ANNUAL REPORT 2021
STRONG CANADIAN FOUNDATION | EXPANDING GLOBAL PRESENCE
PROFILE
Headquartered in Val-d’Or, Quebec, Orbit Garant Drilling (TSX: OGD) is one of the
largest Canadian-based mineral drilling companies, providing both underground and
surface drilling services in Canada and internationally through its 223 drill rigs and
approximately 1,250 employees. Orbit Garant provides services to major, intermediate
and junior mining companies, through each stage of mining exploration, development
and production. The Company also provides geotechnical drilling services to mining or
mineral exploration companies, engineering and environmental consultant firms, and
government agencies.
Head Office
Head Office
Regional Office
Field Operations
Regional Offices
Field Operations
MARKET POSITION (BY PERCENTAGE OF REVENUE¹)
DRILLING ACTIVITY
CUSTOMERS
34%
65%
1%
Surface
Underground
Manufacturing
27%
73%
Majors &
Intermediates
Juniors
REGIONS
RESOURCE EXPOSURE
20%
80%
Canada
International
24%
Gold
76%
Base Metals / Other
1. For the year ended June 30, 2021
To our shareholders,
The mineral drilling industry experienced a solid recovery during our fiscal 2021 year, following the negative impact
of the COVID-19 pandemic beginning in March 2020. As pandemic-related business restrictions on mining activities
began to ease at the end of our fiscal 2020 year and our customers resumed their projects or commenced new
ones, we started to gradually ramp up our operations in Canada and West Africa. This steady escalation continued
throughout the first half of fiscal 2021, and we reached pre-pandemic activity levels in these regions in the second
half of fiscal 2021. More recently, we have surpassed them. Our drilling activity in Chile continues to be impacted by
COVID-19 related challenges and has not yet reached pre-pandemic levels, but demand has started to increase in
this market. We recently commenced a new, long-term contract in Chile with a major copper producer.
Our fiscal 2021 revenue totalled $163.3 million, an increase of 18.5% compared to fiscal 2020. Our revenue in
Canada totalled $130.0 million, an increase of 19.2% compared to fiscal 2020, and our international revenue was
$33.3 million, an increase of 15.7% compared to last year. Our growth in international revenue was attributable to
increased drilling activity in Burkina Faso, Guinea and Guyana, partially offset by a decline in Chile and Argentina.
Our net earnings for fiscal 2021 were $2.3 million, or $0.06 per share, compared to a net loss of $7.4 million,
or $0.20 per share, in fiscal 2020. The positive variance reflects improved gross margins driven by increased
drilling activity, improved operational efficiencies and cost reduction measures we implemented at the outset of the
pandemic. These factors offset the additional logistical challenges and related costs due to the pandemic, significant
mobilization costs in Guinea and Chile in the second half of fiscal 2021 related to new, long-term contracts, and
increased driller training and project ramp-up costs in Canada during the fourth quarter of fiscal 2021. In fiscal 2021,
costs associated with our contract revenue were reduced by $2.9 million as a result of financial support recorded
from the Canada Emergency Wage Subsidy program, compared to $3.2 million in fiscal 2020. Net earnings for fiscal
2021 also reflect the reversal of a $1.96 million provision for litigation in Burkina Faso during our third quarter, as the
courts in Burkina Faso ruled in favor of Orbit Garant regarding a legal claim.
Our record quarterly revenue of $51.1 million and all-time high in metres drilled in our fiscal 2021 fourth quarter
demonstrates our success in ramping up our operations throughout the year and the strong recovery in customer
demand in Canada and West Africa. While we are pleased with our record revenue and metres drilled in our fourth
quarter, our margins and profitability were impacted by increased driller training, project ramp-up and mobilization
costs as we adapt our operations to this higher level of demand. Further, the strong customer demand has resulted
in a shortage of experienced drillers in Canada, which is expected to increase labour costs and impact productivity
levels in the near term. We also expect to see higher material costs in the near term due to temporary supply
chain issues related to the pandemic. We expect to be able to offset these cost increases with higher contract
pricing. As for the near-term shortage in experienced drillers in Canada, we are managing this through our driller
training program in which we now have a significant number of new recruits enrolled, and we are leveraging our
computerized drill technology to accelerate the learning process. We expect to increase our capacity utilization and
driller productivity and grow our margins as this positive mining cycle progresses.
We repaid a net amount of $4.4 million on our Credit Facility in fiscal 2021, compared to a drawdown of $3.2 million
last year. Our long-term debt under the Credit Facility, including US$1.0 million drawn from our US$5.0 million
revolving facility and the current portion, was $24.3 million as at fiscal year-end, compared $28.7 million as at June
30th a year ago, providing us with improved financial flexibility.
The strong recovery in customer demand for mineral drilling services is supported by the continued strength in
metals prices. With the spot price of gold currently at approximately US$1,750 per ounce and copper priced at
approximately US$4.20 per pound, precious and base metal mining companies are generating robust cash flows
and have a strong incentive to focus on exploration spending, particularly given the lack of major new discoveries and
an industry-wide decline in both gold and copper reserves.
1
This positive industry outlook is supported by a recent report from S&P Global Market Intelligence, which
forecasts that global exploration budgets for nonferrous metals will increase 25% to 35% in calendar 2021,
from US$8.7 billion in calendar 2020, and will grow another 5% to 15% in 2022.
Looking ahead, as we pursue future growth, our focus on innovation and leading-edge technology will remain
a priority for us and a competitive advantage in our industry. We currently have 43 drill rigs outfitted with
our computerized monitoring and control technology. These technologically-advanced drills increase accuracy
and productivity, have long-lasting rig components, are ideal for training less experienced drillers, and have
proven to be in high demand from our customers. In addition to our continuous focus on innovation, our global
operations and scale, sound balance sheet, expertise in both surface and underground drilling, vertically-
integrated manufacturing capabilities, and highly experienced leadership team position us favorably to
capitalize on what appears to be the beginning of a strong market cycle.
We will continue to carefully monitor the pandemic, taking all the necessary measures to prioritize the health
and safety of our employees and other stakeholders, including the communities in which we operate. We are
pleased to have recovered so rapidly from the negative impact we experienced early in the pandemic, and look
forward to pursuing further opportunities to grow our business and build shareholder value in the year ahead.
In closing, we extend our appreciation to all of our employees, management team and their families for their ongoing
commitment to the success of Orbit Garant. And to our shareholders, we appreciate your continued support.
Sincerely,
Jean-Yves Laliberté
Chair
Éric Alexandre
President and Chief Executive Officer
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MD&A and
Consolidated Financial
Statements
YEAR END AND FOURTH QUARTER FISCAL 2021
SEPTEMBER 28, 2021
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YEAR END AND FOURTH QUARTER 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
This Management Discussion and Analysis (“MD&A”) is a review of the results of operations, the liquidity and the
capital resources of Orbit Garant Drilling Inc. This discussion contains forward-looking statements. Please see
‘‘Forward-Looking Statements’’ for a discussion of the risks, uncertainties and assumptions relating to these
statements.
This MD&A should be read in conjunction with the audited consolidated financial statements for the fiscal years ended
June 30, 2021 (“Fiscal 2021”) and June 30, 2020 (“Fiscal 2020”) and the notes thereto which are available on the
SEDAR website at www.sedar.com.
The Company’s Fiscal 2021 audited consolidated financial statements and the accompanying notes were prepared in
accordance with International Financial Reporting Standards (“IFRS”). All amounts in this MD&A are in Canadian
dollars, except when otherwise noted.
In this MD&A, references to the “Company” or to “Orbit Garant” shall mean, as the context may require, either Orbit
Garant Drilling Inc. or Orbit Garant Drilling Inc. together with its wholly-owned subsidiaries.
This MD&A is dated September 28, 2021. Disclosure contained in this document is current to that date unless
otherwise stated.
Percentage calculations are based on numbers in the Financial Statements and may not correspond to rounded figures
presented in this MD&A.
Additional information relating to the Company, including the Company’s Annual Information Form for the most recently
completed fiscal year, can be found on SEDAR at www.sedar.com.
FORWARD-LOOKING STATEMENTS
Securities laws encourage companies to disclose forward-looking information in order for investors to have a better
understanding of a company’s future prospects and make informed investment decisions.
This MD&A contains forward-looking statements about the Company’s objectives, strategies, financial condition,
results of operations, cash flows and businesses. These statements are “forward-looking” because they are based on
current expectations, estimates and assumptions about: the markets in which the Company operates; the world
economic climate as it relates to the mining industry; the Canadian economic environment; and the Company’s ability
to attract and retain customers and to manage its assets and operating costs. They are not guarantees of future
performance and involve risks and uncertainties that are difficult to control or predict. Risks and uncertainties that could
cause actual results, performance or achievements to differ materially include the ability of the jurisdictions in which
the Company operates to manage and cope with the implications of COVID-19, the impact of measures taken by such
jurisdictions to control the spread of COVID-19 on the Company's operations, and the economic and financial
implications of COVID-19 to the Company.
Actual results could be materially different from expectations if known or unknown risks affect the business, or if
estimates or assumptions turn out to be inaccurate. The Company does not guarantee that any forward-looking
statement will materialize and, accordingly, the reader is cautioned not to place reliance on these forward-looking
statements.
The Company disclaims any intention and assumes no obligation to update any forward-looking statement, even if
new information becomes available, as a result of future events or for any other reasons except in accordance with
applicable securities laws. Risks that could cause the Company’s actual results to materially differ from its current
expectations are discussed in this MD&A. For a more complete discussion of the risk factors that could cause the
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MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
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Company’s actual results to materially differ from its current expectations, please refer to the Company’s Annual
Information Form dated September 28, 2021, accessible via www.sedar.com.
COVID-19
On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic.
Governments responded by implementing emergency measures to minimize the spread of the virus, including the
temporary shutdown of businesses deemed to be non-essential. These measures caused significant economic
disruption, as well as volatility in equity markets, commodity prices and foreign exchange rates.
Orbit Garant’s operations were significantly impacted by these measures beginning late in its Fiscal 2020 third quarter
(“Q3 2020”), as a number of its drilling projects were put on hold or postponed. In Quebec, as a result of the provincial
government’s order to minimize non-essential business activity, the Company’s operations were suspended from
March 24, 2020 until April 20, 2020, at which time they were permitted to resume in a gradual and supervised manner.
In addition, drilling activity on certain projects in Nunavut Territory and Ontario was temporarily reduced or suspended.
Orbit Garant’s international drilling operations were also affected, either as a result of government restrictions on
certain business activities, or customer decisions to reduce or delay certain projects.
Orbit Garant considers the health and safety of its personnel, customers, suppliers, and the communities in which it
operates to be a top priority. The Company has implemented precautionary health and safety measures across its
operations, based on the recommendations, or directives, issued by the public health authorities and governments in
the various jurisdictions in which the Company operates.
Management has implemented several measures to mitigate the economic impact of COVID-19 on its business and
operations. To ensure Orbit Garant’s continuing ability to meet its financial and contractual obligations, the Company:
(i) applied for government grants and subsidies made available by various governments in response to COVID-19; (ii)
reworked its cost structure and postponed non-essential expenses; (iii) made arrangements with Export Development
Canada (“EDC”) to temporarily suspend principal and interest payments on its loans from EDC until October 2020 (see
Note 14 in Fiscal 2021 Financial Statements); and (iv) made arrangements with National Bank of Canada (“National
Bank”) to modify the covenants in its senior credit facility (the “Credit Facility”). The Company believes that as a result
of these measures it will continue to meet its obligations under its credit facilities and have sufficient resources to carry
on its business operations.
Operationally, the Company implemented multiple initiatives to reduce costs and manage its liquidity position, including
lower purchases of inventory items and a program to progressively reduce overall inventory levels. Importantly, these
measures were implemented without impacting the Company’s ability to ramp up its business. In addition, from
April 1, 2020 to September 30, 2020, Orbit Garant’s Management and Directors agreed to take a temporary 15%
reduction in their remuneration to further support the Company.
During Fiscal 2021, Orbit Garant recorded a benefit related to the Canadian Emergency Wage Subsidy (“CEWS”)
program in the amount of $3.2 million, of which $2.9 million was recognized as a reduction of cost of contract revenue
and $0.3 million was recognized as a reduction of general and administrative expenses, compared to $3.6 million in
Fiscal 2020, of which $3.2 million was recognized as a reduction of cost of contract revenue and $0.4 million was
recognized as a reduction of general and administrative expenses.
Orbit Garant’s drilling activities in Canada began to gradually resume or ramp up in the latter half of its Fiscal 2020
fourth quarter (“Q4 2020”) and have now returned to, or surpassed, pre-pandemic levels. The Company’s drilling
activities in West Africa began to gradually resume or ramp up in the first quarter of Fiscal 2021 (“Q1 2021”) and have
now returned to, or surpassed, pre-pandemic levels. The Company’s drilling activities in Chile began to gradually ramp
up in the latter half to its Fiscal 2021 fourth quarter (“Q4 2021”) and have not yet reached pre-pandemic levels.
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MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
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The long-term impact of COVID-19 is unknown. While mineral drilling projects are now allowed to operate with
appropriate safety measures, government business restrictions could be reinstated in any of the jurisdictions that the
Company operates in should there be a significant increase in COVID-19, or COVID-19 variant, case counts.
Management continues to closely monitor the impact of the pandemic in the jurisdictions in which it operates. As part
of its business continuity plan, Orbit Garant continues to manage its variable cost structure and cash prudently, while
maintaining the flexibility required to adapt to any potential increase in COVID-19 related business restrictions.
FISCAL 2021 SUMMARY
• Revenue totalled $163.3 million, an increase of 18.5% compared to $137.8 million in Fiscal 2020
• Gross margin increased to 12.4% from 9.4% in Fiscal 2020
• Adjusted gross margin(1) (excluding depreciation expense) increased to 17.9% from 16.3% in Fiscal 2020
• EBITDA(1) totalled $17.6 million, an increase of 157.1% compared to $6.8 million in Fiscal 2020
• Net earnings were $2.3 million, compared to net loss of $7.4 million in Fiscal 2020; and
• Metres drilled totalled 1,661,396, an increase of 28.0% compared to 1,297,838 metres drilled in Fiscal 2020
(1) See Reconciliation of non-IFRS Financial Measures
CORPORATE OVERVIEW
Orbit Garant (TSX: OGD) is one of the largest Canadian-based mineral drilling companies, with 223 drill rigs and
approximately 1,250 employees. Headquartered in Val-d’Or, Québec, the Company provides both underground and
surface drilling services in Canada and internationally to major, intermediate and junior mining companies, through
each stage of mineral exploration, mine development and production. Orbit Garant also provides geotechnical and
water drilling services to mining or mineral exploration companies, engineering and environmental consultant firms,
and government agencies. The majority of Orbit Garant’s business activity is conducted in Canada. The Company has
regional offices and facilities in Sudbury, Ontario and Moncton, New Brunswick, to support its Canadian business
activities. Orbit Garant has worked on international projects in the United States, Mexico, Guyana, Chile, Argentina,
Kazakhstan, Burkina Faso, Ghana and Guinea. The Company has established international operating subsidiaries in:
Winnemucca (Nevada), U.S.A.; Santiago, Chile; Georgetown, Guyana; Ouagadougou, Burkina Faso; Takoradi, Ghana
and most recently in Conakry, Guinea, to support its international operations.
Orbit Garant has a comprehensive infrastructure with vertically integrated manufacturing capabilities. The Company
manufactures custom drill rigs and ancillary equipment for its own use and also manufactures conventional drill rigs
for third-party customers from its facilities in Val-d’Or, Québec. Orbit Garant focuses on “specialized drilling”, which
refers to drilling projects that are in remote locations or, in the opinion of Management, because of the scope,
complexity or technical nature of the work, cannot be undertaken by smaller conventional drilling companies.
The Company has two operating segments: Canada (including surface drilling, underground drilling and manufacturing
Canada), and International (including surface drilling, underground drilling).
For Fiscal 2021:
• Specialized drilling services, which typically generate a higher gross margin than conventional drilling
services, accounted for approximately 36% of the Company’s total revenue, compared to 45% in Fiscal 2020.
• Approximately 76% of the Company’s revenues were generated by gold related operations, and
approximately 24% were generated by base metal related and other operations.
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• Surface and underground drilling services accounted for approximately 65% and 34%, respectively, of the
Company’s revenue. Orbit Garant’s manufacturing activities accounted for the remaining 1% of revenue.
• Approximately 73% of Orbit Garant’s revenue was generated from major and intermediate mining company
projects, compared to 83% in Fiscal 2020. Orbit Garant’s drilling contracts with major and intermediate
customers are typically from one to five years in length.
• Approximately 80% of Orbit Garant’s revenue was generated from domestic drilling projects, and
approximately 20% was generated from international drilling contracts, compared to 79% and 21%
respectively in Fiscal 2020.
CONTINGENCIES
The Company is subject to various claims that arise in the normal course of business. Management believes that
adequate provisions have been made in the accounts where appropriate. Although it is not possible to estimate the
extent of potential costs and losses, if any, Management believes that the ultimate resolution of such contingencies
will not have a material adverse effect on the financial position of the Company.
In June 2020, a claim by a financial institution (the “Claimant”) for damages against a subsidiary of the Company in
the amount of 843.7 million West African Francs (“XOF”) ($1.90 million) was confirmed by a court in Burkina Faso.
The Company had vigorously disputed this claim and filed an appeal. The Company had recorded a provision of
XOF 871.5 million ($1.96 million) in Q4 2020 for this claim and additional legal fees.
During the first half of Fiscal 2021, a total of XOF 857.2 million ($1.92 million) was required to be deposited in a
restricted cash account by the Company’s financial institution in Burkina Faso at the request of the Claimant.
On April 1, 2021, the Court of Appeal in Burkina Faso ruled in favor of Orbit Garant and overturned the original decision,
resulting in the release of XOF 857.2 million ($1.92 million) that the Company had deposited into a restricted cash
account. Notwithstanding the decision of the Court of Appeal, the Claimant appealed this decision. Based on the
opinion of the Company’s legal counsel, Management considered this appeal to be unfounded. As a result, the
recognized liability was reversed during the third quarter of Fiscal 2021 (“Q3 2021”).
On August 18, 2021, the Court of Appeal of Burkina Faso rejected the Claimant’s appeal. By upholding the first degree
decision, this order put an end to the claims of the Claimant in relation to the initial court decision. Based on the opinion
of the Company’s legal counsel, Management maintained the liability reversal noted above.
BUSINESS STRATEGY
Orbit Garant’s goal is to be the leading Canadian-based mineral drilling company. This will be achieved through the
pursuit of both domestic and international market opportunities, and through the provision of best-in-class underground
and surface drilling services, equipment and personnel for all stages of the mining and minerals business, including
exploration, development and production. The Company employs the following business strategies:
•
Focus primarily on major and well-financed intermediate mining and exploration companies operating in
stable jurisdictions;
• Provide conventional, specialized and geotechnical drilling services;
• Manufacture customized drills and equipment to fit the needs of customers;
• Maintain a commitment to technological innovation and advanced drilling technologies, such as the
Company’s current implementation of computerized monitoring and control technologies;
• Provide training for the Company’s personnel to continuously improve labour efficiency and the availability of
a skilled labour force;
• Maintain a high level of health and safety standards in the workplace and promote protection of the
environment;
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• Establish and maintain long-term relationships with customers;
• Cross-sell drilling services to existing customers;
• Expand the Company’s base of operations in strategic regions, such as: the Company’s acquisition of
Orbit Garant Chile S.A. (“OG Chile”) based in Santiago, Chile in December 2015, and the acquisition of the
drilling business of Projet Production International BF S.A. (“PPI”) in Ouagadougou, Burkina Faso in
October 2018;
• Maintain a sound balance sheet and a judicious deployment of capital; and
• Evaluate strategic acquisition opportunities to enhance value for the Company’s stakeholders.
INDUSTRY OVERVIEW
Orbit Garant provides drilling services, in Canada and internationally, to the minerals industry through all stages of
mine development, from exploration through production. Client mining companies consist of major (or senior),
intermediate, and junior companies (which generally focus on exploration only). Mining companies’ budgets for
external drilling services, such as those offered by Orbit Garant, are typically determined by ferrous (iron) and non-
ferrous (precious and base) metals prices, and the availability of capital to finance exploration (particularly in the case
of juniors) and development programs, and/or ongoing mining operations.
Gold
Gold prices are determined by the balance between supply (primarily mine production) and the many sources of
demand including global demand for gold jewelry, investment demand, and to a much lesser extent, demand from
industrial applications.
The price of gold is lower today compared to 12 months ago, when it was trading at near-record levels. However, the
price is significantly above its trailing five-year lows. At the time of this report, the spot price of gold was approximately
US$1,735 per ounce, representing a decline of approximately 8% compared to a year ago and an increase of
approximately 54% from its trailing five-year price low in late 2016.
