasingly into the spotlight as countries around the world look to secure and increase supply of various strategic commodities.

With substantial investments having been made in our fleet and inventory through the most recent downturn, the company remains very well positioned to take advantage of rapidly growing demand for drilling services driven by these various factors. While the shortage of experienced drill crews is expected to put temporary pressure on labor costs and productivity, particularly in our busiest markets, we expect wider industry demand for drilling services to drive pricing improvements and expedite margin recovery over a longer term. It's crucial that we continue to aggressively and successfully invest in the recruitment and training of new drillers to ensure that major drilling remains both the operator and employer of choice in the industry.

Finally, I know it's a bit early, but I'd like to wish happy holidays to our more than 6,000 employees around the world, and thank you for your amazing dedication and hard work. I'm always amazed by the passion and commitment of our crews and staff to safety and getting the job done. I hope you each get a chance to rest up as it should be a busy year ahead.

With that, we can open the call to questions. Operator?

[Operator Instructions] And our first question comes from Donangelo Volpe with Beacon Securities.

Congratulations on the results, strong print. I just wanted to highlight the Canadian revenues. I think they were up about 63% year-over-year. Majority of the peers reflecting year-over-year declines in Canada through the July through September period. Just wondering if momentum kind of accelerated throughout the quarter and you guys finished with a strong October? Or was it kind of a function of pricing dynamics that led to the strong year-over-year improvement?

Yes. It was pretty much throughout the quarter and driven by pricing dynamics. As I said, we had strategic market initiatives that we put in place to gain market share and obviously work. And basically, the idea is to be positioned on key projects going forward as we see -- as we said, as we see good activity coming up in the future.

And then just pivoting over to kind of the junior financings. I usually look at the TSX. So October was a record-setting month in terms of financings. It's now up 74% year-over-year on a year-to-date basis and the highest level we've seen in the last decade. So I'm just wondering how you view the pipeline for juniors heading into calendar 2026 on the back of these financings. And if you're starting to see any improvements in activity levels now that we're kind of, let's call it, the halfway point through December?

Yes. The level of discussion has certainly increased. It's still early because as we said, there's always a lag of like 6 months, sometimes it could be a bit longer or it could be shorter, but usually, on average, it takes 6 months between the time that money is raised and the time it gets deployed with all the logistics and everything. But we've certainly seen an increase in discussions and phone calls and things like that. So we certainly see activity bubbling right now.

Okay. Good to hear. And then final question for me and then I'll pass the line. Just I understand that direct costs are increasing in preparation for elevated activity levels for a busy calendar 2026. We've kind of seen an uptick in salaries and benefits as well as materials and consumables. Just wondering if we're approaching a level that you're starting to feel prepared for the upcoming bump in activity? Or do we still have a little bit of room to grow here?

Well, the good quarter is always a time where there's a lot of activity that happens that way, right? We bring in, first of all, the rigs that have been busy during the year, we bring them in the shop to do the maintenance -- the yearly maintenance on them and everything. But at the same time, that's the time where as we forecast the level of activity, that's where we bring in more rigs that have been parked just to give them a bit of a cleanup or get them ready. And so that's where you have a little bit of extra cost. So every time that we have a pickup in activity coming, we usually see a bit of a pickup in the third quarter from these type of costs.

But the good news is that the investments we've made in our fleet over the last few years, while we were in the downturn and keeping our fleet fresh and everything, that's where it's going to pay off because we can pull rigs out and have rigs ready very quickly and not have to rebuild or replace all kinds of parts that have been stripped off of them or things like that. We -- so the cost is going to be very reasonable, but it's just when you've got to an uptick of activity that happens, there's a lot of that happening and a lot of upfront hiring and mobilization and things like that. So upfront, there's always upfront cost and then things take off after that.

Our next question comes from James Vail with Arcadia Advisors.

I've got 2 nitpick questions. In the income statement, you highlighted some extra income that could come in over the course of the year. One was foreign exchange, and I forget what the other one was. But how was that -- how will that play into future earnings? Or is that just an accounting issue?

Sorry James, you're really bold, was coming in -- you said there's a line on we didn't get...

It's -- you showed net income and then you showed extra income, which was foreign exchange gains of like $7 million and then there was another -- the total of that account came to CAD 10 million, I guess. I mean how does that come into earnings? Is that cash? Or is it just accounting?