Base Metals
Base metals’ prices generally reflect global economic conditions, as these metals are used primarily in infrastructure,
industrial and manufacturing applications. Demand from emerging markets, particularly China and India, has a major
influence on base metals markets. As emerging markets advance their economic development, their infrastructure and
industrial bases expand. Further, residents typically become more affluent, driving increased demand for manufactured
goods.
Aluminum, copper, lead, nickel and zinc are the primary base metals. The spot prices of each of these metals are
significantly higher compared to 12 months ago. The spot price for copper, the metal widely considered to be the most
sensitive to macroeconomic activity, was approximately US$2.99 per pound a year ago and at the time of this report
was approximately US$4.19 per pound, an increase of approximately 40%. The spot prices of aluminum, copper, and
nickel are currently near the upper end of their respective trailing five-year price ranges, while the spot prices of lead
and zinc are currently near the mid-point of their respective trailing five-year price ranges.
Iron Ore
Iron ore prices are determined by the global demand for steel, as more than 95% of mined iron ore is used to make
steel. As both the world’s largest consumer and producer of steel, China is widely regarded as having the most
influence on global iron ore market prices. Continuing urbanization of the world’s population, particularly in China and
India, the world’s most populous countries, is fueling global steel consumption, and long-term demand is expected to
continue to trend higher. In the short term, the spot price of iron ore is principally affected by seasonal effects, short-
term mismatches between supply and demand and other factors. At the time of this report, the spot price of iron ore
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was approximately US$115 per tonne, compared to approximately US$118 per tonne one year ago. In May 2021, the
spot price of iron ore reached a record high of approximately US$233 per tonne.
Market Participants
The mining industry has strengthened since a prolonged downturn ended in early 2016. Metal prices have increased,
driving higher mining equity valuations and increased financing activity. Over the past 12 months, market conditions
have been favourable for both precious metals and base metals mining companies, supported by the relatively strong
price of gold and increases in base metal prices. Financing activity has strengthened during the period.
TSX / TSX-V Mining Sector Financings (2008 to August 31, 2021)
Mining companies listed on the Toronto Stock Exchange (“TSX”) and the TSX-Venture Exchange (“TSX-V”) raised
more equity capital in the first eight months of 2021 than in the first eight months of any calendar year since 2016.
According to TMX Group, they completed 1,018 financings and raised $7.3 billion of equity capital in the first eight
months of 2021. By comparison, they completed 1,064 financings and raised $4.6 billion of equity capital in the same
period in 2020.
Global exploration activity is currently strong. According to S&P Capital IQ Metals and Mining Research (September
2021), drilling results were reported from 331 projects in August 2021. While that was down from a record 387 projects
in July 2021, the number of drill holes increased by 17% month-over-month to 6,180 in August. That was the most in
a single month since October 2018.
According to a report from S&P Global Market Intelligence (August 2021), global exploration budgets for nonferrous
metals are expected to increase 25% to 35% in 2021 from US$8.7 billion in 2020. That surpasses S&P’s previous
forecast, provided in March 2021, that budgets could rise 15% to 20% year-over-year if metal prices remain strong.
Looking ahead to 2022, S&P anticipates another increase in global exploration budgets for nonferrous metals, though
smaller than its projected increase in 2021. S&P expects budgets to pull back slightly from 2023 to 2025 as the
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economic recovery related to the COVID-19 pandemic subsides and global economic growth returns to a “more
moderate” pace.
OVERALL PERFORMANCE
Results of operations for the year ended June 30, 2021
FISCAL YEARS ENDED JUNE 30
* ($millions)
Fiscal 2021
Fiscal 2020
2021 vs. 2020
Variance
Revenue *
Gross profit *
Gross margin (%)
Adjusted gross margin (%) (1)
Net earnings (loss) *
Net earnings (loss) per common share - Basic ($)
- Diluted ($)
EBITDA * (2)
Metres drilled
163.3
20.3
12.4
17.9
2.3
0.06
0.06
17.6
137.8
12.9
9.4
16.3
(7.4)
(0.20)
(0.20)
6.8
25.5
7.4
3.0
1.6
9.7
0.26
0.26
10.8
1,661,396
1,297,838
363,558
(1) Reflects gross margin, excluding depreciation expenses. See “Reconciliation of non-IFRS financial measures”
(2) EBITDA = Earnings before interest, taxes, depreciation and amortization. See “Reconciliation of non-IFRS financial measures.”
During Fiscal 2021, Orbit Garant drilled 1,661,396 metres, an increase of 28.0% compared to 1,297,838 metres drilled
in Fiscal 2020. Average revenue per metre drilled in Fiscal 2021 was $97.45, compared to $105.53 in Fiscal 2020.
The decrease in average revenue per metre drilled is primarily attributable to a lower proportion of specialized
international drilling activity, which is priced at a higher rate than conventional drilling, and revenue mix related to
increased drilling activities in West Africa.
The Company had 223 drill rigs as at June 30, 2021, compared to 231 drill rigs at the end of Fiscal 2020. During
Fiscal 2021, the Company purchased one drill rig, while six conventional drill rigs were dismantled and three were
sold. Orbit Garant currently has 43 drill rigs outfitted with computerized monitoring control technology.
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SELECTED ANNUAL FINANCIAL INFORMATION
For the years ended June 30 *($millions)
Fiscal 2021
Fiscal 2020
Fiscal 2019
Contract revenue
Drilling Canada *
Drilling International *
Total *
Gross profit *
Gross margin (%)
Adjusted gross margin (%) (1)
Net earnings (loss) *
Net earnings (loss) per common share ($)
Net earnings (loss) per common share diluted ($)
Total assets *
Long-term debt including current portion *
Lease liabilities including current portion*
EBITDA * (2)
EBITDA % (2)
Total metres drilled (million)
130.0
33.3
163.3
20.3
12.4
17.9
2.3
0.06
0.06
138.1
32.4
2.0
17.6
10.9
1.7
109.0
28.8
137.8
12.9
9.4
16.3
(7.4)
(0.20)
(0.20)
129.8
36.7
4.6
6.8
4.9
1.3
109.5
43.3
152.8
16.3
10.7
16.4
(3.5)
(0.09)
(0.09)
134.7
29.6
-
8.3
5.4
1.4
(1) Reflects gross margin, excluding depreciation expenses. See “Reconciliation of non-IFRS financial measures”
(2) EBITDA = Earnings before interest, taxes, depreciation and amortization. See “Reconciliation of non-IFRS financial measures”.
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Year End and Fourth Quarter 2021Management’s Discussion and AnalysisOrbit Garant Drilling Inc.
YEAR END AND FOURTH QUARTER 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
10
RESULTS OF OPERATIONS
FISCAL 2021 COMPARED TO FISCAL 2020
Contract Revenue
Revenue in Fiscal 2021 totalled $163.3 million, compared to $137.8 million in Fiscal 2020. The increase in revenue
was primarily attributable to an increase in drilling activities in Canada and West Africa.
Canada revenue totalled $ 130.0 million in Fiscal 2021, an increase of 19.2% compared to $109.0 million in Fiscal
2020. The Company’s domestic drilling operations gradually ramped up in the latter half of Q4 2020 and throughout
first half of Fiscal 2021 following the initial slowdown caused by the pandemic beginning in late Q3 2020. The
Company’s drilling activities in Canada in the second half of Fiscal 2021 returned to, and more recently surpassed,
pre-pandemic levels.
International revenue increased 15.7% to $33.3 million in Fiscal 2021, compared to $28.8 million in Fiscal 2020,
reflecting increased drilling activity in Burkina Faso and Guyana, and the commencement of a drilling project in
Guinea, partially offset by a decline in drilling activity in Chile and Argentina.
Gross Profit and Margins (see Reconciliation of non-IFRS Financial measures)
Gross profit for Fiscal 2021 was $20.3 million, an increase of 56.8% compared to $12.9 million in Fiscal 2020. Gross
margin was 12.4% compared to 9.4% in Fiscal 2020. Depreciation expenses totalling $8.9 million are included in cost
of contract revenue for Fiscal 2021, compared to $9.5 million in Fiscal 2020. Adjusted gross margin, excluding
depreciation expenses, was 17.9% in Fiscal 2021, compared to 16.3% in Fiscal 2020.
Orbit Garant’s gross profit and margins were positively impacted by increased drilling activity, improved operational
efficiencies and cost reduction initiatives, which offset the additional logistical challenges and related costs due to
COVID-19, significant mobilization costs in Guinea and Chile in the second half of Fiscal 2021 related to new, long-
term contracts and increased driller training and ramp-up costs in Canada during Q4 2021. In Fiscal 2021, the cost of
contract revenue was reduced by $2.9 million as a result of the financial support recorded from the CEWS program
($3.2 million in Fiscal 2020).
General and Administrative Expenses
General and administrative (G&A) expenses were $14.5 million, or 8.9% of revenue, in Fiscal 2021, compared to G&A
expenses of $15.4 million, or 11.2% of revenue, in Fiscal 2020. The decline in G&A expenses reflects the cost reduction
measures that were implemented following the onset of the pandemic. G&A expenses were reduced by $0.3 million in
Fiscal 2021 resulting from financial support recorded from the CEWS program ($0.4 million in Fiscal 2020).
Operating Results
Earnings from operations for Fiscal 2021 were $9.5 million, compared to $1.2 million in Fiscal 2020. As discussed
above, the increase in drilling activities in Canada and West Africa positively affected earnings from operations.
Drilling Canada’s operating earnings in Fiscal 2021 totalled $15.2 million, compared to operating earnings of
$6.7 million in Fiscal 2020. The increase reflects increased drilling activity, operational efficiencies and initiatives to
reduce costs following the onset of the pandemic, partially offset by increased driller training and ramp-up costs in
Canada during Q4 2021. Drilling Canada’s operating earnings include $2.9 million in financial support from the CEWS
program recorded in Fiscal 2021 ($3.2 million in Fiscal 2020).
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Year End and Fourth Quarter 2021Management’s Discussion and AnalysisOrbit Garant Drilling Inc.
YEAR END AND FOURTH QUARTER 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
11
Drilling International’s operating loss in Fiscal 2021 totalled $5.7 million, compared to operating loss of $5.5 million in
Fiscal 2020. The operating loss for Fiscal 2021 is primarily attributable to the impact of the pandemic and the significant
mobilization costs incurred in the second half of Fiscal 2021, as discussed above.
Foreign Exchange Loss (Gain)
Foreign exchange loss was $0.7 million in Fiscal 2021, compared to a foreign exchange gain of $0.1 million in
Fiscal 2020.
Provision for litigation
As disclosed in the Contingency section of this MD&A, in June 2020, a claim against a subsidiary of the Company for
XOF 843.7 million ($1.90 million) was confirmed by a court in Burkina Faso. The Company recorded a provision
of XOF 871.5 million ($1.96 million) in Q4 2020 for this claim and additional legal fees.
On April 1, 2021, the Court of Appeal in Burkina Faso ruled in favor of Orbit Garant and overturned the original decision,
resulting in the release of XOF 857.2 million ($1.92 million) that the Company had deposited into a restricted cash
account. As a result, the recognized liability was reversed during Q3 2021.
EBITDA (see Reconciliation of non-IFRS financial measures)
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) totalled $17.6 million in Fiscal 2021,
compared to $6.8 million in Fiscal 2020. EBITDA in Fiscal 2021 was positively impacted by increased gross margin
and the reversal of the $1.96 million provision in Burkina Faso, partially offset by increased driller training and project
ramp-up costs in Q4 2021, and new long term contracts mobilization costs incurred in the second half of Fiscal 2021,
as discussed above. EBITDA in Fiscal 2021 includes $3.2 million in financial support received from the CEWS program
($3.6 million in Fiscal 2020).
Financial Expenses
Interest costs related to long-term debt and bank charges were $2.3 million in Fiscal 2021, compared to $2.7 million
in Fiscal 2020.
Income Tax Expense
Income tax expense was $2.5 million for Fiscal 2021, compared to an income tax expense of $0.2 million for
Fiscal 2020. The effective tax rate for Fiscal 2021 was negatively impacted mainly by tax losses for which no deferred
tax assets were recognized, as in Fiscal 2020.
Net Earnings (Loss)
The Company’s net earnings for Fiscal 2021 were $2.3 million, or $0.06 per share, compared to a net loss of
$7.4 million, or $0.20 per share, in Fiscal 2020. The positive variance reflects improved gross margins, and the reversal
of the $1.96 million provision for litigation in Burkina Faso during Q3 2021, partially offset by increased driller training
and project ramp-up costs in Q4 2021, and new project mobilization costs incurred in the second half of Fiscal 2021,
as discussed above.
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YEAR END AND FOURTH QUARTER 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
12
SUMMARY OF QUARTERLY RESULTS
* ($millions)
Contract revenue *
Gross profit (1)*
Gross margin %
Net earnings (loss) *
Net earnings
(loss) per
common share ($)
- Basic
- Diluted
Fiscal 2021
Fiscal 2020
June 30
Mar. 31
Dec. 31
Sept. 30
June 30
Mar. 31
Dec. 31
Sept. 30
51.1
40.5
3.0
5.9
(2.2)
(0.06)
(0.06
3.2
7.8
0.7
0.02
0.02
36.1
5.4
14.9
0.3
0.01
0.01
35.6
8.7
24.6
3.5
0.09
0.09
20.2
2.3
11.5
(2.7)
(0.08)
(0.08)
36.0
38.3
1.3
3.5
(3.4)
(0.09)
(0.09)
2.4
6.3
(2.4)
(0.06)
(0.06)
43.3
6.9
16.0
1.1
0.03
0.03
(1) Includes amortization and depreciation expenses related to operations.
SEASONALITY
The Company’s quarterly revenue reflects certain seasonal factors. In underground drilling operations, scheduled mine
shutdowns over holiday and summer periods at some locations reduce revenue during these periods. In domestic and
international surface drilling operations, weather conditions often cause drilling programs to pause, or to be planned
around seasonal fluctuations.
ANALYSIS OF THE FOURTH QUARTER OF FISCAL 2021 COMPARED TO THE FOURTH QUARTER OF
FISCAL 2020
Contract Revenue
Revenue for Q4 2021 totalled $51.1 million, an increase of 152.2% compared to $20.2 million for the quarter ended
June 30, 2020 (“Q4 2020”), reflecting an increase in drilling activities in Canada and internationally.
Canada revenue totalled $38.1 million in Q4 2021, an increase of 132.3% compared to $16.4 million in Q4 2020,
reflecting the strong domestic demand for the Company’s drilling services in Q4 2021 and the impact of COVID-19
related business restrictions and / or customer project suspensions or slowdowns in Q4 2020.
International revenue increased to $13.0 million in Q4 2021 from $3.8 million in Q4 2020. The increase reflects
increased drilling activity in Burkina Faso, Guinea and Guyana, the commencement of a new drilling project in Chile
and the negative impact of COVID-19 in Q4 2020.
Gross Profit and Margins (see Reconciliation of non-IFRS financial measures)
Gross profit for Q4 2021 was $3.0 million, an increase of 28.4% from $2.3 million in Q4 2020. Gross margin for Q4
2021 was 5.9% compared to 11.5% in Q4 2020. Depreciation expenses totalling $2.0 million are included in the cost
of contract revenue for Q4 2021, compared to $2.4 million in Q4 2020. Adjusted gross margin, excluding depreciation
expenses, was 9.8% in Q4 2021, compared to adjusted gross margin of 23.3 % in Q4 2020. In Q4 2021, margins were
negatively impacted by increased driller training and project ramp-up costs in Canada due to rapid growth in customer
demand, and significant mobilization costs related to new, long-term contracts in Guinea and Chile. In Q4 2021, the
cost of contract revenue was reduced by $0.1 million as a result of financial support recorded from the CEWS program
($3.2 million in Q4 2020).
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Year End and Fourth Quarter 2021Management’s Discussion and AnalysisOrbit Garant Drilling Inc.
YEAR END AND FOURTH QUARTER 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
13
General and Administrative Expenses
G&A expenses were $3.9 million, or 7.7% of revenue, in Q4 2021, compared to $2.9 million, or 14.1% of revenue, in
Q4 2020. The increase in G&A expenses reflect the increase in drilling activities. The Company’s G&A expenses for
Q4 2020 also reflect a $0.4 million reduction resulting from financial support from the CEWS program ($nil in Q4 2021).
Operating Results
Earnings from operations for Q4 2021 were negligible, compared to $0.1 million in Q4 2020.
Drilling Canada’s operating earnings totalled $1.6 million in Q4 2021, compared to $2.5 million in Q4 2020. The
Company recorded $0.1 million in financial support from the CEWS program in Q4 2021, compared to $3.2 million in
Q4 2020. Drilling Canada’s operating earnings in Q4 2021 also reflect the decline in gross margin due to increased
driller training and project ramp-up costs, as discussed above.
Drilling International’s operating loss totalled $1.6 million in Q4 2021, compared to an operating loss of $2.4 million in
Q4 2020. The positive variance was primarily attributable to the increase in drilling activities in both West Africa and
South America, partially offset by the impact of significant mobilization costs related to new, long-term contracts in
Guinea and Chile.
Foreign Exchange Loss (Gain)
Foreign exchange loss was $0.2 million in Q4 2021, compared to a negligible amount in Q4 2020.
EBITDA (see Reconciliation of non-IFRS financial measures)
EBITDA totalled $1.2 million in Q4 2021, compared to $0.3 million in Q4 2020. The increase was primarily attributable
to increased drilling activities in Canada and internationally, partially offset by increased driller training and project
ramp-up costs, and new project mobilization costs and the reduction of financial support from the CEWS program, as
discussed above.
Financial Expenses
Interest costs related to long-term debt and bank charges were $0.5 million in Q4 2021, compared to $0.6 million in
Q4 2020.
Income Tax (Recovery)
Income tax expense was $0.5 million in Q4 2021, compared to a tax recovery of $0.4 million in Q4 2020.
Net Loss
Net loss for Q4 2021 was $2.2 million, or $0.06 per share, compared to a net loss of $2.7 million, or $0.08 per share,
in Q4 2020. The positive variance is primarily attributable to increased drilling activities in Canada and internationally.
The net loss for Q4 2021 reflects increased drilling training and project ramp-up costs, new project mobilization costs
and the reduction of financial support from the CEWS program, as discussed above.
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Year End and Fourth Quarter 2021Management’s Discussion and AnalysisOrbit Garant Drilling Inc.
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MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
14
EFFECT OF EXCHANGE RATE
The Company realizes portions of its business activities in the following foreign currencies: US dollars (“US $”), Chilean
Pesos (“CLP”), Argentine Pesos (“ARS”), Ghanaian cedi (“GHS”), West African Francs (“XOF”), and Guinean Francs
(“GNF”), and is thus exposed to foreign exchange fluctuations. Orbit Garant does not actively manage this risk.
As at June 30, 2021 and 2020, the Company had the following amounts of cash and accounts receivable in foreign
currencies and has provided the respective impact on earnings before income taxes ("EBIT") in Canadian dollars, if
the corresponding foreign exchange rates were to change by plus or minus 10%:
As at June 30, 2021
*($millions)
Cash*
Accounts receivable*
EBIT impact +/- 10%*
As at June 30, 2020
*($millions)
Cash*
Accounts receivable*
EBIT impact +/- 10%*
US $
1.1
1.2
0.1
US $
0.6
0.2
0
CLP
527.3
1,904.4
-
ARS
-
-
-
GHS
0.2
5.6
0.1
XOF
3.8
1,552.5
0.5
GNF
7,157.0
7,678.8
0.1
CLP
168.6
529.4
0.1
ARS
4.1
18.9
0.1
GHS
0.2
2.6
0.1
XOF
158.4
1,137.6
0.2
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Cash flow from operations (before changes in non-cash operating working capital items, finance costs and income
taxes paid), was $15.5 million in Fiscal 2021, compared to $9.0 million in Fiscal 2020.
The change in non-cash operating working capital items was an outflow of $3.4 million, compared to an inflow of
$4.6 million in Fiscal 2020.The change in non-cash operating working capital in Fiscal 2021 was primarily attributable
to:
•
•
•
$19.8 million related to an increase in accounts receivable and prepaid expenses, partially offset by
$12.0 million related to an increase in accounts payable and
$4.4 million related to a decrease in inventory
Investing Activities
Cash used in investing activities totalled $6.7 million in Fiscal 2021, compared to $9.3 million in Fiscal 2020. During
Fiscal 2021, $7.9 million was used for the acquisition of property, plant and equipment and for deposits on purchased
equipment, partially offset by a cash inflow of $1.2 million on disposal of investments, plant and equipment. During
Fiscal 2020, $9.7 million was used for the acquisition of property, plant and equipment, partially offset by a cash inflow
of $0.4 million on disposal of investments, property, plant and equipment.
Financing Activities
During Fiscal 2021, the Company repaid a net amount of $3.8 million of its long-term debt and lease liabilities. In
Fiscal 2020, cash flow of $2.9 million was generated from financing activities.
Orbit Garant’s primary sources of liquidity are cash flow from operations and borrowings under a credit facility (the
“Credit Facility”) with National Bank of Canada Inc. (“National Bank”). On March 8, 2021 the Company and National
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Year End and Fourth Quarter 2021Management’s Discussion and AnalysisOrbit Garant Drilling Inc.
YEAR END AND FOURTH QUARTER 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
15
Bank entered into an amended and restated Credit Agreement in respect of the Credit Facility. This Credit Facility
consists of a $35.0 million revolving credit facility and a US$5.0 million revolving credit facility guaranteed by EDC.
The current term of the Credit Facility expires on November 2, 2022.
The Company repaid a net amount of $4.4 million during Fiscal 2021 on its Credit Facility, compared to a withdrawal
of $3.2 million in Fiscal 2020.The Company’s long-term debt, under the Credit Facility, including US$1.0 million
($1.2 million) drawn from the US$5.0 million revolving credit facility and the current portion, was $ 24.3 million as at
June 30, 2021, compared to $28.7 million as at June 30, 2020. The debt was used to support working capital
requirements and the acquisition of capital assets, property, plant and equipment.
In February 2021, OG Chile entered into a financing agreement with Banco Scotiabank for a total of approximately
$2.6 million in order to purchase the office building it had rented for several years. This agreement bears interest at a
rate of 3.3% per annum and has a term of 84 months.
As at June 30, 2021, the Company’s working capital totalled $54.0 million, compared to $52.1 million as at
June 30, 2020.
The Company believes that it will be able to generate sufficient cash flow to meet its current and future working capital
expenditures and repayment of its debt obligations. The Company’s principal capital expenditures are related to the
acquisition of drill rigs and property, plant and equipment.
Sources of Financing
As at June 30, 2021, the Company complied with all covenants in the Credit Facility and in the EDC Loan Agreement.
Orbit Garant’s primary sources of liquidity are cash flow from operations and borrowings under its Credit Facility. The
Credit Facility matures no later than November 2, 2022. As at June 30, 2021, the Company had drawn $24.3 million
($28.7 million as at June 30, 2020) under the Credit Facility.
Availability under the main revolving facility under the Credit Facility is subject to a borrowing base that is determined
by the value of the Company’s inventory, accounts receivable and real estate. All of Orbit Garant’s assets are pledged
as security for the Company’s obligations under the Credit Facility. In addition, the Company’s obligations under the
US$5.0 million revolving credit facility are guaranteed by EDC.
The Credit Facility contains covenants that limit the Company’s ability to undertake certain actions without prior
approval of the Lender, including: i) mergers, liquidations, dissolutions and changes of ownership; ii) the incurrence of
additional indebtedness; iii) encumbering the Company’s assets; iv) guarantees, loans, investments and acquisitions
that may be made by the Company; v) investing in or entering into derivative instruments, paying dividends and/or
making other capital distributions to related parties; vi) capital expenditures exceeding mutually agreed upon limits;
and vii) certain asset sales. The Credit Facility also contains a number of financial covenants that the Company must
comply with.
On December 20, 2018, Orbit Garant entered into an additional loan agreement with EDC for a term loan in the principal
amount of up to US$5.15 million for the purposes of financing the acquisition of certain assets of PPI that was
completed on October 11, 2018 (the “EDC Loan”). Orbit Garant is required to repay this loan in 57 consecutive monthly
installments commencing May 2019, and maturing January 2024. The Company’s obligations under the EDC Loan,
are secured by a third ranking hypothec over all of Orbit Garant’s assets. On January 21, 2019, an initial drawdown
of US$2.575 million was used to reduce the amount drawn from the Company’s Credit Facility. On October 9, 2019,
Orbit Garant withdrew an amount of $3.4 million (US$2.575 million) to fund the final payment in connection with the
acquisition of certain assets of PPI.
On April 23, 2020, the Company and EDC made arrangements whereby, among other things, all payments of principal
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Year End and Fourth Quarter 2021Management’s Discussion and AnalysisOrbit Garant Drilling Inc.
YEAR END AND FOURTH QUARTER 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
16
and interest under the EDC Loan were deferred until October 16, 2020 and therefore the terms of these loans were
extended by six months. Orbit Garant’s long-term debt under the EDC loan including current portion amounted to
$4.3 million as at June 30, 2021 ($5.9 million as at June 30, 2020).
In May 2020, OG Chile obtained a total of approximately $1.7 million in loans from Banco Scotiabank. The loans bear
interest at a rate of 3.5% per annum, have a term of 36 months and are 70% guaranteed by the Chilean government.
The loans have no capital repayments for the first six months and the interest over such period will be capitalised over
the remaining term of the loans.
In February 2021, OG Chile, entered into a financing agreement with Banco Scotiabank for a total of approximately
$2.6 million in order to purchase the office building it had rented for several years. This agreement bears interest at a
rate of 3.3% per annum, has a term of 84 months and is guaranteed by OG Chile’s real estate assets.
Orbit Garant believes that it will continue to meet its payment terms under its credit facilities and have sufficient
resources to carry on its business operations.
As at June 30, 2021, the Company had future contractual obligations as follows:
($000s)
Long-term debt
Lease liabilities
Operating leases
Equipment purchase
Total
Total
32.703
1.196
197
1.145
36.041
Less than 1 year
2.524
635
125
1.145
4.429
1-3 years
28.111
595
72
-
28.778
4-5 years
514
236
-
-
750
Subsequent years
1.554
530
-
-
2.084
OUTSTANDING SECURITIES AS AT SEPTEMBER 28, 2021
Number of common shares
Number of options
Fully diluted
37,372,756
3,342,500
40,715,256
On October 1, 2020, the Company issued 75,000 options at an exercise price of $0.93 per share. On December
2, 2020, 735,000 options were issued at an exercise price of $0.80 per share. On May 12, 2021, 25,000 options were
issued at an exercise price of $1.20 per share. On June 23, 2021, 350,000 options were issued at an exercise price of
$1.06 per share. During Fiscal 2021, the Company cancelled 646,500 options and 351,000 options were exercised.
RELATED PARTY TRANSACTIONS
Transactions with related parties
The Company is related to Dynamitage Castonguay Ltd., a company in which a director has an interest.
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Year End and Fourth Quarter 2021Management’s Discussion and AnalysisOrbit Garant Drilling Inc.
YEAR END AND FOURTH QUARTER 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
17
During the twelve-month periods ended June 30, 2021 and June 30, 2020, the Company entered into the following
transactions with its related company and with persons related to directors:
($000s)
Revenue
Expenses
12 months ended
June 30, 2021
10
162
12 months ended
June 30, 2020
54
148
As at June 30, 2021, a negligible amount was a receivable resulting from these transactions (a negligible amount as
at June 30, 2020)
All of these related party transactions made in the normal course of business measured at the exchange amount,
which is the amount established and agreed to by the parties.
Key management personnel and directors’ transactions
The definition of key management includes the close members of the family of key personnel and any entity over which
key management exercises control. The key management personnel have been identified as directors of the Company
and key management staff. Close members of the family are those family members who may be expected to influence,
or be influenced by that individual in their dealings with the Company.
Compensation paid to key management personnel and directors is as follows:
($000s)
Salaries and fees
Share-based compensation
Total
12 months ended
June 30, 2021
1,187
176
1,363
12 months ended
June 30, 2020
1,504
113
1,617
CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGMENTS
The significant accounting policies are described in note 5 of the Fiscal 2021 audited consolidated financial statements.
The preparation of financial statements in accordance with IFRS requires the Company's Management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and contingent liabilities on the reporting date, and amounts of revenues and expenses for the relevant period.
Although Management regularly reviews its estimates, actual results may differ. The impact of changes to accounting
estimates is recognized in the period during which the change occurs, and in the affected future periods, when
applicable. Areas in which the estimates and assumptions are significant, or which are complex, are presented as
follows:
A- CRITICAL ACCOUNTING ESTIMATES
Inventories
Part of the inventory was estimated based on the number of drills on mining site. In estimating the cost of this inventory,
management takes into account the estimated amount of inventory per drill, based on the most reliable evidence
available at the time the estimate was made.
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Year End and Fourth Quarter 2021Management’s Discussion and AnalysisOrbit Garant Drilling Inc.
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MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
18
Impairment of non-financial assets
The Company also uses its judgment to determine whether an impairment test must be performed due to the presence
of potential impairment indicators. In applying its judgment, the Company relies primarily on its knowledge of its
business and the economic environment. Significant management estimates are required to determine the recoverable
amount of the cash-generating unit ("CGU") including estimates of future cash flows. Differences in estimates could
affect whether tangible and intangible assets are in fact impaired and the dollar amount of that impairment. Significant
assumptions are used by management to determine the projected revenue, operating expenses, utilization, discount
rates and market pricing. Notably, these estimates are made in the context of COVID-19, an unprecedented global
pandemic, resulting in a higher degree of uncertainty. Consequently, the impact on the Consolidated Financial
Statements of future periods could be material.
Deferred income tax assets
The assessment of the probability in which deferred tax assets can be utilized is based on the Company’s latest
approved budget forecast, which is adjusted for significant non-taxable income (and expenses) and specific limits to
the use of any unused tax loss or credit. The tax rules in the numerous jurisdictions in which the Company operates
are also carefully taken into consideration. If a forecast of taxable income indicates the probable use of a deferred tax
asset, especially when it can be utilized without a time limit, that deferred tax asset is usually recognized in full. The
recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed
individually by Management based on specific facts and circumstances.
Leases
In determining the carrying amount of right-of-use assets and lease liabilities, the Company is required to estimate the
incremental borrowing rate specific to each leased asset if the interest rate implicit in the lease is not readily
determined. Management determines the incremental borrowing rate of each leased asset by incorporating the
Company's creditworthiness, the security, term and value of the underlying leased asset, and the economic
environment in which the leased asset operates in. The incremental borrowing rates are subject to change mainly due
to macroeconomic changes in the environment.
Income taxes
The Company is subject to income taxes in various jurisdictions. Judgment is required in determining the worldwide
provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is
uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional
taxes will be due in the future. Where the final tax outcome of these matters is different from the amounts that were
initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in
which such determination is made. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate,
on the basis of amounts expected to be paid to the tax authorities.
B- JUDGMENTS
Functional currency
In determining the functional currency of its foreign subsidiaries, the Company needs to evaluate different factors such
as the currency that mainly influences sales prices and costs, the economic environment and the degree of autonomy
of the subsidiary. Following the evaluation of the different factors, when the functional currency is not obvious, the
Company uses its judgment to determine the functional currency that most faithfully represents the economic effects
of the underlying transactions, events and conditions.
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Year End and Fourth Quarter 2021Management’s Discussion and AnalysisOrbit Garant Drilling Inc.
YEAR END AND FOURTH QUARTER 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
19
Significant judgment in determining the lease term of contracts with renewal options
The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered
by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to
terminate the lease, if it is reasonably certain not to be exercised. After the commencement date, the Company
reassesses the lease term for whether significant event of change in circumstances that is within its control and affects
its ability to exercise (or not exercise) the option to renew has occurred.
STANDARDS AND INTERPRETATIONS ADOPTED AND NOT YET ADOPTED
The following standards and amendments to existing standards were adopted by the Company on July 1, 2020:
• Amendments to IFRS 3 – Business Combinations
Further information on this new accounting standard can be found in note 6 of the audited consolidated financial
statements for Fiscal 2021. The amendments had no impact on the Company's consolidated financial statements.
RECONCILIATION OF NON - IFRS FINANCIAL MEASURES
Financial data has been prepared in conformity with IFRS. However, certain measures used in this discussion and
analysis do not have any standardized meaning under IFRS and could be calculated differently by other companies.
The Company believes that certain non-IFRS financial measures, when presented in conjunction with comparable
IFRS financial measures, are useful to investors and other readers because the information is an appropriate measure
to evaluate the Company’s operating performance. Internally, the Company uses this non-IFRS financial information
as an indicator of business performance. These measures are provided for information purposes, in addition to, and
not as a substitute for, measures of financial performance prepared in accordance with IFRS.
EBITDA:
Net earnings (loss) before interest, taxes, depreciation and amortization.
Adjusted gross profit and margin: Contract revenue less operating costs. Operating expenses comprise material and
service expenses, personnel expenses, other operating expenses, excluding
depreciation.
EBITDA
Management believes that EBITDA is an important measure when analyzing its operating profitability, as it removes
the impact of financing costs, certain non-cash items and income taxes. As a result, Management considers it a useful
and comparable benchmark for evaluating the Company’s performance, as companies rarely have the same capital
and financing structure.
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Reconciliation of EBITDA
(unaudited)
(in millions of dollars)
Net earnings (loss) for
the period
Add:
Finance costs
Income tax expense
(recovery)
Depreciation and
amortization
EBITDA
3 months ended
June 30, 2021
3 months ended
June 30, 2020
12 months ended
June 30, 2021
12 months ended
June 30, 2020
12 months ended
June 30, 2019
(2.2)
(2.7)
0.5
0.5
2.4
1.2
0.6
(0.4)
2.8
0.3
2.3
2.3
2.5
10.5
17.6
(7.4)
2.7
0.2
11.3
6.8
(3.5)
2.1
(0.3)
10.0
8.3
Adjusted Gross Profit and Margin
Although adjusted gross profit and margin are not recognized financial measures defined by IFRS, Management
considers them to be important measures as they represent the Company’s core profitability, without the impact of
depreciation expense. As a result, Management believes they provide a useful and comparable benchmark for
evaluating the Company’s performance.
Reconciliation of Adjusted Gross Profit and Margin
(unaudited)
(in millions of dollars)
Contract revenue
Cost of contract revenue
(including depreciation)
Less depreciation
Direct costs
Adjusted gross profit
Adjusted gross margin (%) (1)
3 months
ended
June 30, 2021
51.1
48.1
(2.0)
46.1
5.0
9.8
3 months ended
June 30, 2020
20.2
17.9
(2.4)
15.5
4.7
23.3
12 months
ended
June 30, 2021
163.3
12 months
ended
June 30, 2020
137.8
143.1
(8.9)
134.2
29.1
17.9
124.9
(9.5)
115.4
22.4
16.3
12 months ended
June 30, 2019
152.8
136.5
(8.8)
127.7
25.1
16.4
(1) Adjusted gross profit, divided by contract revenue X 100
RISK FACTORS
The following are certain factors relating to the Company’s business and the industry within which it operates. The
following information is a summary only of certain risk factors and is qualified in its entirety by reference to, and should
be read in conjunction with, the detailed information appearing elsewhere in this report and in the Company’s Annual
Information Form dated September 28, 2021. These risks and uncertainties are not the only ones relevant to the
Company. Additional risks and uncertainties not currently known to the Company, or that the Company currently deems
immaterial, may also impair the operations of the Company. If any such risks actually occur, the business, financial
condition, liquidity and results of operations of the Company could be affected materially and adversely.
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COVID-19
The Company’s business, operations and financial condition could be materially adversely affected by the outbreak of
epidemics, pandemics or other health crises, including COVID-19.
COVID-19 negatively affected the Company and its customers in the second half of Fiscal 2020 and the first half of
Fiscal 2021, particularly Q1 2021. The Company’s Chilean operations continue to be negatively impacted by logistical
and supply chain challenges related to COVID-19. Further spreading of the infection could continue to impact
customers, vendors, suppliers and other counterparties and materially impact the Company’s business, operations
and financial condition. The extent to which COVID-19 impacts the Company’s business, including its operations and
the market for its securities, will depend on future developments, which are highly uncertain and cannot be predicted
at this time, and include the duration, severity and scope of any worsening COVID-19, or COVID-19 variant, outbreaks
and the actions taken to contain or resolve them. In particular, the continued spread of COVID-19, or COVID-19
variants, or a resurgence of infections in jurisdictions that have previously controlled the pandemic, could result in a
slowdown or temporary suspension in operations or a re-imposition of restrictions on the operation of non-essential
services.
The risks to the Company’s business include, without limitation, the risk of breach of material contracts and customer
agreements, employee health, workforce productivity, increased insurance premiums, limitations on travel, the
availability of industry experts and personnel, prolonged restrictive measures put in place in order to control an
outbreak of contagious disease or other adverse public health developments in Canada or any of the markets in which
Orbit Garant operates and other factors that will depend on future developments beyond the Company’s control, which
may have a material and adverse effect on the Company’s business, financial condition and results of operations.
There can be no assurance that Orbit Garant will not ultimately see its workforce productivity reduced or that the
Company will not incur increased medical costs / insurance premiums as a result of these health risks. Under the
circumstances, the Company or its customers, suppliers and other counterparties may be forced to declare force
majeure on certain contracts. In addition, the pandemic could adversely affect global economies and financial markets
resulting in an economic downturn that could have an adverse effect on the demand for drilling services, the Company’s
prospects and its ability to achieve its objectives. Orbit Garant continues to monitor the situation and the impact COVID-
19, or COVID-19 variants, may have on its business.
Risk Related to Structure to the Business and Industry
Cyclical Downturns
Demand for drilling services and products depends significantly on the level of mineral exploration and development
activities conducted by mining companies, which in turn, are driven significantly by commodity prices. There is a
continued risk that low commodity prices could substantially reduce future exploration and drilling expenditures by
mining companies, which in turn, could result in a decline in the demand for the drilling services offered by the Company
and would materially impact the Company’s revenue, financial condition, cash flows and growth prospects.
Sensitivity to General Economic Conditions
The operating and financial performance of Orbit Garant is influenced by a variety of international and country-specific
general economic and business conditions (including inflation, interest rates and exchange rates), access to debt and
capital markets, as well as, monetary and regulatory policies. Deterioration in domestic or international general
economic conditions, including an increase in interest rates or a decrease in consumer and business demand, could
have a material adverse effect on the financial performance and condition, cash flows and growth prospects of the
Company.
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Reliance on and Retention of Employees
In addition to the availability of capital for equipment, a key limiting factor in the growth of drilling services companies
is the supply of qualified drillers, on whom the Company relies upon to operate its drills. As such, the ability to attract,
train and retain high quality drillers is a high priority for all drilling services providers. A failure by the Company to retain
qualified drillers or attract and train new qualified drillers could have a material adverse effect on the Company’s
financial performance, financial condition, cash flows and growth prospects. In addition, rising rates paid to drillers and
helpers will exert pressure on the Company’s profit margins if it is unable to pass on such higher costs to its customers
through price increases.
Increased Cost of Sourcing Consumables
When bidding on an underground drilling contract, the cost of sourcing consumables is a key consideration in deciding
upon the pricing. Underground drilling contracts are typically for one to two years and expose the Company to an
increase in the cost of consumables and labor during that period. A material increase in the cost of labor or
consumables during that period could result in materially higher costs and could materially reduce the Company’s
financial performance, financial condition, cash flows and growth prospects.
Country Risks
The Company does business internationally in numerous regions of different countries and with this comes the risk of
dealing with business and political systems in a variety of jurisdictions. Unanticipated events in a country (precipitated
by developments within or external to the country), such as economic, political, legal, tax related, regulatory or legal
changes (or changes in interpretation), could, directly or indirectly, have a material negative impact on operations and
assets. The risks include, but are not limited to, military repression, extreme fluctuations in currency exchange rates,
high rates of inflation, changes in mining or investment policies, nationalization/expropriation of projects or assets,
corruption, delays in obtaining or inability to obtain necessary permits, nullification of existing mining claims or interests
therein, hostage takings, labour unrest, opposition to mining from environmental or other non-governmental
organisations or shifts in political attitude that may adversely affect the business. There has been an emergence of a
trend by governments to increase their participation in the industry and thereby their revenues through increased
taxation, expropriation, or otherwise. This could negatively impact the level of foreign investment in mining and
exploration activities and thus drilling demand in these regions. Such events could result in reductions in revenue and
additional transition costs as equipment is shifted to other locations. Nationalization/expropriation of mining projects
has a direct impact on suppliers (such as the Company) to the mining industry.
While the Company works to mitigate its exposure to potential country risk events, the impact of any such event is
mostly not under the Company’s control, is highly uncertain and unpredictable and will be based on specific facts and
circumstances. As a result, the Company can give no assurance that it will not be subject to any country risk event,
directly or indirectly, in the jurisdictions in which it operates.