Are you looking at like the other comprehensive earnings section?

Yes.

Yes, that doesn't flow through the P&L.

Okay. All right.

That's something -- yes, a lot of that is like the variation of, for example, the equipment that's denominated in U.S. dollars like the value of that equipment, but it's not a P&L.

Okay. Now my second question becomes -- you mentioned a new accounting standard that you're examining to see how it's going to affect the company. And I read that and concluded it was, excuse me, it was just written by lawyers. I had no idea what it means. Can you help me on that?

Yes, for sure. There's just some new presentation for the P&L that will be coming into effect and different breakout of different accounts. For us, we don't think it's going to have a material impact at this stage. And it's not until fiscal '28 that these changes need to go into effect. So we're just in the initial stages of reviewing those now, but we don't expect it to have material impact.

[Operator Instructions] Our next question comes from Brett Kearney with American Rebirth Opportunity Partners.

Denis, as you noted, the whole world is focused on critical minerals. You guys obviously have been ahead of the curve expanding and upgrading the fleet the past several years. As we look ahead to calendar 2026, how do you think about the allocation of the fleet by geography, customer type? How much will you lock up with senior customers relative to a potential wave you see coming with juniors following the recent financings to maximize economics and returns for yourself?

Yes. That's a good question. Basically, first, the fleet -- the fleet is, I would say, well positioned in terms of geographic, but we can only move -- we can always move rigs if need be, but we do have the fact that we're still in the 50% utilization rates. We do have the [indiscernible] as demand comes, we fill that demand with either adding rigs or just moving rigs around. So on that part, I feel -- I feel really good and comfortable.

On the contracts and like you said, in terms of locking how we go play the seniors versus juniors versus -- frankly, the thing we're -- that we're trying to avoid is to lock ourselves up in long-term contracts because at this point, it's a -- the labor cost is highly unpredictable, material cost, all these things -- I mean those are going to fluctuate with the cycle. And so therefore -- and really, the contracts are de facto lots of times short term.

So just for that reason, you end up kind of maximizing you lock yourself into good contracts as the cycle lifts, we basically will price the jobs accordingly. It's -- and it's a factor of availability of rigs, availability of crews. And as those get tighter, that's where the prices typically goes up because there's a whole lot more -- I always tell our managers a lot more headache that comes with that. And therefore, you need a higher prices to basically be able to handle all these additional issues.

Our next question comes from James Vail with Arcadia Advisors.

I promise this is the last question. It kind of follows up to the previous question. Given the 707 rigs, what is the effective top capacity utilization you would experience before you have to make some major capital spending decisions?

Yes. Well, it's not necessarily in terms of -- in aggregate, it's more market by market where those decisions are made. So in other words, I don't know if -- in Argentina, there was a big boom, all of a sudden and the decision to move rigs or buy rigs. If things are busy everywhere else, you want to preserve your capacity, we might end up buying a bunch of rigs, even though the global fleet might only be at, I don't know, 60%. But we always say, though, that the maximum utilization that we can achieve with the total fleet is in the range of 75% to 80%, just because there's always rigs being mobilized. There are seasonal factors. There's different types of rates. There's -- so for us, 75% to 80% is highest and [indiscernible] that, that's where, yes, we would be -- if the demand is still booming and we are able to prove, then we would -- will likely be adding rigs at that point. Again, it all on the economics.

There are no further questions at this time. I'd like to turn the call back over to Denis Larocque for closing remarks.

Well, thanks -- thank you, and thank you, everybody, and Merry Christmas and happy holidays to everybody.

Thank you for your participation. This does conclude the program. You may now disconnect. Good day.

Good morning, ladies and gentlemen, and welcome to the First Quarter 2026 Results Conference Call. I would now like to turn the meeting over to Ryan Hanley. Please go ahead, Mr. Hanley.

Thank you, and good morning, everyone. As mentioned, we would like to welcome you to Major Drilling's conference call for the first quarter of fiscal 2026. With me on the call today are Denis Larocque, President and CEO; and Ian Ross, CFO. Our results were released last night and can be found on our website at www.majordrilling.com. We also invite you to visit our website for further information.

Before we get started, we'd like to caution you that during this conference call, we will be making forward-looking statements about future events or the future financial performance of the company. These statements are forward-looking in nature, and actual events or results may differ materially from those currently anticipated in such statements.