Tax Risks
Orbit Garant operates in many countries and is therefore subject to many different forms of taxation in various
jurisdictions throughout the world, including but not limited to, property tax, income tax, withholding tax, commodity
tax, social security and other payroll related taxes, foreign currency and capital repatriation laws. An unfavorable
interpretation of the current tax legislation could have a material adverse effect on the profitability of the Company or
may lead to disagreements with tax authorities regarding the interpretation of tax law.
Tax law and its administration are extremely complex and often require the Company to make subjective
determinations. The Company must make assumptions about, but not limited to, the tax rates in various jurisdictions,
the effect of tax treaties between jurisdictions and taxable income projections due to tax law and its administration
which are extremely complex. To the extent that such assumptions differ from actual results, or if such jurisdictions
were to change or modify such laws or the current interpretation thereof, the Company may have to record additional
tax expenses and liabilities, including interest and penalties. Moreover, there is a risk in which the countries where the
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Company operates may change their current tax regime with little prior notice or that the tax authorities in these
jurisdictions may attempt to claim tax on the global revenues of the Company.
Leverage and Restrictive Covenants
Orbit Garant entered into the Credit Agreement in order to provide it with credit facilities to fund, among other things,
working capital and acquisitions. The degree to which Orbit Garant is leveraged could have important consequences,
including: i) Orbit Garant’s ability to obtain additional financing for working capital, capital expenditures or acquisitions
in the future may be limited; ii) a significant portion of Orbit Garant’s cash flow from operations may be dedicated to
the payment of the principal of and interest on its indebtedness, thereby reducing funds available for future operations;
and iii) certain of Orbit Garant’s borrowings (including borrowings under the Credit Agreement) will be at variable rates
of interests, which exposes Orbit Garant to the risk of increased interest rates which may have an adverse effect on
Orbit Garant’s financial condition.
The Credit Agreement contains numerous restrictive covenants that limit the discretion of Orbit Garant’s Management
with respect to certain business matters. These covenants place significant restrictions on, among other things,
changes in ownership and the ability of Orbit Garant to create liens or other encumbrances, to pay dividends or make
certain other payments, investments, acquisitions, capital expenditures, loans and guarantees and to sell or otherwise
dispose of assets and merge with another entity. In addition, the Credit Agreement contains financial covenants that
require Orbit Garant to meet certain financial ratios and financial condition tests. A failure to comply with the obligations
in the Credit Agreement could result in a default that, if not cured or waived, could permit acceleration of the relevant
indebtedness. If the indebtedness under the Credit Agreement were to be accelerated, there can be no assurance that
the assets of Orbit Garant would be sufficient to repay in full that indebtedness. In addition, the Credit Agreement will
mature no later than November 2, 2022. There can be no assurance that future borrowings or equity financing will be
available to Orbit Garant or available on acceptable terms, in an amount sufficient to repay the Credit Agreement at
maturity or to fund Orbit Garant’s needs thereafter. This could have a material adverse effect on the business, financial
condition and results of operations of Orbit Garant.
Access of Customers to Equity Markets
Economic factors may make it more difficult for mining companies, particularly junior mining companies, to raise money
to fund exploration activity. This difficulty would have an adverse impact on the demand for drilling services and could
have a material adverse effect on the financial performance, financial condition, cash flows and growth prospects of
the Company.
Acquisitions
Orbit Garant is continuously seeking business acquisitions. It may be exposed to business risks or liabilities for which
it may not be fully indemnified or insured. The ongoing integration of existing and new computer systems, equipment
and personnel may impact the success of the acquisitions. Any issues arising from the integration of the acquired
businesses, including the integration of the accounting software, may require significant management, financial or
personnel resources that would otherwise be available for ongoing development and expansion of the Company’s
existing operations. If this happens, it may have a material adverse effect on the financial performance, financial
condition, cash flows and growth prospects of the Company.
Supply of Consumables
If the Company should grow, it could put pressure on its ability to manufacture or otherwise obtain new drills and
consumables required to conduct the Company’s drilling operations. This could constrain Orbit Garant’s ability to
increase its capacity and increase or maintain revenue and profitability.
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Competition
The Company faces competition from several large drilling services companies and many smaller, regional
competitors. Some of the Company’s competitors have been in the drilling services industry for a longer period and
have substantially greater financial and other resources than the Company has. Increased competition in the drilling
services market may adversely affect the Company’s current market share, profitability and growth opportunities. The
capital cost to acquire drilling rigs is relatively low, enabling competitors to finance expansion and providing opportunity
for new competitors to enter the market. This dynamic exposes the Company to the risk of reduced market share and
scope for geographic growth, as well as lower revenue and margin for its existing business.
A significant portion of the drilling services business is a result of being awarded contracts through a competitive tender
process. It is possible that the Company will lose potential new contracts to competitors if it is unable to demonstrate
reliable performance, technical competence and competitive pricing as part of the tender process or if mining
companies elect not to undertake a competitive tender process.
Ability to Sustain and Manage Growth
Orbit Garant’s ability to grow will depend on a number of factors, many of which are beyond the Company’s control,
including, but not limited to, commodity prices, the ability of mining companies to raise financing and the demand for
raw materials from large, emerging economies such as Brazil, Russia, India and China (“BRIC’’) economies. In
addition, the Company is subject to a variety of business risks generally associated with growing companies. Future
growth and expansion could place significant strain on the Company’s Management personnel and likely will require
the Company to recruit additional management personnel.
There can be no assurance that the Company will be able to: i) manage its expanding operations (including any
acquisitions) effectively; ii) sustain or accelerate its growth or that such growth, if achieved, will result in profitable
operations; iii) attract and retain sufficient management personnel necessary for continued growth; or, iv) successfully
make strategic investments or acquisitions. The failure to accomplish any of the foregoing could have a material
adverse effect on the Company’s financial performance, financial condition, cash flows and growth prospects.
Future Acquisition Strategy
Orbit Garant intends to grow through acquisitions in addition to organic growth. There is considerable competition
within the drilling services industry for attractive acquisition targets. It is not possible to ensure that future acquisition
opportunities will exist on acceptable terms, or that newly acquired or developed entities will be successfully integrated
into the Company’s operations. Additionally, the Company cannot give assurances that it will be able to secure the
adequate financing on acceptable terms to pursue this strategy.
Customer Contracts
The Company’s surface drilling customer contracts are typically for a term of six (6) to twelve (12) months and its
underground drilling customer contracts are typically for a term of one to two years and can be cancelled by the
customer on short notice in prescribed circumstances with limited or no amounts payable to the Company. There is a
risk that existing contracts may not be renewed or replaced. The failure to renew or replace some or all of these existing
contracts and cancellation of existing contracts could have a material adverse effect on the Company’s financial
performance, financial condition, cash flows and growth prospects. In addition, consolidation by the Company’s
customers could materially and adversely affect the Company’s results of operations and financial condition.
International Expansion and Instability
Expansion internationally entails additional political and economic risk. Some of the countries and areas targeted by
the Company for expansion are undergoing industrialization and urbanization and do not have the economic, political
or social stability that many developed nations now possess. Other countries have experienced political or economic
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instability in the past and may be subject to risks beyond the Company’s control, such as war or civil disturbances,
political, social and economic instability, corruption, nationalization, terrorism, expropriation without fair compensation
or cancellation of contract rights, significant changes in government policies, breakdown of the rule of law and
regulations and new tariffs, taxes and other barriers. There is a risk that the Company’s operations, assets, employees
or repatriation of revenue could be impaired or adversely affected by factors related to the Company’s international
expansion and have a material adverse effect on the financial performance, financial condition, cash flow and growth
prospects of the Company.
Operational Risks and Liability
Risks associated with drilling include, in the case of employees, personal injury and loss of life and, in the case of the
Company, damage and destruction to property, equipment, release of hazardous substances to the environment and
interruption or suspension of drill site operation due to unsafe drill operations. The occurrence of any of these events
may have an adverse effect on the Company, including financial loss, key personnel loss, legal proceedings and
damage to the Company’s reputation.
In addition, poor or failed internal processes, people or systems, along with external events could negatively impact
the Company’s operational and financial performance. The risk of this loss, known as operational risk, is present in all
aspects of the business of the Company, including, but not limited to, business disruptions, technology failures, theft
and fraud, damage to assets, employee safety, regulatory compliance issues or business integration issues. The
number and significance of the changes and the possibility that the Company may not be able to successfully
implement the changes made, may adversely affect the performance of the business and its financial condition, cash
flows and growth prospects of the Company.
Currency Exposure
Orbit Garant conducts some of its activities in US $, CLP, ARS, GHS, XOF and GNF and is thus exposed to foreign
exchange fluctuations. As at June 30, 2021, the Company had the following currency risk exposure related to financial
assets and liabilities in US $, CLP, ARS, GHS, XOF and GNF of approximately: $1.2, $0.6, $0.0, $1.8, $(6.7) and
$1.4 million, respectively in Canadian dollars ($0.0, $0.6, $0.6, $1.4, $(3.2) and $0.0 respectively in Canadian dollars
as at June 30, 2020). This exposure could change in the future and a significant portion of our revenue could potentially
be denominated in currencies other than the Canadian dollar, fluctuations of which could cause a negative impact on
our financial performance.
Business Interruptions
Business interruptions can occur as a result of a variety of factors, including; regulatory intervention, delays in
necessary approvals and permits, health and safety issues or product input supply bottlenecks. In addition, the
Company operates in a variety of geographic locations, some of which are prone to inclement weather conditions,
natural or other disasters. The occurrence of such conditions or any business interruption could have a material
adverse effect on the Company’s financial performance, financial condition, cash flows and growth prospects.
Risk to the Company’s Reputation
Risks to the Company’s reputation could include any negative publicity, whether true or not, and could cause a decline
in the Company’s customer base and have a material adverse impact on the Company’s financial performance,
financial condition, cash flows and growth prospects. All risks have an impact on reputation, and as such, reputational
risk cannot be managed in isolation from other types of risk. Every employee and representative of the Company is
charged with upholding its strong reputation by complying with all applicable policies, legislation and regulations as
well as creating positive experiences with the Company’s customers, stakeholders and the public.
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Corruption, Bribery and Fraud
Orbit Garant is required to comply with the Canadian Corruption of Foreign Public Officials Act (“CFPOA”) as well as
similar applicable laws in other jurisdictions, which prohibit companies from engaging in bribery or other prohibited
payments or gifts to foreign public officials for the purpose of retaining or obtaining business. The Company’s policies
mandate compliance with these laws. However, there can be no assurance that the policies and procedures and other
safeguards that the Company has implemented in relation to its compliance with these laws will be effective or that
Company employees, agents, suppliers or other industry partners have not engaged or will not engage in such illegal
conduct for which the Company may be held responsible. Violations of these laws could disrupt the Company’s
business and result in a material adverse effect on its business and operations.
Environment, Health and Safety Requirements and Related Considerations
The Company’s operations are subject to a broad range of federal, provincial, state and local laws and regulations as
well as permits and other approvals, including those relating to the protection of the environment and workers’ health
and safety governing, among other things, air emissions, water discharges, non-hazardous and hazardous waste
(including waste water), storage, handling, disposal and clean-up of dangerous goods and hazardous materials such
as chemicals, remediation of releases and workers’ health and safety in Canada and elsewhere (the ‘‘Environment,
Health and Safety Requirements’’). As a result of the Company’s operations, it may be involved from time to time in
administrative and judicial proceedings and inquiries relating to Environment, Health and Safety Requirements. Future
proceedings or inquiries could have a material adverse effect on the Company’s business, financial condition and
results of operations.
The activities at clients’ worksites may involve operating hazards that can result in personal injury and loss of life.
There can be no assurance that the Company’s insurance will be sufficient or effective under all circumstances or
against all claims or hazards to which it may be subject or that it will be able to continue to obtain adequate insurance
protection. A successful claim or damage resulting from a hazard for which it is not fully insured could adversely affect
the Company’s results of operations. In addition, if the Company is seen not to adequately implement health and safety
and environmental policies, its relationships with its customers may deteriorate, which may result in the loss of
contracts and restrict its ability to obtain new contracts.
Climate Change Risk
Orbit Garant operates in various regions and jurisdictions where environmental laws are evolving and may be different
according to each jurisdiction. Several governments or governmental bodies have introduced or are contemplating
regulatory changes in response to the potential impact of climate change, such as regulation relating to emission
levels. If the current regulatory trend continues, this may result in increased cost in some of the Company’s operations.
In addition, the physical effect of climate change, such as extreme weather conditions, natural disasters, resource
shortages and changing sea levels could have an adverse financial impact on operations located in the regions where
these conditions occur.
Insurance Limits
The Company maintains property, general liability and business interruption insurance. However, there can be no
assurance that such insurance will continue to be offered on an economically feasible basis, that all events that could
give rise to a loss or liability are insurable, or that the amounts of insurance will at all times be sufficient to cover each
and every loss or claim that may occur involving the assets or operations of the Company.
Legislative and Regulatory Changes
Changes to any of the laws, rules, regulations or policies affecting the business of the Company would have an impact
on the Company’s business and may significantly and adversely affect the operations and financial performance of the
Company.
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Legal and Regulatory Risk
The mining and drilling industries are highly regulated by legal, environmental and health and safety regulations.
Failure to comply with such regulations could lead to penalties, including fines or suspension of operations which could
have a significant impact on the financial strength and future earnings potential of the Company. Furthermore, the
Company’s mineral exploration customers are also subject to similar legal, regulatory, health and safety regulations
which could materially affect their decision to go ahead with mineral exploration or mine development and thereby
indirectly negatively impact the Company.
Cyber-Security Risk
While information systems are integral to supporting the Company’s business, due to the nature of the Company’s
services, it is not considered to be subject to the same level of cyber security risks as companies operating in sectors
where sensitive information is at the core of their business. Nevertheless, the Company is potentially exposed to risks
ranging from internal human error to uncoordinated individual attempts to gain unauthorised access to its information
technology systems, to sophisticated and targeted measures directed at the Company and its systems, clients or
service providers. Any such disruptions in the Company’s systems or the failure of the systems to operate as expected
could, depending on the magnitude of the problem, result in the loss of client information, a loss of current or future
business, reputational harm and/or potential claims against the Company, all of which could have an adverse effect
on the Company’s business, financial condition and operating results. The Company continues to enhance its efforts
to mitigate these risks. It invests in technology security initiatives to better identify and address any vulnerability
including periodic third-party vulnerability assessments, testing user knowledge of cyber security best practices, and
audits of security processes and procedures. In addition, the Company continues to increase the employees’
awareness of security policies through ongoing communications.
Risk Related to Structure and Common Shares
Equity Market Risks
There is a risk associated with any investment in shares. The market price of securities such as the Common Shares
of the Company are affected by numerous factors including, but not limited to, general market conditions, actual or
anticipated fluctuations in the Company’s results of operations, changes in estimates of future results of operations by
the Company or securities analysts, risks identified in this section and other factors. In addition, the financial markets
have experienced significant price and volume fluctuations that have sometimes been unrelated to the operating
performance of the issuers or the industries in which they operate. Consequently, the trading price of the Common
Shares may fluctuate.
Influence of Existing Shareholders
As of September 28, 2021, Pierre Alexandre, Vice Chairman and Vice President of Corporate Development of the
Company, holds or controls, directly or indirectly, approximately 23% of Orbit Garant’s outstanding Common Shares.
As a result, this shareholder has the ability to influence Orbit Garant’s strategic direction and policies, including any
merger, consolidation or sale of all or substantially all of its assets, and the election and composition of Orbit Garant’s
Board of Directors. The foregoing ability to affect the control and direction of Orbit Garant could reduce its
attractiveness as a target for potential takeover bids and business combinations, and correspondingly affect its share
price.
Future Sales of Common Shares by the Company’s Existing Shareholders
Certain shareholders, including Pierre Alexandre, hold or control significant blocks of shares of the Company. The
decision of any of these shareholders to sell a substantial number of Common Shares in the public market could result
in a material imbalance in demand for the Company’s shares and therefore a decline in the market price of the Common
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Shares. In addition, the perception among the public that such sales may occur could also result in a reduction in the
market price of the Common Shares.
Dilution
Orbit Garant may raise additional funds in the future by issuing equity securities. Holders of Common Shares will have
no pre-emptive rights in connection with such further issuances. Additional Common Shares may be issued by Orbit
Garant in connection with the exercise of options granted. Such additional equity issuances could, depending on the
price at which such securities are issued, substantially dilute the interests of the holders of Common Shares.
Dividend Payments
Orbit Garant does not expect to pay dividends as it intends to use cash for future growth or debt repayment. In addition,
the Credit Agreement places restrictions on the ability of Orbit Garant to declare or pay dividends.
Credit Risk
The Company provides credit to its customers in the normal course of its operations. The Company has adopted a
policy of only dealing 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. 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.
During these unprecedented market challenges, COVID-19 may adversely affect the Company's customers and their
solvency. Our customers' financial difficulties can negatively impact the Company's results of operations and financial
condition, especially if those customers were to delay or default in payment owed to the Company. Collection of trade
and other receivables from third parties remains a priority for the Company under the current situation.
In order to reduce the credit risk, the Company is using insurance coverage from EDC on certain accounts receivable
from its customers. The insurance program provides under certain terms and conditions an insurance coverage amount
of up to 90% of unpaid accounts. As at June 30, 2021, the amount of the insurance coverage from EDC represents
6% of the accounts receivable (6% as at June 30, 2020).
As at June 30, 2021, 73% (66% as at June 30, 2020) of the trade accounts receivable are aged as current and 3% are
impaired (4% as at June 30, 2020).
Two major customers represent 15% of the trade accounts receivable as at June 30, 2021 (one major customer
represented 14% as at June 30, 2020).
One major customer represents 12% of the contract revenue for the year ended June 30, 2021 (for the year ended
June 30, 2020, one major customer represented 20% of the contract revenue).
Credit risk also arises from cash and cash equivalents with banks and financial institutions. This risk is limited because
the counterparties are mainly Canadian banks with high credit ratings. The Company does not enter into derivatives
to manage credit risk.
Interest Rate Risk
The Company is subject to interest rate risk since a significant part of the long-term debt bears interest at variable
rates.
30
Year End and Fourth Quarter 2021Management’s Discussion and AnalysisOrbit Garant Drilling Inc.
YEAR END AND FOURTH QUARTER 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
29
As at June 30, 2021, the Company estimates that a 100 basis point increase or decrease in interest rates would have
caused a corresponding annual increase or decrease in net earnings (loss) and comprehensive earnings (loss) of
$0.2 million ($0.2 million as at June 30, 2020).
Equity Market Risk
Equity market risk is defined as the potential adverse impact on the Company's earnings due to movements in
individual equity prices or general movements in the level of the stock market. The Company closely monitors the
general trends in the stock markets and individual equity movements, and determines the appropriate course of actions
to be taken by the Company.
Fair Value
The fair value of cash and equivalents, trade and other receivables, trade and other payables and factoring liability is
approximately equal to their carrying values due to their short-term maturity.
The fair value of long-term debt approximates its carrying value as most of it bears interest at a variable rate and has
financing conditions similar to those currently available to the Company.
OUTLOOK
Orbit Garant continues to monitor market conditions in the mining sector and the impact of the COVID-19 pandemic
on its business. Orbit Garant’s business activity in Canada and West Africa have has recently surpassed pre-pandemic
levels, and the Company’s business activity in Chile, which began to ramp up in the latter half of Q4 2021, remains
below pre-pandemic levels. The current high level of customer demand in Canada has resulted in a shortage of
experienced drillers, which is expected to increase labour costs and impede productivity levels in the near term. The
Company does not expect to experience a shortage of experienced drillers in its international operations. Orbit Garant
is addressing the shortage of experienced drillers in Canada through its driller training program and its computerized
drilling technology. The impact of the pandemic on global supply chains is also expected to result in a higher cost of
materials for Orbit Garant in the near term. The Company expects to offset the increased labour costs in Canada and
the higher costs of materials with price increases on its drilling contracts. Orbit Garant expects to gradually increase
its capacity utilization and driller productivity as the mining cycle progresses and grow margins.
While market conditions may fluctuate in the near term, Management believes that the longer-term outlook for drilling
in the gold industry is positive, as many mining companies are facing declining reserves. Accordingly, increased
spending on exploration and new mine development will be required for the industry to remain viable in the long term
as the reserves at existing mines are being depleted. The current strong price of gold may incentivize mining
companies to increase exploration and development spending on gold projects in the near term. Orbit Garant is well
positioned for increased drilling services demand in the gold sector as it derives approximately 76% of its revenue from
gold related projects.
Management is also encouraged by the strong rebound in the price of copper, which has increased significantly from
its low of US$2.10 per pound in March 2020 and reached a record high in May 2021. Many industry analysts expect
that declining copper reserves may necessitate increased exploration activity for copper in the coming years. The
current strength in the price of copper may incentivize increased exploration and development spending on copper
projects.
Orbit Garant generated approximately 80% of its revenue from its Canadian operations in fiscal 2021. S&P Global
Market Intelligence forecasts that Canada is the only major gold-producing country in the world in which output is
expected to increase significantly over the next five years. As such, Orbit Garant is well positioned to benefit from the
positive outlook for the gold mining sector in Canada. An additional positive factor for mining companies operating in
Canada is the current lower value of the Canadian dollar relative to the US dollar, as their expenses are typically in
31
Year End and Fourth Quarter 2021Management’s Discussion and AnalysisOrbit Garant Drilling Inc.
YEAR END AND FOURTH QUARTER 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
30
Canadian dollars and their revenues are denominated in US dollars. At the time of this report, the value of the Canadian
dollar was approximately $0.79 US dollars.
Orbit Garant’s international operations provide enhanced market, customer and commodity diversification, as well as
increased access to higher margin specialized drilling activity. In South America, Orbit Garant is currently working on
projects in Chile and Guyana. In West Africa, the Company is currently working on projects in Burkina Faso and
Guinea.
Civil unrest and widespread protests in Chile as well as regional security concerns in Burkina Faso resulted in the
delay or interruption of certain mineral drilling projects in these countries during the Company’s 2020 fiscal year. This
was prior to the pandemic, which temporarily disrupted most of the Company’s remaining mineral drilling projects in
these countries. The Company believes that the impact of the civil protests in Chile on mineral drilling projects has
now diminished, but logistical challenges related to the pandemic continue to impact drilling projects in Chile. Orbit
Garant’s drilling projects in Burkina Faso are in areas of the country that have historically experienced less incidents
of violence. Orbit Garant continues to monitor regional security concerns in Burkina Faso and while the situation
stabilized in fiscal 2021. Orbit Garant’s policy is to only work in areas where the security of its employees can be
appropriately maintained.
Management believes the Company’s proprietary computerized monitoring and control drilling technology will
increasingly be an important contributor in reducing both labour and consumable drilling costs, enhancing driller
productivity rates and improving safety. Orbit Garant currently has 43 drill rigs featuring its computerized monitoring
and control technology, all of which are currently deployed on customer projects. These next generation drill rigs have
demonstrated a significant increase in productivity rates compared to conventional drill rigs. Orbit Garant’s customers
have responded positively to this improved performance, which has led to new or renewed underground drilling
contracts for longer terms.
Management will remain focused on maximizing stakeholder value by: managing its variable cost structure and cash,
optimizing its drill rig utilization, increasing productivity rates, continuing to focus on technology innovation, retaining
key personnel, and maintaining strong health and safety standards. Orbit Garant will also continue to evaluate
opportunities to further expand its market presence both in Canada and abroad.
DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING
The CEO and the CFO of the Company are responsible for establishing and maintaining disclosure controls and
procedures (DC&P) for the Company as defined under Multilateral Instrument 52-109 issued by the Canadian
Securities Administrators. The CEO and the CFO have designed such DC&P, or caused them to be designed under
their supervision, to provide reasonable assurance that information required to be disclosed by the Company in its
annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed,
summarized and reported within the time periods specified in the securities legislation and includes controls and
procedures designed to ensure that information required to be disclosed by an issuer in its annual filings, interim filings
or other reports filed or submitted under securities legislation is accumulated and communicated to the Company’s
management, including its certifying officers, as appropriate to allow timely decisions regarding required disclosure.
As at June 30, 2021, the CEO and CFO evaluated the design and operation of the Company’s DC&P. Based on that
evaluation, the CEO and CFO concluded that the Company’s DC&P was effective as at June 30, 2021.
The CEO and the CFO are responsible for designing internal controls over financial reporting (“ICFR”) or causing them
to be designed under their supervision. The Company’s ICFR are designed to provide reasonable assurance regarding
the reliability of the Company’s financial reporting and its preparation of financial statements for external purposes in
accordance with IFRS.
As discussed above, the inherent limitations in all control systems are such that they can provide only reasonable, not
absolute, assurance that all control issues and instances of fraud or error, if any, within the Company, have been
32
Year End and Fourth Quarter 2021Management’s Discussion and AnalysisOrbit Garant Drilling Inc.
YEAR END AND FOURTH QUARTER 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
31
detected. Therefore, no matter how well designed, ICFR have inherent limitations and can provide only reasonable
assurance with respect to financial statement preparation and may not prevent and detect all misstatements.
During Fiscal 2021, Management, including its CEO and CFO, evaluated the existence and design of the Company's
ICFR and confirmed there were no changes to the ICFR that have occurred during the year which materially affected,
or are reasonably likely to materially affect, the Company's ICFR. The Company continues to review and document its
disclosure controls and its ICFR, and may, from time to time make changes aimed at enhancing their effectiveness
and to ensure that its systems evolve with the business. As of June 30, 2021, an evaluation was carried out, under the
supervision of the CEO and CFO, of the effectiveness of the Company's ICFR as defined in NI 52-109. Based on this
evaluation the CEO and the CFO concluded that the design and operation of these ICFR were effective.
The evaluations were conducted in accordance with the framework and criteria established in Internal Control –
Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission
("COSO"), a recognized control model, and the requirements of NI 52-109.
33
Year End and Fourth Quarter 2021Management’s Discussion and AnalysisOrbit Garant Drilling Inc.
KPMG LLP
600 de Maisonneuve Blvd. West
Suite 1500, Tour KPMG
Montréal (Québec) H3A 0A3
Canada
Telephone
Fax
Internet
(514) 840-2100
(514) 840-2187
www.kpmg.ca
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Orbit Garant Drilling Inc.
Opinion
We have audited the consolidated financial statements of Orbit Garant Drilling Inc. (the "Entity"),
which comprise:
•
•
•
•
the consolidated statements of financial position as at June 30, 2021 and June 30, 2020;
the consolidated statements of earnings (loss) and comprehensive earnings (loss) for the years
then ended;
the consolidated statements of changes in equity for the years then ended;
the consolidated statements of cash flows for the years then ended;
• and notes to the consolidated financial statements, including a summary of significant accounting
policies
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the
consolidated financial position of the Entity as at June 30, 2021 and June 30, 2020, and its
consolidated financial performance and its consolidated cash flows for the years then ended in
accordance with International Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the "Auditors’ Responsibilities for
the Audit of the Financial Statements" section of our auditors’ report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our
audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matter
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements for the year ended June 30, 2021. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG
Canada provides services to KPMG LLP.
Page 2
We have determined the matter described below to be the key audit matters to be communicated in
our auditors’ report.
Assessment of the accuracy of mining sites inventories
Description of the matter
We draw attention to Note 5 and Note 10 to the consolidated financial statements.
The Entity’s inventories mainly include spare parts and consumables. As at June 30, 2021, the Entity
holds inventories of $44.68 million, a portion of which consists of mining site inventories. Inventories
are valued at the lower of cost and net realizable value. Cost is determined on the first-in, first-out
basis.
Why the matter is a key audit matter
We identified the assessment of the accuracy of mining sites inventories as a key audit matter. This
matter represented an area of higher assessed risk of material misstatement given the magnitude of
the inventory balance and the extent of audit effort needed to address the matter. In addition,
significant auditor judgment was required in evaluating the results of our audit procedures on the first-
in, first-out cost basis of the mining site inventories.
How the matter was addressed in the audit
The following are the primary procedures we performed to address this key audit matter:
We sorted mining site inventories by item and by location, to calculate movements during the year for
items held in inventory at year-end. We performed substantive analytical procedures on the first-in,
first-out cost basis for these items, using data including purchase costs and mining site inventory
quantities at year-end. To evaluate the reliability of the data used in the substantive analytical
procedures described above:
We tested a sample of inventory purchases to invoices.
For a selection of mining site locations, we observed the Entity’s physical inventory counts at year-
end and performed independent test counts for a sample of items which we compared to the Entity’s
records.
Other Information
Management is responsible for the other information. Other information comprises:
•
•
the information included in Management’s Discussion and Analysis filed with the relevant
Canadian Securities Commissions.
the information, other than the financial statements and the auditors’ report thereon, included in a
document likely to be entitled "Annual Report".
Our opinion on the financial statements does not cover the other information and we do not and will
not express any form of assurance conclusion thereon.
35
Page 3
In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for
indications that the other information appears to be materially misstated.
We obtained the information included in Management’s Discussion and Analysis filed with the
relevant Canadian Securities Commissions as at the date of this auditors’ report. If, based on the
work we have performed on this other information, we conclude that there is a material misstatement
of this other information, we are required to report that fact in the auditors’ report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditors’ report thereon, included in a
document likely to be entitled "Annual Report" is expected to be made available to us after the date of
this auditors’ report. If, based on the work we will perform on this other information, we conclude that
there is a material misstatement of this other information, we are required to report that fact to those
charged with governance.
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with International Financial Reporting Standards (IFRS), and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Entity’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Entity or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial reporting
process.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report
that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit.
36
Page 4
We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting
intentional omissions,
misrepresentations, or the override of internal control.
involve collusion,
from error, as
fraud may
forgery,
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Entity's ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditors’ report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditors’ report. However, future events or conditions may cause the Entity to
cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
• Communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
• Provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
37
Page 5
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the group Entity to express an opinion on the financial statements. We
are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
The engagement partner on the audit resulting in this auditors’ report is Alain Bessette.
Montréal, Canada
September 28, 2021
*CPA auditor, CA, public accountancy permit No. A115894
38
ORBIT GARANT DRILLING INC.
Consolidated Statements of Earnings (Loss)
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share)
Contract revenue
Cost of contract revenue
Gross profit
Expenses (income)
General and administrative expenses
Foreign exchange loss (gain)
Finance costs
Litigation
Earnings (loss) before income taxes
Income tax expense (recovery)
Current
Deferred
Net earnings (loss)
Net earnings (loss) per share
Basic
Diluted
Notes
June 30
2021
$
June 30
2020
$
25
7, 8
7
20
8
18
17
163,294
137,810
143,004
20,290
124,866
12,944
14,497
712
2,290
(1,962)
15,537
4,753
461
1,998
2,459
2,294
0.06
0.06
15,388
(53)
2,692
2,035
20,062
(7,118)
451
(212)
239
(7,357)
(0.20)
(0.20)
See accompanying notes to consolidated financial statements.
Page 7
39
ORBIT GARANT DRILLING INC.
Consolidated Statements of Comprehensive Earnings (Loss)
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars)
Net earnings (loss)
Other comprehensive loss
Cumulative translation adjustments
Other comprehensive loss, net of income tax
Comprehensive earnings (loss)
June 30
June 30
2021
$
2,294
(442)
(442)
1,852
2020
$
(7,357)
(1,470)
(1,470)
(8,827)
See accompanying notes to consolidated financial statements.
Page 8
40
ORBIT GARANT DRILLING INC.
Consolidated Statements of Changes in Equity
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars)
Year ended June 30, 2021
Balance as at July 1, 2020
Total comprehensive earnings (loss)
Net earnings
Other comprehensive loss
Cumulative translation adjustments
Other comprehensive loss
Transactions with shareholders, recorded directly in equity
(Note 17)
Share-based compensation
Stock options issued
Stock options exercised
Stock options cancelled
Total transactions with shareholders
Balance as at June 30, 2021
Year ended June 30, 2020
Balance as at July 1, 2019
Total comprehensive loss
Net loss
Other comprehensive loss
Cumulative translation adjustments
Other comprehensive loss
Transactions with shareholders, recorded directly in equity
(Note 17)
Share-based compensation
Stock options cancelled
Total transactions with shareholders
Balance as at June 30, 2020
See accompanying notes to consolidated financial statements.
Share capital
$
(Note 17)
58,857
-
-
-
-
-
347
-
347
59,204
Share capital
$
(Note 17)
58,857
-
-
-
-
-
-
58,857
41
Equity-settled
reserve
$
Retained
earnings
$
Accumulated
other
comprehensive
loss
$
Total
Shareholders'
equity
$
1,309
10,047
(2,208)
68,005
-
-
-
232
330
(88)
(331)
143
1,452
2,294
-
2,294
-
-
-
(330)
-
331
1
12,342
(442)
(442)
-
-
-
-
-
(2,650)
(442)
(442)
232
-
259
-
491
70,348
Total
Equity-settled
reserve
$
Retained
earnings
$
Accumulated
other
comprehensive
earnings (loss)
$
Shareholders'
equity
$
1,486
16,971
(738)
76,576
-
-
-
256
(433)
(177)
1,309
(7,357)
-
(7,357)
-
-
-
433
433
10,047
(1,470)
(1,470)
-
-
-
(2,208)
(1,470)
(1,470)
256
-
256
68,005
Page 9
ORBIT GARANT DRILLING INC.
Consolidated Statements of Financial Position
As of June 30, 2021 and June 30, 2020
(in thousands of Canadian dollars)
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income taxes receivable
Prepaid expenses
Non-current assets
Investments
Deposit on equipment purchase
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Income taxes payable
Factoring liability
Current portion of long-term debt
Current portion of lease liabilities
Provision for litigation
Non-current liabilities
Long-term debt
Lease liabilities
EQUITY
Share capital
Equity-settled reserve
Retained earnings
Accumulated other comprehensive loss
Equity attributable to shareholders
Total liabilities and equity
Contingencies and commitments (notes 20 and 21)
APPROVED BY THE BOARD
(signed) Éric Alexandre
Éric Alexandre, Director
Notes
(Recast - Note 2)
June 30
2020
$
June 30
2021
$
9
10
21
11
12
13
18
24
14
15
20
14
15
17
3 256
40 724
44 684
1 112
796
90 572
259
1 909
39 258
2 106
141
3 897
138 142
30 486
7
2 880
2 524
635
-
36 532
29 901
1 361
67 794
59 204
1 452
12 342
(2 650)
70 348
138 142
4 996
21 122
49 055
1 478
827
77 478
317
-
41 079
4 486
588
5 890
129 838
18 452
5
-
1 979
2 954
2 035
25 425
34 759
1 649
61 833
58 857
1 309
10 047
(2 208)
68 005
129 838
(signed) Nicole Veilleux
Nicole Veilleux, Director
See accompanying notes to consolidated financial statements.
Page 10
42
ORBIT GARANT DRILLING INC.
Consolidated Statements of Cash Flows
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars)
OPERATING ACTIVITIES
Earnings (loss) before income taxes
Items not affecting cash
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
(Gain) loss on disposal of property, plant and equipment
Gain on disposal of right-of-use assets
Share-based compensation
Finance costs
Net change in fair value of investments
Litigation
Changes in non-cash operating working capital items
Income taxes paid
Finance costs paid
INVESTING ACTIVITIES
Acquisition of investments
Deposit on equipment purchase
Proceeds from disposal of investments
Acquisition of property, plant and equipment
Proceeds from disposal of right-of-use assets
Proceeds from disposal of property, plant and equipment
FINANCING ACTIVITIES
Repayment of balance payable related to a business combination
Proceeds from stock options exercised
Proceeds from factoring
Repayment on factoring
Proceeds from long-term debt
Repayment of long-term debt
Repayment of lease liabilities
Effect of exchange rate changes
(Decrease) increase in cash
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Notes
(Recast - Note 2)
June 30
2020
$
June 30
2021
$
11
12
13
11
12
17
10
20
19
10
21
10
11
12
11
4,753
9,503
591
441
(346)
-
232
2,290
(2)
(1,962)
15,500
(3,362)
(93)
(2,250)
9,795
(54)
(1,909)
310
(5,953)
-
908
(6,698)
-
259
4,896
(1,984)
79,495
(85,777)
(677)
(3,788)
(1,049)
(1,740)
4,996
3,256
(7,118)
10,204
597
439
18
(13)
256
2,692
(94)
2,035
9,016
4,577
(1,530)
(2,670)
9,393
(30)
-
226
(9,659)
4
171
(9,288)
(3,409)
-
-
-
85,886
(78,909)
(709)
2,859
(448)
2,516
2,480
4,996
See accompanying notes to consolidated financial statements.
Page 11
43
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
1. DESCRIPTION OF BUSINESS
Orbit Garant Drilling Inc. (the "Company"), amalgamated under the Canada Business Corporations Act , mainly operates a surface and underground
diamond drilling business. The Company has operations in Canada, the United States, Central and South America and West Africa.
The Company's head office is located at 3200, boul. Jean-Jacques Cossette, Val-d'Or (Québec), Canada. The Company holds interests in several
entities. The percentage of voting rights in its subsidiaries and its associates is as follows:
Orbit Garant Drilling Services Inc.
9116-9300 Québec inc.
Drift Exploration Drilling Inc.
Drift de Mexico SA de CV
Orbit Garant Chile S.A.
Orbit Garant Drilling Ghana Limited
Perforación Orbit Garant Peru S.A.C.
OGD Drilling (Guyana) Inc.
Forage Orbit Garant BF S.A.S.
Orbit Garant Perforaciones Patagonia S.A.S. (dissolved on December 31, 2020)
Forage Orbit Garant Guinée SARLU (since December 3, 2020)
Sarliaq-Orbit Garant Inc.
Tumiit Orbit Garant Inc.
2.
BASIS OF PREPARATION
Basis of presentation
% of voting rights
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
49%
49%
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the
International Accounting Standards Board ("IASB"). The IFRS accounting policies set out below were consistently applied to all periods presented.
The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates, assumptions and
judgments. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. The areas involving a
higher degree of judgment or complexity, or areas where assumptions and estimates are significant, are disclosed in Note 5.
These consolidated financial statements have been prepared on a historical cost basis except for the investments, which are measured at fair value, and
share-based compensation which is measured in accordance with IFRS 2, Share-Based Payment . They are presented in Canadian dollars, which are the
currency of the primary economic environment in which the Company operates ("functional currency"). All values are rounded to the nearest thousand
dollars, except where otherwise indicated.
These consolidated financial statements were approved for issue by the Board of Directors of Orbit Garant Drilling Inc. on September 28, 2021.
Recast of June 30, 2020 Financial Position
The comparative figures have been revised in these consolidated financial statements to reclassify Property, plant and equipment of' $745 and Long-term
debt of $618, to Right-of-use assets and Leases liabilities, respectively, as at June 30, 2020. This reclassification had no material impact on the financial
statements.
44
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ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
3.
COVID-19
Since February 29, 2020, the outbreak of the novel strain of coronavirus, specifically identified as "COVID-19", has resulted in governments worldwide
enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, temporary restriction
on all non-essential business, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in
an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with
significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at
this time, as is the efficacy of the government and central bank interventions.
The Company’s priority is to ensure the health of its employees and business partners as well as ensure the continuity of its business operations and
support its customers in their mining operations. The impact of the pandemic has negatively affected the Company’s activities in 2020 as some projects
were put on hold or postponed.
As at June 30, 2021, the Company complied with its financial covenants. Due to the current economic uncertainties, management has taken several
measures to secure the Company’s ability to meet its financial and contractual obligations including (i) applying for government grants and subsidies (ii)
reworking its cost structure and postponing non-essential expenses (iii) making arrangements with Export Development Canada to temporarily suspend
the debt payments on its two loans (see Note 14(e)) and (iv) modify certain applicable covenants to its loans.
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company. A subsidiary is an
entity controlled by the Company. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over the investee, independently of its percentage of participation. The existence and
effect of potential voting rights are considered when the Company controls another entity.
Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statements of earnings (loss) from the
effective date of acquisition to the effective date of disposal, as appropriate. Intercompany transactions and balances are eliminated on consolidation.
Foreign currency translation
Transactions denominated in a currency other than the functional currency of the Company or of a foreign subsidiary whose functional currency is the
Canadian dollar, are accounted for using the exchange rate prevailing on the transaction date. On each reporting date, monetary items denominated in a
foreign currency are translated using the exchange rate prevailing on that date, and non-monetary items that are measured at historical cost are not
adjusted. Exchange differences are recognized in net earnings in the period during which they occur.
The assets and liabilities of foreign subsidiaries whose functional currency is not the Canadian dollar are translated into Canadian dollars by applying the
exchange rate prevailing at the reporting date. Revenue and expense items are translated at the average exchange rate for the period. Exchange
differences are recognized in OCI under "Cumulative translation adjustments" and are accumulated in equity. The accumulated amount of exchange
differences is reclassified in net earnings upon disposal or partial disposal of an interest in a foreign operation. Additionally, foreign exchange gains and
losses related to certain intercompany loans that are permanent in nature are included in OCI under "Cumulative translation adjustments" and are
accumulated in equity.
Financial instruments
Financial assets and financial liabilities are initially recognized at fair value and their subsequent measurement is dependent on their classification as
described below. Their classification depends on the purpose for which the financial instruments were acquired or issued, their characteristics and the
Company’s designation of such instruments. Financial instruments are recognized when the Company becomes a party to the contractual provisions of
the instrument.