I'll now turn the presentation over to Denis Larocque, President and CEO.

Thanks, Ryan, and good morning, everyone, and thank you for joining us today to discuss our first quarter results. So we got off to a slower start to the calendar year due to delayed mobilizations, but we're pleased to see activity levels steadily accelerate through the beginning of fiscal 2026. As we reach our previously stated growth target achieving 21% revenue growth over the last 3 months, showing momentum across the business.

We were particularly pleased with activity levels in Peru and Chile with Peru's revenue run rate continuing to increase following the completion of the Explomin acquisition last November. This growth is expected to more than offset temporary softness in the Australian -- Australasian market where pauses at certain projects caused by changing exploration plans led to a reduction of activity in the quarter.

While the North American market was impacted by forest fires, permitting delays and continues to see elevated levels of competition, activity levels began to improve towards the end of the quarter. That recovery, combined with our strong positioning in Latin America gives us confidence in our platform as we face further growth in exploration budget over the years to come.

Overall, we remain optimistic as we move into the second quarter of fiscal 2026. I'll discuss the rest of the outlook when Ian has taken us through the financials.

Thanks, Denis. Revenue for the quarter was $226.6 million, up 20.8% from the prior quarter and 19.3% from the $190 million over the same period last year. Revenue growth was driven by continued strength in the South and Central American region, in particular, Peru, but partially offset by Australasia, which were impacted by unexpected modifications to certain drill programs.

The unfavorable foreign exchange translation impact on revenue when compared to the effective rates for the same period last year was approximately $1 million. While the impact on net earnings was minimal, expenditures and foreign jurisdictions tend to be in the same currency as revenue.

The overall adjusted gross margin percentage, excluding depreciation, was 25.2% for the quarter compared to 28.9% from the same period last year. The decrease in margins was attributable to the continued competitive environment in North America as well as by some mobilization costs as a few additional projects ramped up in the quarter.

Additionally, Explomin's margin profile is reflected given its focus on longer-term contracts and a higher proportion of underground drilling. While these programs typically result in more margins, they provide increased revenue diversification and stability.

G&A costs increased $3.2 million compared to the same quarter last year due to the addition of Explomin along with annual inflationary wage adjustments. Company generated EBITDA of $32.1 million in the quarter compared to $34.3 million in the prior year period with net earnings of $10.1 million or $0.12 per share compared to net earnings of $15.9 million or $0.19 per share for the prior year period.

The company ended the quarter with $2.8 million in net debt while working capital grew by $13.1 million to $206.8 million, driven by an increase in receivables, which coincided with the ramp-up in activity levels. The total available liquidity of $127 million and strong levels of cash flow expected to be generated through the busier months of the year, the company remains very well positioned moving through fiscal 2026.

During the quarter, we strategically relocated drill rigs within certain regions to areas experienced higher levels of demand, which when combined with prior investments in the fleet, resulted in lower-than-expected CapEx spending of $14.4 million in the quarter and improved utilization.

A total of 5 new drill rigs and support equipment were added, while 4 older, less efficient rigs were disposed of, bringing total rig count at quarter end to 709.

The breakdown of our fleet and utilization in the quarter is as follows: 307 specialized drills at 46% utilization, 163 conventional drills at 50% utilization, 239 underground drills at 54% utilization for a total of 709 drills at 50% utilization.

As we've mentioned before, specialized work in our definition is not necessarily conducted with a specialized drill. Rather, it is work that requires that meet the rigorous standards of our customers in terms of technical capabilities, operational and safety standards and other related factors. These standards are becoming increasingly important to our customers.

In the first quarter, specialized work accounted for 60% of our total revenue. We continue to see high levels of demand for our specialized services and expect this trend to continue as deposits become increasingly more challenging to find with discoveries continuing to be in remote locations.

Conventional drilling, which is mostly driven by juniors, increased slightly to 14% of revenue for the quarter, while underground drilling contributed 26% of total revenue, aided by the contribution of Explomin.

We continue to see the bulk of our revenue driven by seniors and intermediates representing 92% of our revenue this quarter as they continued their elevated efforts to address the depleting reserves. While junior financings have begun to increase, the amount of capital raise is still well below the level seen in prior cycles. As a result, juniors continue to represent approximately 8% of our revenue in the first quarter.