45
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ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Asset/Liability
Cash and equivalents
Trade and other receivables
Investments
Trade and other payables
Factoring liability
Long-term debt
Classification
Amortized cost
Amortized cost
Fair value through profit or loss
Amortized cost
Amortized cost
Amortized cost
Financial assets measured at amortized cost
A financial asset is subsequently measured at amortized cost, using the effective interest method and net of any impairment loss, if
(a) The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
(b) The contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and/or interest.
Financial assets measured at fair value
These assets are measured at fair value and changes therein, including any interest or dividend income, are recognized in net income. However, for
investments in equity instruments that are not held for trading, the Company may elect at initial recognition to present gains and losses in other
comprehensive income. For such investments measured at fair value through other comprehensive income, gains and losses are never reclasified to net
income, and no impairment is recognized in net income.
Financial liabilities measured at amortized cost
A financial liability is subsequently measured at amortized cost, using the effective interest method.
Financial liabilities measured at fair value
liabilities measured at fair value are initially recognized at fair value and are remeasured at each reporting date with any changes therein
Financial
recognized in net income. The Company has no financial liabilities measured at fair value.
The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.
Financial assets and liabilities are offset and the net amount presented in the consolidated statements of financial position when and only when the
Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Amortized cost and effective interest method
The effective interest method is a method of calculating the amortized cost of a financial instrument and of allocating interest income over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash flows (including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or,
where appropriate, a shorter period, to the net carrying amount on initial recognition.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, bank overdraft and short-term deposits with original maturities of three months or less.
46
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ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Trade and other receivables
Trade and other receivables consist of amounts due from normal business activities. An allowance for expected credit losses is maintained to reflect an
impairment risk for trade and other receivables based on an expected credit loss model which factors in changes in credit quality since the initial
recognition of trade accounts receivable based on customer risk categories. Bad debts are also provided for based on collection history and specific risks
identified on a customer-by-customer basis.
Employee benefits
Employee benefits are all forms of consideration given by an entity in exchange for services rendered by employees or for the termination of employment.
Wages, paid leaves, bonuses and non-monetary benefits are short-term employee benefits, and they are recorded in the annual reporting period in which
the employees of the Company render the related services.
Inventories
The Company maintains an inventory of operating supplies, motors, drill rods and drill bits on mining sites and warehouses. These inventories are valued
at the lower of cost and net realizable value. Net realizable value is determined using the estimated selling price less estimated costs to complete the sale.
Cost is determined on the first-in, first-out basis. Used and revised inventories are adjusted to reflect consumption and the level of refurbishment. The
amount of any write-down of inventories can be reversed when the circumstances that led to the write-down no longer exist.
Investments
Investments in publicly traded securities are classified as fair value through profit or loss. Fair value through profit or loss investments are recorded at fair
value, with changes in fair value recognized in profit or loss.
Investment in an associate
An associate is an entity over which the Company has significant influence. The Company has significant influence when it has the power to participate in
the financial and operating policy decisions of the investee, but does not have control or joint control. The Company accounts for its investment in an
associate using the equity method. Under the equity method, the investment is initially recognized at cost. Subsequent to initial recognition, distributions
received from an associate reduce the carrying amount of the investment. The consolidated statements of comprehensive earnings (loss) include the
Company's share of any amounts recognized by its associate in profit or loss and in other comprehensive loss, if any. Intercompany balances between the
Company and its associate are not eliminated.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost represents the acquisition
installation and testing costs. The
costs, net of government grants and investment
manufacturing costs for drilling equipment include the material, direct labour and indirect specific costs.
tax credits, or manufacturing costs,
including preparation,
Borrowing costs are also included in the cost of self-constructed property, plant and equipment. Future expenditures, such as maintenance and repairs,
are expensed as incurred.
Significant improvements are capitalized and amortized over the useful life of the asset.
Property, plant and equipment are recorded at cost and depreciation is calculated using the straight-line method based on their estimated useful life using
the following periods:
Buildings and components
Drilling equipment
Vehicles
Other
Useful life
5 to 40 years
5 to 10 years
5 years
3 to 10 years
Residual value
-
0 - 20%
-
-
47
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ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property, plant and equipment (continued)
The depreciation is calculated on the cost of an asset less its residual value and begins when the property, plant and equipment are ready for their
intended use. Land is not depreciated.
Depreciation methods, residual values and the useful lives of significant property, plant and equipment are reviewed at each financial year-end. Any
change is accounted for prospectively as a change in accounting estimate.
Intangible assets
Intangible assets are accounted for at cost. Amortization is based on their estimated useful life using the straight-line method and the following periods:
Customer relationship
3 years
Amortization methods, residual values and the useful
accounted for prospectively as a change in accounting estimate.
lives of significant intangible assets are reviewed at each financial year-end. Any change is
Government assistance
Government grants are recognized when there is reasonable assurance that the Company has complied with the conditions attached to the grant. When
the grant is related to an expensed item, it is recognized as a reduction of the related expense. When the grant is to property, plant and equipment, it is
recognized against the net book value of the asset and recognized over the expected useful life as a reduction of asset depreciation.
Impairment of non-financial assets
For the purposes of assessing impairment, assets are grouped in cash-generating units ("CGU"), which represent the lowest levels for which there are
separately identifiable cash inflows generated by those assets. The Company reviews, at
the end of each reporting period, whether events or
circumstances have occurred to indicate that the carrying amounts of its non-financial assets with finite useful lives may be less than their recoverable
amounts.
Goodwill, other intangible assets having an indefinite useful life, and intangible assets not yet available for use are tested for impairment on June 30 of
each financial year or whenever there is an indication that the carrying amount of the asset, of the CGU to which an asset has been allocated, exceeds its
recoverable amount. The recoverable amount is the higher of the fair value, less costs of disposal, and the value in use of the asset or the CGU. Fair
value, less costs of disposal, represents the amount an entity could obtain at the valuation date from the asset’s disposal in an arm’s length transaction
between knowledgeable, willing parties, after deducting the costs of disposal. The value in use represents the present value of the future cash flows
expected to be derived from the asset or the CGU.
An impairment loss is recognized in the amount by which the carrying amount of an asset or a CGU exceeds its recoverable amount. When the
recoverable amount of a CGU to which goodwill has been allocated is lower than the CGU’s carrying amount, the related goodwill is first impaired. Any
excess amount of impairment is recognized and attributed to assets in the CGU, prorated to the carrying amount of each asset in the CGU.
An impairment loss recognized in prior periods for non-financial assets with finite useful lives and intangible assets having an indefinite useful life, other
than goodwill, can be reversed through the consolidated statements of earnings (loss) to the extent that the carrying amount at the date that the
impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
Income taxes
Current income taxes are recognized with respect to amounts expected to be paid or recovered under the tax rates and laws that have been enacted or
substantively enacted at the reporting date.
48
Page 16
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income taxes (continued)
Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the carrying
amounts of existing assets and liabilities in the consolidated financial statements and their respective tax bases. Deferred income tax assets and liabilities
are measured using enacted or substantively enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or
settled. The effect of a change in tax rates on deferred income tax assets and liabilities is recognized in earnings in the period that includes the
substantive enactment date. A deferred tax asset is recognized initially when it is probable that future taxable income will be sufficient to use the related
tax benefits. A deferred tax expense or benefit is recognized in other comprehensive loss or otherwise directly in equity to the extent that it relates to items
that are recognized in other comprehensive earnings (loss) or directly in equity in the same or a different period.
In the course of the Company’s operations, there are a number of uncertain tax positions due to the complexity of certain transactions and due to the fact
that related tax interpretations and legislation are continually changing. When a tax position is uncertain, the Company recognizes an income tax benefit
or reduces an income tax liability only when it is probable that the tax benefit will be realized in the future or that the income tax liability is no longer
probable.
Financing fees
Financing fees related to long-term debt are capitalized in reduction of long-term debt and amortized using the effective interest rate.
Leases
At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control
the use of an identified asset for a period of time in exchange for consideration.
Right-of-use assets on leases
Right-of-use assets are initially measured at cost, comprised of the initial measurement of the corresponding lease liabilities, lease payments made on or
before the commencement date and any initial direct costs incurred, less any lease incentives received. They are subsequently depreciated on a straight-
line basis on the lease term and reduced by impairment losses, if any. If it is reasonably certain that the Company will exercise the purchase options, the
underlying asset is depreciated on the basis of its estimated useful life. Right-of-use assets may also be adjusted to reflect the re-measurement of related
lease liabilities.
The lease term includes the renewal option only if it is reasonably certain to be exercised. The lease terms range from 1 to 19 years for land and buildings
and from 1 to 3 years for vehicles.
The Company has elected not to recognize a right-of-use asset and liability for leases where the total lease term is less than or equal to twelve months
and for leases of low value assets. The lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease
term.
Lease liabilities
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the
lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index and the
exercise price of a purchase option reasonably certain to be exercised. Subsequently, the lease liability is measured at amortized cost using the effective
interest method and adjusted for interest and lease payments. In calculating the present value of lease payments, the Company uses the incremental
borrowing rate as at the lease commencement date if the interest rate implicit in the lease is not readily determinable. Subsequently, the carrying amount
of the lease liability is remeasured if there has been a modification, a change in the lease term, a change in the in-substance fixed lease payments or a
change in the assessment to exercise a purchase option for the underlying asset.
Revenue recognition
Revenue from drilling contracts and ancillary services is recognized on the basis of actual metres drilled for each contract, which corresponds to the
amount to which the entity has a right to invoice.
49
Page 17
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings per share
Earnings per share are calculated using the weighted average number of shares outstanding during the year.
Diluted earnings per share are determined as net earnings (loss), divided by the weighted average number of diluted common shares outstanding for the
period. Diluted common shares reflect the potential dilutive effect of exercising the share options based on the treasury share method.
Share options
The Company uses the fair value method under IFRS 2 to account for share options. In accordance with this method, compensation cost is measured at
the fair value of the option at the grant date using the Black-Scholes option pricing model and is amortized to earnings over the vesting period. The fair
value is recognized as an expense with a corresponding increase in equity-settled reserve. The amount recognized as an expense is adjusted to reflect
the number of share options expected to vest and is net of share options cancelled prior to being vested. When unexercised share options are forfeited or
expired, the amounts are transferred to retained earnings.
5.
CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGMENTS
The preparation of financial statements in accordance with IFRS requires the Company's management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and contingent liabilities on the reporting date, and amounts of revenues and
expenses for the relevant period. Although management regularly reviews its estimates, actual results may differ. The impact of changes to accounting
estimates is recognized in the period during which the change occurs, and in the affected future periods, when applicable. Areas in which the estimates
and assumptions are significant or which are complex, are presented as follows:
A) CRITICAL ACCOUTING ESTIMATES
Inventories
Part of the inventory was estimated based on the number of drills on mining site. In estimating the cost of this inventory, management takes into account
the estimated amount of inventory per drill, based on the most reliable evidence available at the time the estimate was made.
Impairment of non-financial assets
The Company also uses its judgment to determine whether an impairment test must be performed due to the presence of potential impairment indicators.
In applying its judgment, the Company relies primarily on its knowledge of its business and the economic environment. Significant management estimates
are required to determine the recoverable amount of the cash-generating unit ("CGU") including estimates of future cash flows. Differences in estimates
could affect whether tangible and intangible assets are in fact impaired and the dollar amount of that impairment. Significant assumptions are used by
management to determine the projected revenue, operating expenses, utilization, discount rates and market pricing. Notably, these estimates are made in
the context of COVID-19, an unprecedented global pandemic, resulting in a higher degree of uncertainty. Consequently, the impact on the Consolidated
Financial Statements of future periods could be material.
50
Page 18
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
5.
CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGMENTS (continued)
A) CRITICAL ACCOUTING ESTIMATES (continued)
Deferred income tax assets
The assessment of the probability in which deferred tax assets can be utilized is based on the Company’s latest approved budget forecast, which is
adjusted for significant non-taxable income (and expenses) and specific limits to the use of any unused tax loss or credit. The tax rules in the numerous
jurisdictions in which the Company operates are also carefully taken into consideration. If a forecast of taxable income indicates the probable use of a
deferred tax asset, especially when it can be utilized without a time limit, that deferred tax asset is usually recognized in full. The recognition of deferred
tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on specific facts and
circumstances.
Leases
In determining the carrying amount of right-of-use assets and lease liabilities, the Company is required to estimate the incremental borrowing rate specific
to each leased asset if the interest rate implicit in the lease is not readily determined. Management determines the incremental borrowing rate of each
leased asset by incorporating the Company's creditworthiness, the security, term and value of the underlying leased asset, and the economic environment
in which the leased asset operates in. The incremental borrowing rates are subject to change mainly due to macroeconomic changes in the environment.
Income taxes
The Company is subject to income taxes in various jurisdictions. Judgment is required in determining the worldwide provision for income taxes. There are
many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due in the future. Where the final tax outcome of these matters is different from the amounts
that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination
is made. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.
B) JUDGMENTS
Functional currency
In determining the functional currency of its foreign subsidiaries, the Company needs to evaluate different factors such as the currency that mainly
influences sales prices and costs, the economic environment and the degree of autonomy of the subsidiary. Following the evaluation of the different
factors, when the functional currency is not obvious, the Company uses its judgment to determine the functional currency that most faithfully represents
the economic effects of the underlying transactions, events and conditions.
Significant judgment in determining the lease term of contracts with renewal options
The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it
is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. After the
commencement date, the Company reassesses the lease term for whether significant event of change in circumstances that is within its control and
affects its ability to exercise (or not exercise) the option to renew has occurred.
6.
STANDARDS AND INTERPRETATIONS ADOPTED
The following standards and amendments to existing standards have been adopted by the Company on July 1, 2020:
Amendments to IFRS 3, Business Combinations
On October 22, 2018, the IASB issued Definition of a Business (Amendments to IFRS 3, Business Combinations) aimed at resolving the difficulties that
arise when an entity determines whether it has acquired a business or a group of assets. The amendments are effective for business combinations for
which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020. On July 1, 2020, the
Company adopted the amendments to IFRS 3 prospectively. The amendments had no impact on the Company's consolidated financial statements.
51
Page 19
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
7. GOVERNMENT ASSISTANCE
In April 2020, the Government of Canada passed legislation creating the Canada Emergency Wage Subsidy (“CEWS”). Under the CEWS, eligible
employers are entitled to receive a 75% wage reimbursement for eligible employees up to a maximum amount of $0.847 per employee, per week
commencing on March 15, 2020 until July 4, 2020. Beginning July 5, 2020, the Governement of Canada expanded eligibility for the CEWS until June 2021
and confirmed that it would maintain the current subsidy rate of up to a maximum of 65% of eligible wages until December 19, 2020. On November 30,
2020, the Government of Canada increased the CEWS to a maximum of 75% of eligible wages for the qualifying periods from December 20, 2020 to
March 13, 2021. The maximum base subsidy remained at 40% and the maximum top-up wage subsidy rate increased to 35%. In April 2021, the
Government of Canada announced that it is extending the CEWS until September 25, 2021, but that it will gradually phase out the subsidy rates starting
on July 4, 2021. Under this change, only employers with a decline in revenue of more than 10% would be eligible for the wage subsidy as of July 4, 2021.
The Company has a receivable amount of $0 as at June 30, 2021 ($1,848 as at June 30, 2020). For the year ended June 30, 2021, income relating to
CEWS of $2,901 was recognized as a reduction of cost of contract revenue and $270 as a reduction of general and administrative expenses ($3,151 and
$472, respectively, for the year ended June 30, 2020).
8.
EXPENSES BY NATURE
Detail of the depreciation and amortization expenses
The depreciation expense of property, plant and equipment, the depreciation expense of right-of-use assets and the amortization expense of intangible
assets have been charged to the consolidated statements of earnings (loss) as follows:
Cost of contract revenue
General and administrative expenses
Total depreciation and amortization
Principal expenses by nature
June 30
2021
$
8,858
1,677
10,535
Cost of contract revenue, general and administrative expenses, foreign exchange loss (gain) and finance costs by nature are as follows:
Depreciation and amortization
Employee benefits expense
Cost of inventories
Other expenses
Total cost of contract revenue, general and administrative
expenses, foreign exchange loss (gain), finance costs and litigation
Cost of contract revenue
General and administrative expenses, foreign exchange
loss (gain), finance costs and litigation
Total cost of contract revenue, general and administrative
expenses, foreign exchange loss (gain), finance costs and litigation
June 30
2021
$
10,535
78,466
36,807
32,733
158,541
143,004
15,537
158,541
June 30
2020
$
9,474
1,766
11,240
June 30
2020
$
11,240
72,007
30,874
30,807
144,928
124,866
20,062
144,928
52
Page 20
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
9.
INVENTORIES
Spare parts
Consumables
Other
June 30
2021
$
14,408
29,709
567
44,684
Spare parts mainly include motors and machine parts. Consumables mainly include limited life tools, rods, hammers, wire lines and casings.
The cost of inventories recognized as an expense and included in cost of contract revenue has been recorded as follows:
June 30
2021
$
36,807
June 30
2020
$
15,038
33,375
642
49,055
June 30
2020
$
30,874
During the year, an amount of $150 (2020: $175) has been accounted for as a write-down of inventories as a result of net realizable value being lower
than cost. As at June 30, 2021 and 2020, no amount has been accounted as a reversal of a write-down of inventory.
The Company's credit facilities are in part secured by a general assignment of the Company's inventories.
10.
INVESTMENTS
Investments in public companies, beginning of the year
Acquisition of investments
Conversion of trade receivables
Proceeds from disposal of investments
Change in fair value of investments measured at fair value through profit or loss
Investments in public companies, end of the year
June 30
2021
$
317
54
196
(310)
2
259
June 30
2020
$
419
30
-
(226)
94
317
The Company holds common shares in publicly traded companies. These shares are classified as fair value through profit or loss and are reported at fair
value, reflecting their quoted share price at the reporting date. The change in fair value of investments is included in general and administrative expenses.
The cost is $465 ($397 as at June 30, 2020).
53
Page 21
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
11.
PROPERTY, PLANT AND EQUIPMENT
Cost
Balance as at July 1, 2020
Additions
Transfer from right-of-use assets
Disposals and write-offs
Effect of movements in exchange rates
Balance as at June 30, 2021
Accumulated Depreciation
Balance as at July 1, 2020
Depreciation
Transfer from right-of-use assets
Disposals and write-offs
Effect of movements in exchange rates
Balance as at June 30, 2021
Cost
Balance as at June 30, 2019
Transfer to right-of-use assets
Balance as at July 1, 2019
Additions
Transfer from right-of-use assets
Disposals and write-offs
Effect of movements in exchange rates
Balance as at June 30, 2020
Accumulated Depreciation
Balance as at June 30, 2019
Transfer to right-of-use assets
Balance as at July 1, 2019
Depreciation
Transfer from right-of-use assets
Disposals and write-offs
Effect of movements in exchange rates
Balance as at June 30, 2020
June 30, 2020:
Net book value
June 30, 2021:
Net book value
Land
$
804
-
1,779
-
(68)
2,515
-
-
-
-
-
-
Buildings and
components
$
Drilling
equipment
$
10,676
196
684
-
(16)
11,540
5,130
624
72
-
(1)
5,825
86,791
4,089
-
(4,380)
443
86,943
59,422
6,020
-
(4,019)
372
61,795
Vehicles
$
20,677
1,536
307
(1,306)
(269)
20,945
14,371
2,527
240
(1,106)
(112)
15,920
Other
$
4,205
132
-
(1)
-
4,336
3,151
332
-
-
(2)
3,481
Total
$
123,153
5,953
2,770
(5,687)
90
126,279
82,074
9,503
312
(5,125)
257
87,021
Buildings and
Drilling
(Recast - Note 2)
(Recast - Note 2)
Land
$
components
$
equipment
$
804
-
804
-
-
-
-
804
-
-
-
-
-
-
-
-
804
2,515
10,685
-
10,685
71
-
(62)
(18)
10,676
4,520
-
4,520
653
-
(32)
(11)
5,130
5,546
5,715
85,456
(286)
85,170
6,659
289
(2,572)
(2,755)
86,791
57,713
(244)
57,469
6,577
260
(2,604)
(2,280)
59,422
27,369
25,148
Vehicles
$
19,827
(254)
19,573
2,731
-
(1,486)
(141)
20,677
13,293
(135)
13,158
2,645
-
(1,295)
(137)
14,371
Other
$
4,058
-
4,058
198
-
-
(51)
4,205
2,854
-
2,854
329
-
-
(32)
3,151
6,306
1,054
5,025
855
Total
$
120,830
(540)
120,290
9,659
289
(4,120)
(2,965)
123,153
78,380
(379)
78,001
10,204
260
(3,931)
(2,460)
82,074
41,079
39,258
The gain on disposal of property, plant and equipment totalling $346 for the year ended June 30, 2021 (a loss of $18 for the year ended June 30, 2020)
is included in cost of contract revenue.
Drilling equipment includes construction work in progress for an amount of $0 ($528 as at June 30, 2020).
54
Page 22
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
12. RIGHT-OF-USE ASSETS
Cost
Balance as at July 1, 2020
Additions
Disposals and write-offs
Transferred to property, plant and equipment
Effect of movements in exchange rates
Balance as at June 30, 2021
Accumulated Depreciation
Balance as at July 1, 2020
Depreciation
Disposals and write-offs
Transferred to property, plant and equipment
Effect of movements in exchange rates
Balance as at June 30, 2021
Cost
Balance as at July 1, 2019
Additions
Disposals and write-offs
Transferred to property, plant and equipment
Effect of movements in exchange rates
Balance as at June 30, 2020
Accumulated Depreciation
Balance as at July 1, 2019
Depreciation
Disposals and write-offs
Transferred to property, plant and equipment
Effect of movements in exchange rates
Balance as at June 30, 2020
June 30, 2020:
Net book value
June 30, 2021:
Net book value
Land
$
1,672
-
-
(1,779)
107
-
-
-
-
-
-
-
Land
$
1,937
-
-
-
(265)
1,672
-
-
-
-
-
-
1,672
-
Buildings and
components
$
Drilling
equipment
$
2,280
234
(203)
(684)
41
1,668
384
322
(203)
(72)
(1)
430
-
-
-
-
-
-
-
-
-
-
-
-
Vehicles
$
1,228
310
(17)
(307)
1
1,215
310
269
-
(240)
8
347
Total
$
5,180
544
(220)
(2,770)
149
2,883
694
591
(203)
(312)
7
777
Buildings and
Drilling
(Recast - Note 2)
(Recast - Note 2)
components
$
equipment
$
2,379
-
-
-
(99)
2,280
-
387
-
-
(3)
384
1,896
1,238
300
(289)
(11)
-
258
8
(260)
(6)
-
-
-
Vehicles
$
254
1,057
(78)
-
(5)
1,228
135
202
(27)
-
-
310
918
868
Total
$
4,870
1,057
(78)
(289)
(380)
5,180
393
597
(27)
(260)
(9)
694
4,486
2,106
The gain on disposal of right-of-use-assets totalling $0 for the year ended June 30, 2021 ($13 for the year ended June 30, 2020) is included in
cost of contract revenue.
55
Page 23
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
13.
INTANGIBLE ASSETS
Customer relationship
Balance as at July 1, 2020
Amortization
Effect of movements in exchange rates
Balance as at June 30, 2021
Balance as at July 1, 2019
Amortization
Effect of movements in exchange rates
Balance as at June 30, 2020
14.
LONG-TERM DEBT
Loan of US$1,000 (June 30, 2020: US$1,000) authorized for a maximum amount
of $6,197 (US$5,000), bearing interest at prime rate plus 0.25%, effective rate as
at June 30, 2021 of 3.50% (June 30, 2020: interest at prime rate plus 0.25%,
effective rate of 3.50%), maturing in November 2022, secured by a first rank
hypothec on the universality of all present and future assets (c)
Loan authorized for a maximum amount of $35,000, bearing interest at prime rate
interest
plus 2.00%, effective rate as at June 30, 2021 of 4.45% (June 30, 2020:
at prime rate plus 3.00%, effective rate of 5.45%), maturing in November 2022,
secured by a first
rank hypothec on the universality of all present and
future assets (a) (b) (c)
Loan, bearing interest at prime rate plus 4.50%, effective rate as at June 30, 2021
of 6.95% (June 30, 2020: bearing interest at prime rate plus 4.50%, effective rate
of 6.95%), payable in monthly instalments of $52 from June 2017, maturing in
November 2021, secured by a second rank hypothec on the universality of all
present and future assets (b) (e)
Loan of US$3,480 (June 30, 2020: US$4,350), bearing interest at prime rate plus
2.75%, effective rate as at June 30, 2021 of 6.00% (June 30, 2020: bearing
interest at prime rate plus 2.75%, effective rate of 6.00%), payable in monthly
instalments of $120 (US$97) (June 30, 2020 : $132 (US$97)) from May 2019,
maturing in June 2024, secured by a third rank hypothec on the universality of all
present and future assets (d) (e)
Cost
$
1,317
-
(6)
1,311
1,290
-
27
1,317
Accumulated
amortization
$
(729)
(441)
-
(1,170)
(290)
(439)
-
(729)
Total
$
588
(441)
(6)
141
1,000
(439)
27
588
June 30
2021
$
(Recast - Note 2)
June 30
2020
$
1,239
1,363
22,794
27,059
260
727
4,313
5,929
56
Page 24
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
14.
LONG-TERM DEBT (continued)
Loans of CLP$804,941, bearing interest at rates of 3.50%, payable in monthly
instalments of $60 (CLP$35,507) from December 2020, maturing in June 2023. (f)
Loan of CLF 50 bearing interest at rates of 3.30%, payable in monthly instalments
of $22 (CLF 0.43) from March 2021, maturing in February 2028, secured by land
and building. (g) (h)
Current portion
June 30
2021
$
(Recast - Note 2)
June 30
2020
$
1,368
1,660
2,451
32,425
(2,524)
29,901
-
36,738
(1,979)
34,759
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
The rate is variable based on the quarterly calculation of a financial ratio and can vary from prime rate plus 1.50% to 3.50%.
An unamortized amount of $228 ($264 as at June 30, 2020), representing financing fees, has been netted against the long-term debt. This amount is
being amortized to earnings over the term of the debt, using the effective interest method.
On March 8, 2021, the Company entered into the Fourth Amended and Restated Credit Agreement with National Bank of Canada, consisting of a
revolving credit facility in the amount of $35,000 along with a revolving credit facility in the amount of US$5,000, that will expire November 2, 2022.
On December 20, 2018, the Company entered into a loan agreement for a term loan in a principal amount of up to US$5,150. The initial drawdown of
US$2,575 received on January 21, 2019 was used to reduce the credit facility described above. The second drawdown of US$2,575 was received on
October 9, 2019 and was used to pay the balance payable related to a business combination from Fiscal 2019.
On April 23, 2020, the Company entered into the First Amending Agreement with one of its lenders, Export Development Canada, to defer payments
of principal and interest on its long-term debt by six months and extend the term of the loans by the same period. Accrued interest over such period
was payable at the next payable instalment.
In May 2020, Orbit Garant Chile S.A., a wholly-owned subsidiary of the Company, obtained two loans totaling CLP$1,000,000 ($1,699) from Banco
Scotiabank. The loans have no capital repayments for the first six months and the interest over such period will be payable on the first instalment.
On February 12, 2021, Orbit Garant Chile S.A., a wholly-owned subsidiary of the Company, entered into a financing agreement with Banco
Scotiabank for an amount of CLF 51 ($2,369).
An unamortized amount of $50 ($0 as at June 30, 2020), representing financing fees, has been netted against the long-term debt. This amount is
being amortized to earnings over the term of the debt, using the effective interest method.
Under the terms of the long-term debt agreements, the Company must satisfy certain restrictive covenants as to minimum financial ratios (Note 16). As at
June 30, 2021, the Company was compliant with its financial covenants (June 30, 2020: the Company was compliant with its financial covenants).
As at June 30, 2021, the prime rate in Canada was 2.45% for Canadian loans (2.45% as at June 30, 2020) and the prime rate in United States was 3.25%
for US loans (3.25% as at June 30, 2020).
57
Page 25
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
14.
LONG-TERM DEBT (continued)
As at June 30, 2021, principal payments required in the next years are as follows:
Within one year
Later than one year and no later than five years
More than five years
Long-term debt by currency and by term are as follows:
As at June 30, 2021
$000s
CAN
US (US$4,480)
Chilean UF (CLF 50)
Chilean pesos (CLP$804,941)
Total
$
23,282
5,553
2,501
1,367
32,703
Within
one year
$
260
1,399
179
686
2,524
Later than one
but no later than
five years
$
23,022
4,154
768
681
28,625
Reconciliation of movements of long-term debt to cash flows arising from financing activities:
Balance, beginning of year
Transfer (to)/from lease liabilities , including related finance costs
Net change in the revolving credit facility
Increase in other long-term debts
Repayment of other long-term debts
Transaction costs related to loans
Amortization of transaction costs related to loans
Impact of the change in foreign exchange rates on the foreign currency debts
Balance, end of year
15.
LEASE LIABILITIES
The summary of of the activity related to the lease liabilities for the years ended June 30, 2021 and 2020 is as follows:
Lease liabilities recognized, beginning of year
Additions
Disposals
Finance costs
Payment of lease liabilities, including related finance costs
Exercise of a purchase option financed by long-term debt
Reassessment of lease term
Foreign exchange differences
Current portion
Balance, end of year
2021
$
36,738
2,632
(4,313)
-
(1,969)
(203)
190
(650)
32,425
2021
$
4,603
392
(62)
415
(1,092)
(2,534)
147
127
1,996
635
1,361
$
2,524
28,625
1,554
32,703
Later than
five years
$
-
-
1,554
-
1,554
(Recast - Note 2)
2020
$
29,576
(151)
3,172
5,150
(1,345)
(112)
134
314
36,738
(Recast - Note 2)
2020
$
4,598
1,026
(60)
235
(913)
-
-
(283)
4,603
2,954
1,649
58
Page 26
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
15.
LEASE LIABILITIES (continued)
Lease payments required in the next years are as follows:
Within one year
Later than one year and no later than five years
Later than five years
Less: discounting impact
Present value of lease payments
16.
CAPITAL MANAGEMENT
June 30
2021
$
747
1,067
597
2,411
(415)
1,996
The Company includes long-term debt, lease liabilities, factoring liability, share capital, equity-settled reserve, retained earnings, accumulated other
comprehensive loss and cash and equivalents in its definition of capital.
The Company's capital structure is as follows:
Long-term debt
Lease liabilities
Factoring liability
Share capital
Equity-settled reserve
Retained earnings
Accumulated other comprehensive loss
Cash and equivalents
June 30
2021
$
32,425
1,996
2,880
59,204
1,452
12,342
(2,650)
(3,256)
104,393
(Recast - Note 2)
June 30
2020
$
36,738
4,603
-
58,857
1,309
10,047
(2,208)
(4,996)
104,350
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 debts.
Under the terms of certain of the Company's debt agreements, the Company must satisfy certain financial covenants, such as Senior debt to earnings
before income taxes, interest, depreciation and amortization ratio, Senior debt to capitalization ratio and fixed charge coverage ratio. 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. As at June 30, 2021, as mentioned in Note 14, the Company complied with its financial covenants (June 30, 2020: the Company was
compliant with its financial covenants).
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 the prior year.
59
Page 27
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
17. SHARE CAPITAL
Authorized, an unlimited number of common and preferred shares:
Common shares, participating and voting, without nominal or par value
Preferred shares rights privileges, restrictions and conditions must be adopted before their issuance by a resolution of the Board of Directors of the
Company.
Common shares
Balance, beginning of the year
Shares issued:
For stock options exercised
Balance, end of the year
June 30, 2021
June 30, 2020
Number of
shares
$
Number of
shares
37,021,756
58,857
37,021,756
351,000
37,372,756
347
59,204
-
37,021,756
$
58,857
-
58,857
Net earnings (loss) per share
Diluted net earnings (loss) per common share was calculated based on net earnings divided by the average number of common shares outstanding using
the treasury stock method. For 2020, stock options are not included in the computation of diluted net loss per share as their inclusion would be anti-
dilutive.
Net earnings (loss) per share - basic
Net earnings (loss) attributable to common
shareholders
Weighted average basic number of
common shares outstanding
Net earnings (loss) per share - basic
Net earnings (loss) per share - diluted
Net earnings (loss) attributable to common
shareholders
Weighted average basic number of
common shares outstanding
Adjustment to average number of common
share - stock options
Weighted average diluted number of
common shares outstanding
Net earnings (loss) per share - diluted
June 30
2021
June 30
2020
$
2,294
$
(7,357)
37,051,928
0.06
$
37,021,756
(0.20)
$
June 30
2021
June 30
2020
$
2,294
$
(7,357)
37,051,928
37,021,756
169,328
-
37,221,256
0.06
$
37,021,756
(0.20)
$
60
Page 28
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
17. SHARE CAPITAL (continued)
Stock option plan
On June 26, 2008, the Company established an equity-settled option plan (the Stock Option Plan), which is intended to aid in attracting, retaining and
motivating the Company’s officers, employees, directors and consultants. The option plan has been prepared in accordance with the TSX’s policies on
listed company security-based compensation arrangements. Persons eligible to be granted options under the option plan are: any director, officer or
employee of Orbit Garant or of any subsidiary company controlled by any such person or a family trust of which at least one trustee is any such person
and all of the beneficiaries of which are such person and his or her spouse or children.
The aggregate number of common shares which may be issued from treasury upon the exercise of options under the Stock Option Plan shall not exceed
10% of the issued and outstanding common shares. The number of common shares which may be reserved for issuance pursuant to options granted
under the option plan, together with common shares reserved for issuance from treasury under any other employee-related plan of the Company, or
options for services granted by the Company to any one person, shall not exceed 5% of the then aggregate issued and outstanding common shares.
The Board of Directors, through the recommendation of the Corporate Governance and Compensation Committee, manages the Stock Option Plan and
determines, among other things, optionees, vesting periods, exercise price and other attributes of the options, in each case pursuant to the 2008 Share
Option Plan, applicable securities legislation and the rules of the TSX. Options vest at a rate ranging from 20% to 33% per annum commencing
12 months after the date of grant and expire no later than 7 years after the grant date. Options are forfeited when the option holder ceases to be a
director, officer or employee of the Company. The exercise price for any option may not be less than the fair market value (the closing price of the
common shares on the TSX on the last trading day on which common shares traded prior to such day, or the average of the closing bid and ask prices
over the last five trading days, if no trades accrued over that period) of the common shares at the time of the grant of the option.
All stock options outstanding are granted to directors, officers and employees. Details regarding the stock options outstanding are as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year (a)
Cancelled during the year
Outstanding at end of the year
Exercisable at end of the year
Number
of options
3,155,000
1,185,000
(351,000)
(646,500)
3,342,500
1,464,834
June 30, 2021
Weighted average
exercise price
$
1.28
0.89
0.74
1.06
1.24
1.56
Number
of options
2,960,500
771,000
-
(576,500)
3,155,000
1,675,335
June 30, 2020
Weighted average
exercise price
$
1.52
0.86
-
2.26
1.28
1.30
(a)
For the year ended June 30, 2021, the weighted average market share price at the date of exercise was $1.25.
On October 1, 2020, 75,000 share options have been granted to a director and on May 12, 2021, 25,000 share options have been granted to an
employee giving the option to purchase a common share for an exercice price of $0.93 and $1,20 per share respectively which represents the fair value of
a common share at the date of the grant. On December 2, 2020, 735,000 stock options and on June 23, 2021, 350,000 stock options have been granted
to employees and directors giving the option to purchase a common share for an exercice price of $0,80 and $1,06 per share respectively which
represents the fair value of a common share at the date of the grant. These options have a life of 5 years and will vest at a rate of 33% per annum
commencing 12 months after the date of the grant.
61
Page 29
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
17. SHARE CAPITAL (continued)
The following table summarizes information on share options outstanding as at June 30, 2021:
Range of
exercise price
$
0.50 - 1.49
1.50 - 2.49
Outstanding at
June 30, 2021
Weighted average
remaining life
(years)
Weighted average
exercise price
$
Exercisable at
June 30, 2021
Weighted average
exercise price
$
2 079 500
1 263 000
3 342 500
3,80
2,01
0,86
1,86
428 500
1 036 334
1 464 834
0,76
1,89
The Company's calculations of the fair value of options granted were made using the Black-Scholes option-pricing model. The following table summarizes
the grant date fair value calculations with weighted average assumptions:
Risk-free interest rate
Expected life (years)
Expected volatility (based on historical volatility)
Expected dividend yield
Fair value of options granted
Granted
in 2021
Granted
in 2020
0.32% to 0.75%
3
40.90% to 44.38%
0%
$0.24 to $0.39
0.35% to 1.46%
3
36.11% to 39.80%
0%
$0.15 to $0.26
During the years mentioned below, the total expense related to share-based compensation to employees and directors has been recorded and presented
in general and administrative expenses as follows:
Expense related to share-based compensation
June 30
2021
$
232
June 30
2020
$
256
62
Page 30
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
18.
INCOME TAXES
Income tax expense (recovery) comprises the following:
Current tax
Current year
Prior years adjustments
Deferred tax
Current year
Prior years adjustements
Earnings (loss) before income taxes
Statutory rates
Income taxes based on statutory rates
Increase (decrease) of income taxes due
to the following:
Non-deductible expenses
Non-deductible share-based
compensation expense
Difference of income tax rates between territories
Withholding taxes
Income tax assets unrecognized
Non-taxable portion of capital gain
Prior years adjustments
Other
Total income tax expense
June 30
2021
$
481
(20)
461
1,932
66
1,998
2,459
June 30
2021
$
4,753
26.50%
1,260
139
61
(25)
180
848
29
(46)
13
2,459
June 30
2020
$
315
136
451
179
(391)
(212)
239
June 30
2020
$
(7,118)
26.55%
(1,890)
61
68
7
571
1,639
(51)
(255)
89
239
63
Page 31
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
18.
INCOME TAXES (continued)
Deferred income taxes are based on differences between the accounting and tax values of assets and liabilities and consist of the following at the dates
presented:
Deferred income tax assets:
Intangible assets
Loss carried forward
Non-deductible provisions
Investments
Total deferred income tax assets
Deferred income tax liabilities:
Property, plant and equipment
Total deferred income tax liabilities
Net deferred income tax assets
Deferred income tax assets:
Intangible assets
Loss carried forward
Non-deductible provisions
Investments
Total deferred income tax assets
Deferred income tax liabilities:
Property, plant and equipment
Total deferred income tax liabilities
Net deferred income tax assets
As presented in the consolidated statements of financial position:
Deferred tax assets
July 1
2020
$
13
5,967
1,822
10
7,812
1,922
1,922
5,890
July 1
2019
$
39
6,301
941
-
7,281
1,498
1,498
5,783
Recognized in
statements of
earnings (loss)
$
Exchange
rate change
$
9
(1,560)
(445)
17
(1,979)
19
19
(1,998)
-
-
-
3
(3)
(5)
(5)
5
Recognized in
statements of
earnings (loss)
$
Exchange
rate change
$
(26)
(321)
1,121
10
784
572
572
212
-
(13)
(240)
-
(253)
(148)
(148)
(105)
June 30
2021
$
3,897
June 30
2021
$
22
4,410
1,374
27
5,833
1,936
1,936
3,897
June 30
2020
$
13
5,967
1,822
10
7,812
1,922
1,922
5,890
June 30
2020
$
5,890
The Company recognized a deferred income tax asset on non-capital losses because it is probable that sufficient taxable profit will be available from
future oprations.
Tax losses, for which no deferred tax assets were recognized, expire as follows:
June 30, 2024
June 30, 2025
No expiry date
Chile
-
-
2,342
Guinea
938
-
-
Burkina Faso
$
206
5,854
-
64
Page 32
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
19. ADDITIONAL INFORMATION RELATING TO THE STATEMENTS OF CASH FLOWS
Changes in non-cash operating working capital items:
Trade and other receivables
Inventories
Prepaid expenses
Trade and other payables
20. CONTINGENCIES
June 30
2021
$
(19,798)
4,371
31
12,034
(3,362)
June 30
2020
$
15,521
(5,112)
327
(6,159)
4,577
The Company is subject to various claims that arise in the normal course of business. Management believes that adequate provisions have been made in
the accounts where appropriate. Although it is not possible to estimate the extent of potential costs and losses, if any, management believes that the
ultimate resolution of such contingencies will not have a material adverse effect on the financial position of the Company.
In June 2020, a claim by a financial institution (the "Claimant") for damages against a subsidiary of the Company in the amount of XOF 843,660 ($1,896)
was confirmed by a court in Burkina Faso. The Company had vigorously disputed this claim and filed an appeal. The Company had recorded a provision
of XOF 871,497 ($1,956) as at June 30, 2020 for this claim and additional legal fees.
During the first half of Fiscal 2021, a total of XOF 857,227 ($1,923) was required to be deposited in a restricted cash account by the Company’s financial
institution in Burkina Faso at the request of the Claimant.