In terms of commodities, oil represented 41% of revenue in the first quarter with continued high gold price, while copper accounted for 34% of revenue, driven primarily by strength in the South and Central American region. Iron ore continues to make a meaningful contribution at 11% aided by our Australian operations and demonstrating the diversity in the commodities for which we drill forward around the world.

With that overview of the financial results, I'll now pass the presentation back to Denis to discuss the outlook.

Thanks, Ian. As we head into Q2, we expect to see some top line momentum driven by additional projects, particularly in the South American region. As we previously discussed, our Peru revenue base -- our Peru revenue run rate has continued to grow since the acquisition of Explomin that was closed back in November. This trend is expected to continue in the second quarter as more long-term contracts are added, while our Peruvian operation also addresses the growing demand for underground drilling.

These types of projects provide stable and diversified streams of incremental revenue. As well, we remain optimistic on the North American region as the junior financing market has begun to show signs of life while discussions surrounding more streamlined permitting processes in both Canada and U.S. are also expected to lead to an increase in activity.

On the commodity side, as you probably know, gold just hit another record high and the outlook for copper and other base metals is looking strong. We anticipate these elevated prices to support further growth in exploration budget over the years to come as mining companies use the additional cash flow generated from these high commodity prices to address their need to replace depletion and continue to build reserves. From an operational standpoint, we're in great shape. Our fleet in a great condition, inventory levels are solid and our crews are doing an outstanding job on safety and performance.

Thanks to prior investments in infrastructure and equipment, we do not foresee the need for significant incremental CapEx. This positions us to unlock a meaningful operational leverage as activity scales up and demand continues to grow.

With that, we can open the call to questions. Operator?

[Operator Instructions] Our first question is from Donangelo Volpe from Beacon Securities.

First question from me. Can you talk about the dynamics you guys are seeing in North America. We've been seeing a modest uptake in junior financings. Just wondering how you view the pipeline in Canada versus the United States. And I was just wondering if you could provide any additional commentary related to the streamlined permitting process you're seeing in both regions.

Yes. Well, in Canada, the activity has -- as we said, we've seen -- as we progress through the quarter, we've seen a pickup in activity. Some of that's driven by juniors, but they're still not back in great force, if I might say, as the financings that were done, there's always a period before we see that come through in the field. And I think we certainly saw some of that coming near the end of the quarter. We didn't see that uptick in the U.S., though at this point.

From the permitting perspective, I must say that we haven't seen -- well, we definitely haven't seen an impact in terms of drilling because it takes -- again, there's -- it takes a bit of time before you see that coming through. And frankly, it's still not moving as quick as I personally would have thought it would following our Canadian election. And in the U.S., you had resolution, for example, just as an example in the U.S. that still got blocked a few weeks ago. So it's still not -- we're still not seeing a great uptick in permitting in North America, while we're certainly seeing more activity coming from that in other areas of the world.

Okay. And then I guess that kind of segues into my next question. With the outlook pointing towards continued top line growth driven by out performance in South America. Can you discuss some of the stronger regions you foresee in the future? And what some of the dynamics are there that will be driving that growth?

Yes. Well, Peru, we're seeing that operation continues to grow over the next quarter for sure. Lots of activity, but at the same time, as we said, lots of mobilization activity, preparation of rigs, additional people that were brought in and with its load of onboarding costs since the beginning of the year. But we're looking forward to all of that basically hitting cruising altitude by next quarter. So Peru is certainly an area.

We see North America like financings, with financing, as you said, picking up lots of time that comes in North America. So we are seeing Canada continuing to increase going into next quarter as well. We'll see in the U.S. if that happens as well. And then the rest is going to be really stated by what mining companies where mining companies end up spending their next budgets.

Okay. Perfect. I appreciate the color. And then last question for me. Just CapEx was about $14 million for the quarter. Can you discuss some of the dynamics that led to the lower-than-expected CapEx? And can we still expect it to be in the $60 million to $70 million range on an annual basis?

Yes. Part of it really was, as I mentioned, I mean, we prepared 30-some rigs for Peru. And the good news is that we were able to move some of those rigs to some of those rigs from other operations to Peru, which helped. You saw that come through on the utilization rates, which are higher. We've hit 50% for the first time in a long time. And so that played part of it in terms of the growth that we expected and not having to spend as much on CapEx.

Going forward, we don't foresee having to spend a lot more than what we had expected. So we'll see how it plays out. Again, it all depends which region, where the demand comes from and the type of demand. But at the moment, we don't foresee needing more CapEx than what we had guided at the last quarter.

[Operator Instructions] Following question is from Brett Kearney from American Rebirth Opportunity Partners.

Terrific to see the continued strength in your major markets and you guys' ability to capitalize and execute on that in the precious metals and copper front. Just curious, as there's been a heightened focus on critical minerals and I guess, the expanded list of the resources included therein. I know they're all small individually, but just curious kind of in aggregate, whether you're seeing any opportunity across some of more niche mining areas from rare earths, tin, tungsten, antimony in aggregate currently or going forward that can move the needle at all for you all?

Yes. Well, like you said, all of those individually are not big contributors to exploration. But in aggregate, can certainly have an impact. So I mean, you mentioned tin, we have part of our operation in Peru that's drilling for 10. Lithium comes back on and off, depending on the times and you've got nickel, you've got uranium down the road that could be a contributor in terms of the whole electricity and everything that is needed there.

So when you -- again, when you put it, it's still going to be -- we're still going to have between 70% to 80% of our activity that's going to come from gold and copper. But those other metal, I always use the flavor of the day kind of comment and critical minerals certainly the flavor of the day. So we expect to see activity from some of these metal...

Excellent. And then maybe an extension of that, given your guys' size and trusted position as a mining services provider to Canada, North America, the West. To the extent you can comment, are you all actively engaging in or been approached at all in some of the security discussions as the importance of these metals, including even copper takes quite in priority. Are you guys being looked in at all to conversations involving discussions around NATO, the West.

Well, I mean, not directly because we're just a supplier to the mining industry, but we are certainly having discussions with different people involved with ministers and trying to drive the point that our Canadian economy really need resources, and we need to get on if we're going to track investment, we need to make the -- we certainly need to make the environment or the business environment conducive to that.

So we're certainly participating in those discussions and making that heard. It's just a matter of speed the intentions are there, and it's just a matter of speed of making this happen. And we certainly see other countries basically taking action much quicker than we see in Canada. But the conversation is certainly heading the right way, let's put it that way. It's more a question of...

Following question is from James Vail from Arcadia Advisors, LLC.

Denis, you said that the second quarter top line is showing momentum. I guess I'll get to the bottom line is what you see change the dynamics of the third fiscal quarter and expecting maybe less of a slowdown that you've had historically, so that the activity wouldn't slow down as quickly as it did last year and slower to pick up in the spring. Is that a possibility? Or is that -- will those historic dynamics still be in place?

Yes. To be frank, Jim, we -- it's too early to tell because we typically have those discussions when we get to October, November when they start to have plans. And lots of time, those -- even those decisions of continuing or not close to Christmas are made when they get to October, November, if they haven't spent all of their budgets or the environment like right now with gold running up, they say, okay, well, let's just add more -- 2 more months of budget to this year and keep going and so those decisions typically happen in October, November. So it's early to tell, but the environment with commodity prices is certainly positive for that to maybe continue later in the season. But again, too early to tell.

Okay. And then just finally, looking at the segment information, and there's the asterisk that says Canada U.S. includes revenues for Canada. If you do the arithmetic, it looks like the U.S. was down 20% in the quarter. Is that correct? Is that accurate?

Yes. It is. There's been a slowdown. We've seen some slowdown in the U.S. A lot of that was driven by juniors. That's where -- last year, we had a lot of junior customers that didn't come back this season and we're waiting to see that. But then basically, as you mentioned, Canada has certainly grown from last year.

Yes, that's up 20%. That's encouraging. That is good. Okay. Are you going to present at Beaver Creek, Denis?

No. We're not. Basically Beaver Creek is only for mining companies in terms of presenting. So we won't be at that conference.

[Operator Instructions] We have no further questions registered at this time. I would now like to turn the meeting back over to Denis Larocque.

Well, thank you. And please don't forget to join us. It's our AGM today, which will be held in-person and virtually at 3:30 Eastern Time. And all the details related to the AGM can be found on our website. So thank you for joining us today, and I hope to see you at our AGM.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.