On April 1, 2021, the Court of Appeal ruled in favor of the Company and overturned the original decision, resulting in the release of XOF 857,227 ($1,923)
that the Company had deposited into a restricted cash account. Notwithstanding the decision of the Court of Appeal, the Claimant appealed this decision.
Based on the assessment of the Company's legal counsel, management considered this appeal to be unfounded. As a result, the recognized liability was
reversed during the third quarter of Fiscal 2021.
On August 18, 2021, the Court of Appeal of Burkina Faso rejected the Claimant’s appeal. By upholding the first degree decision, this order put an end to
the claims of the Claimant in relation to the initial court decision. Based on the assessment of the Company's legal counsel, management maintained the
liability reversal noted above.
21. COMMITMENTS AND GUARANTEES
Commitments
The Company has commitments for the purchase of equipment totaling $1,527 (US$1,232), in addition to the current deposit of $1,909, with delivery
dates early in fiscal 2022. The Company has entered into short-term and low asset value lease agreements expiring between 2022 and 2024 which call
for total lease payments of $197 for the rental of offices. None of the lease agreements contain renewal or purchase options or escalation clauses or any
restrictions.
Lease payments recognized as an expense during the year amount to $8,899 (year ended June 30, 2020: $5,921). This amount consists of minimum
lease payments. No sublease payments or contingent rent payments were made or received. No sublease income is expected as all assets held under
lease agreements are used exclusively by the Company.
65
Page 33
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
21. COMMITMENTS AND GUARANTEES (continued)
Guarantees
As at June 30, 2021, the Company issued some bank guarantees in favor of customers for a total amount of $2,669 (year ended June 30, 2020: $1,385),
maturing between July 2021 and October 2022. For the years ended June 30, 2020 and 2021, the Company has not made any payments in connection
with these guarantees.
22. RELATED AND ASSOCIATE PARTY TRANSACTIONS
Transactions with related parties
The Company is related to Dynamitage Castonguay Ltd., a company in which a director has an interest.
The Company entered into the following transactions with its related companies and with persons related to directors:
Revenues
Expenses
June 30
2021
$
10
162
June 30
2020
$
54
148
As at June 30, 2021, an amount of $0 was receivable resulting from these transactions (June 30, 2020: $6).
In addition, for the twelve-month period ended June 30, 2021, repayments of a lease liability totalling $63 were made to Dynamitage Castonguay Ltd.
(June 30, 2020 : $0).
Transactions with associate parties
The Company entered into the following transactions with its associate parties:
trade and other
receivables included an amount
receivable of $3,065 from one of
the Company's associates
June 30
2021
$
20,252
June 30
2020
$
20,799
Revenues
As at June 30, 2021,
(June 30, 2020: $1,533).
As at June 30, 2021, investment in an associate totalling $0 in financial statement (June 30, 2020: $0).
All of these related and associate parties transactions made in the normal course of business were measured at the exchange amount, which is the
amount established and agreed to by the parties.
23. KEY MANAGEMENT COMPENSATION
The compensation recognized for key management remuneration and director's fees is as follows:
Salaries and fees
Share-based compensation
June 30
2021
$
1,187
176
1,363
June 30
2020
$
1,504
113
1,617
66
Page 34
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
24. FINANCIAL INSTRUMENTS
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 years, unless otherwise stated in this
note.
Currency risk
The Company realizes a part of its activities in US dollars (US $), in Chiliean Pesos (CLP), in Argentine Pesos (ARS), in Ghanian cedi (GHS cedi), in West African
Francs (XOF) and in Guinean Francs(GNF). The Company's exposure to currency risk on its consolidated financial statements was as follows as at June 30, 2021:
Cash and equivalents
Trade receivables
Income tax receivable (payable)
Accounts payable and accrued liabilities
Current portion of long-term debt and lease
liabilities
Net balance exposure
Equivalent in Canadian dollars
US $
$000s
1,120
1,231
39
(193)
(1,190)
1,007
1,248
CLP
$000s
ARS
$000s
GHS cedi
000s
XOF
000s
GNF
000s
527,258
1,904,362
98,333
(4,087,692)
(553,148)
(2,110,887)
(3,586)
-
-
-
-
-
8
8
163
5,636
2,970
(47)
-
8,722
1,836
3,840
1,552,524
118,220
(4,983,675)
-
(3,309,091)
(7,426)
7,157,028
7,678,761
-
(3,251,573)
-
11,584,216
1,448
The Company has estimated that a 10% increase or decrease in the foreign exchange rates would have caused a corresponding annual change in net earnings (loss) and
comprehensive loss of:
Change in net income in Canadian dollars
US $
92
CLP
(264)
ARS
GHS cedi
-
135
The Company's exposure to currency risk on its consolidated financial statements was as follows as at June 30, 2020:
Cash and equivalents
Trade receivables
Income tax receivable (payable)
Accounts payable and accrued liabilities
Current portion of long-term debt and lease liabilities
Net balance exposure
Equivalent in Canadian dollars
US $
$000s
645
195
80
(38)
(898)
(16)
(22)
CLP
$000s
168,611
529,386
163,150
(299,573)
(195,059)
366,515
608
ARS
$000s
4,061
18,860
12,834
(3,802)
-
31,953
619
GHS cedi
000s
157
2,629
3,077
14
-
5,877
1,378
XOF
(546)
XOF
000s
158,384
1,137,609
90,151
(2,766,701)
-
(1,380,557)
(3,224)
GNF
106
GNF
000s
-
-
-
-
-
-
-
The Company has estimated that a 10% increase or decrease in the above foreign exchange rates would have caused a corresponding annual change in net earnings (loss)
and comprehensive earnings (loss) of:
Change in net income in Canadian dollars
US $
(1)
CLP
45
ARS
46
GHS cedi
101
XOF
237
GNF
-
67
Page 35
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
24. FINANCIAL INSTRUMENTS (continued)
Credit risk
The Company provides credit to its customers in the normal course of its operations. The Company has adopted a policy of only dealing 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. 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.
During these unprecedented market challenges, COVID-19 may adversely affect the Company's customers and their solvency. Our customers' financial
difficulties can negatively impact the Company's results of operations and financial condition, especially if those customers were to delay or default in
payment owed to the Company. Collection of trade and other receivables from third parties remains a priority for the Company under the current situation.
In order to reduce the credit risk, the Company is using insurance coverage from Export Development Canada ("EDC") on certain accounts receivable
from its customers. The insurance program provides under certain terms and conditions an insurance coverage amount of up to 90% of certain accounts
receivable. As at June 30, 2021, the amount of the insurance coverage from EDC represents 6% of the accounts receivable (6% as at June 30, 2020).
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.
The allowance for doubtful accounts is established based on the Company's best estimate on the recovery of balances for which collection may be
uncertain. Uncertainty of collection may become apparent from various indicators, such as a deterioration of the credit situation of a given client or delay
in collection when the aging of invoices exceeds the normal payment terms. Management regularly reviews accounts receivable and assesses the
appropriateness of the allowance for doubtful accounts.
The aging of trade receivable balances and the allowance for doubtful accounts as at June 30, 2021 and June 30, 2020 were as follows:
Current
Past due 0-30 days
Past due more than 30 days
Total trade receivables
Less: allowance for doubtful accounts
The change in the allowance for doubtful accounts is detailed below:
Balance at beginning of year
Change in allowance, other than write-offs and recoveries
Write-offs of accounts receivable
Recoveries
Balance at end of year
June 30
2021
$
30,728
2,707
6,153
39,588
407
39,181
June 30
2021
$
786
210
(450)
(139)
407
June 30
2020
$
16,031
603
4,668
21,302
786
20,516
June 30
2020
$
899
(110)
-
(3)
786
As at June 30, 2021, 75% (June 30, 2020: 66%) of the trade and other receivables are aged as current and 1% are impaired (June 30, 2020: 4%).
Two major customers represents 15% of the trade accounts receivable as at June 30, 2021 (June 30, 2020, one major customer represented 14% of
these accounts).
68
Page 36
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
24. FINANCIAL INSTRUMENTS (continued)
Credit risk (continued)
One major customer represents 12% of the contract revenue for the year ended June 30, 2021 (year ended June 30, 2020, one major customer
represented 20%).
Credit risk also arises from cash and cash equivalents with banks and financial institutions. This risk is limited because the counterparties are mainly
Canadian banks with high credit ratings.
The Company does not enter into derivatives to manage credit risk.
Interest rate risk
The Company is subject to interest rate risk since a significant part of the long-term debt bears interest at variable rates.
As at June 30, 2021, the Company has estimated that a 100 basis point increase or decrease in interest rates would have caused a corresponding annual
increase or decrease in net earnings (loss) and comprehensive earnings (loss) of $238 (June 30, 2020, $214).
Equity market risk
Equity market risk is defined as the potential adverse impact on the Company's earnings due to movements in individual equity prices or general
movements in the level of the stock market. The Company closely monitors the general trends in the markets and individual equity movements, and
determines the appropriate course of actions to be taken by the Company.
Fair value
The fair value of cash and equivalents, trade and other receivables, trade and other payables and factoring liability is approximately equal to their carrying
values due to their short-term maturity.
The fair value of long-term debt approximates its carrying value as most of it bears interest at a variable rate and has financing conditions similar to those
currently available to the Company.
69
Page 37
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
24.
FINANCIAL INSTRUMENTS (continued)
Fair value hierarchy
The methodology used to measure the Company's financial instruments accounted for at fair value is determined based on the following hierarchy:
Level
Level 1
Level 2
Level 3
Basis for determination of fair value
Quoted prices in active markets for identical assets or liabilities.
Inputs other than quoted prices included in Level 1 that are directly or indirectly observable for
the asset or liability.
Inputs for the asset or liability that are not based on observable market data.
The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified to the lowest level
of the hierarchy for which a significant input has been considered in measuring fair value.
As at June 30, 2021, the investments are measured at fair value and are classified as a Level 1 financial instrument as their fair value is determined
using quoted prices in the active markets.
As at June 30, 2021
Financial assets measured at amortized cost
Cash and cash equivalents
Trade and other receivables
Financial assets measured at fair value
Investments
Financial liabilities measured at amortized cost
Trade and other payables
Factoring Liability
Long-term debt
As at June 30, 2020
Financial assets measured at amortized cost
Cash and cash equivalents
Trade and other receivables
Financial assets measured at fair value
Investments
Financial liabilities measured at amortized cost
Trade and other payables
Long-term debt
Carrying value
Level 1
Fair value
$
$
Level 1
$
Level 2
$
Level 3
$
3,256
40,724
3,256
40,724
259
259
259
-
-
30,486
2,880
32,425
30,486
2,880
32,425
Carrying value
Fair value
Level 1
$
$
Level 1
$
Level 2
$
Level 3
$
4,996
21,122
4,996
21,122
317
317
317
-
-
18,452
36,738
18,452
36,738
There were no transfers of amounts between Level 1, Level 2 and Level 3 financial instruments for the year ended June 30, 2021.
70
Page 38
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
24. FINANCIAL INSTRUMENTS (continued)
Liquidity risk
Liquidity risk arises from the Company’s management of working capital, the finance costs and principal repayments on its debt instruments.
that the Company will not be able to meet its financial obligations as they fall due.
It is the risk
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.
In Note 14 are details of undrawn facilities that the
Company has at its disposal to further reduce liquidity risk.
The Company enters into receivable purchase agreements (commonly referred to as "factoring agreements") with different banks as part of its normal
working capital financing. The Company receives 100% of the value of the specific sales invoice less a charge between 0.15% and 0.17%. As at
June 30, 2021, trade receivables include $2,880 related to factored accounts (there were no amounts as at June 30, 2020 ).
The following tables present the contractual cash flows for the financial liabilities based on their remaining contractual maturities:
Trade and other payables
Factoring liability
Long-term debt
Trade and other payables
Long-term debt
25. SEGMENTED INFORMATION
Total
$
30,486
2,880
32,703
66,069
Total
$
18,452
37,003
55,455
0 - 1 year
$
30,486
2,880
2,524
35,890
0 - 1 year
$
18,452
1,979
20,431
2 - 3 years
$
-
-
28,112
28,112
2 - 3 years
$
-
33,442
33,442
As at June 30, 2021
4 - 5 years
$
-
-
2,067
2,067
(Recast - Note 2)
As at June 30, 2020
4 - 5 years
$
-
1,582
1,582
The Company is separated into two geographical reportable segments: Canada and International (US, Central and South America and West Africa). The
elements of the results and the financial situation are divided between the segments, based on destination of contracts or profits. Data by geographical
areas follow the same accounting rules as those used for the consolidated accounts. Transfers between segments are carried out at market prices.
Operational sectors are presented using the same criteria as for the production of the internal report to the chief operating decision maker, who allocates
the resources and evaluates the performance of the operational sectors. The chief operating decision maker is considered to be the President and Chief
Executive Officer, who evaluates the performance of both segments by the revenues of ordinary activities from external clients and earnings (loss) from
operations.
71
Page 39
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
25. SEGMENTED INFORMATION (continued)
Data relating to each of the Company's reportable operating segments are presented as follows:
Contract revenue
Canada
International (1)
Earnings (loss) from operations
Canada
International
General and corporate expenses related to head office(2)
Finance costs
Income tax expense (recovery)
Net earnings (loss)
(1)
The International operating segment included
West African revenue as follows:
Chilean revenue as follows :
June 30
2021
$
129,976
33,318
163,294
15,202
(5,707)
9,495
2,452
2,290
2,459
7,201
2,294
14,530
12,517
(2)
General and corporate expenses include expenses for corporate offices, share options, provision for litigation and certain unallocated costs.
Depreciation and amortization
Canada
International
Total depreciation and amortization included in earnings
(loss) from operations
Unallocated and corporate assets
Total depreciation and amortization
5,601
3,257
8,858
1,677
10,535
June 30
2020
$
109,010
28,800
137,810
6,691
(5,537)
1,154
5,580
2,692
239
8,511
(7,357)
6,972
15,409
6,080
3,395
9,475
1,765
11,240
72
Page 40
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2021 and 2020
(in thousands of Canadian dollars, except for data per share and option data)
25. SEGMENTED INFORMATION (continued)
Identifiable assets
Canada
Chile
West Africa
International - Other
Property, plant and equipment
Canada
Chile
West Africa
International - Other
Right-of-use assets
Canada
Chile
West Africa
International - Other
Intangible assets
West Africa
Non-current assets acquisitions
Canada
International
Unallocated and corporate assets
As at
June 30, 2021
$
(Recast - Note 2)
As at
June 30, 2020
$
82,523
19,923
28,844
6,852
138,142
24,993
5,445
6,222
2,598
39,258
1,002
73
930
101
2,106
141
June 30
2021
$
4,153
4,222
31
8,406
86,960
15,400
19,563
7,915
129,838
29,123
3,480
5,194
3,282
41,079
936
2,367
1,042
141
4,486
588
(Recast - Note 2)
June 30
2020
$
8,701
1,847
168
10,716
73
Page 41
74
Notes 75
Notes 76
Notes Shareholder Information
Orbit Garant Drilling Inc.
Directors
Jean-Yves Laliberté 1, 2
Corporate Director and Consultant
Chair of the Board of Directors
Pierre Rougeau 1, 2*
Corporate Director and Consultant
Nicole Veilleux 1*, 2
Corporate Director and Consultant
Pierre Alexandre
Vice Chair and Vice President of Corporate
Development, Orbit Garant Drilling Inc.
Eric Alexandre
President and Chief Executive Officer,
Orbit Garant Drilling Inc.
1 Member of Audit Committe.
2 Member of Corporate Governance and Compensation Committee.
* Denotes Committee Chair.
Officers
Eric Alexandre
President and Chief Executive Officer
Pierre Alexandre
Vice Chair and Vice President of
Corporate Development
Daniel Maheu
Chief Financial Officer
Head Office
3200 Jean-Jacques Cossette Blvd.
Val-d’Or, Quebec
J9P 6Y6
Tel: 866-824-2707
Fax: 801-824-2195
www.orbitgarant.com
Stock Exchange Listing
Toronto Stock Exchange
Trading Symbol: OGD
Common Shares Outstanding
37,372,756 (as at June 30, 2021)
Investor Relations
Daniel Maheu
Tel: 819-824-2707
Email: investors@orbitgarant.com
Bruce Wigle
Tel: 647-496-7856
Email: investors@orbitgarant.com
Transfer Agent and Registrar
TSX Trust Company
2001 Robert-Bourassa Blvd., Suite 1600
Montreal, QC
H3A 2A6
Tel: 1-800-387-0825
General Counsel
Goodmans LLP
Gowling WLG (Canada) LLP
Auditors
KPMG LLP
Annual Meeting
Wednesday, December 1, 2021
Orbit Garant Head Office
3200 Jean-Jacques Cossette Blvd.
Val-d’Or, Quebec
The meeting will commence at 10:00 a.m. (ET)
77
COORDONNÉES
CONTACT
Si vous avez des questions concernant Forage Orbit Garant et ses activités, n’hésitez pas à
Should you have any questions regarding Orbit Garant Drilling and its operations, please
prendre contact avec nous à nos bureaux dont les coordonnées figurent ci-dessous. Nous
do not hesitate to contact us at one of our offices listed below. It will be our pleasure
nous ferons un plaisir de vous aider et nous nous réjouissons à l’idée de travailler avec vous
to assist you and we look forward to working with you to address your specific needs.
pour répondre à vos besoins spécifiques.
HEAD OFFICE
SOUTH AMERICA
ONTARIO
VAL-D’OR
Orbit Garant Drilling Services Inc.
TORONTO
640 Garson Coniston Road
Sudbury (Ontario)
Services de Forage Orbit Garant inc.
P3L 1R3
130, rue King, bureau 3680
Canada
C.P. 99
T: 705 694-5959
Toronto (Ontario)
F: 705 694-4784
M5X 1B1
Canada
Orbit Garant Drilling Services Inc.
Tél. : 416 889-7429
3661 Mount Albert Road
R.R. #1, Sharon (Ontario)
SUDBURY
L0G 1V0
Services de Forage Orbit Garant inc.
Canada
90 Red Deer Lake Road North
T: 905 478-2243
Wahnapitae (Ontario)
F: 905 478-2249
P0M 3C0
NEW BRUNSWICK
Tél. : 705 694-5959
Téléc. : 705 694-4784
Orbit Garant Drilling Services Inc.
398 Dover Road
Dieppe (New Brunswick)
E1A 7L6
Canada
T: 506 853-9131
F: 506 856-4570
.cni tnaraG tibrO egaroF ed secivreS
3200, boul. Jean-Jacques Cossette
Val-d’Or (Québec)
J9P 6Y6
Canada
ALBERTA
Tél. : 866 824-2707
Drift Exploration Drilling Inc.
Téléc. : 819 824-1595
803 9 Ave SE
High River (Alberta)
T1V 1K5
Canada
T: 403 601-4374
F: 403 652-3238
Soudure Royale Concept
3200, boul. Jean-Jacques Cossette
Val-d’Or (Québec)
J9P 6Y6
Canada
Tél. : 819 825-5399
Téléc. : 819 825-7088
Drift Exploration Drilling Inc.
6120 Pedroli Lane
Winnemucca (Nevada)
89445
United States
T: 403 601-4374
F: 403 652-3238
UNITED STATES
VAL-D’OR
NEVADA
Orbit Garant Drilling Inc.
SIÈGE SOCIAL
3200 Jean-Jacques Cossette Blvd.
3200, boul. Jean-Jacques Cossette
Val-d’Or (Québec)
Val-d’Or (Quebec)
J9P 6Y6
J9P 6Y6
Canada
Canada
T: 819-824-2707
Tél : 866-824-2707
T: 866-824-2707
Téléc : 819-824-2195
F: 819-824-2195
info@orbitgarant.com
info@orbitgarant.com
ALBERTA
CANADA
Drift Exploration Drilling Inc.
QUEBEC
PO Box 5184, 803, 9 Ave. S.E.
Orbit Garant Drilling Services Inc.
High River (Alberta)
3200 Jean-Jacques Cossette Blvd.
T1V 1K5
Val-d’Or (Québec)
Canada
J9P 6Y6
Tél. : 403-652-3046
Canada
Téléc. : 403-652-3238
T : 819 824-2707
T: 866 824-2707
NÉVADA
F : 819 824-1595
Drift Exploration Drilling Inc.
Soudure Royale Concept
6120 Pedroli Lane
3200 Jean-Jacques Cossette Blvd.
Winnemucca (Névada)
Val-d’Or (Québec)
89446
J9P 6Y6
États-Unis
Canada
Tél. : 403 601-4374
T : 819 825-5399
F : 819 825-7088
NOUVEAU-BRUNSWICK
.cni tnaraG tibrO egaroF ed secivreS
398, chemin Dover
Dieppe (Nouveau-Brunswick)
E1A 7L6
Canada
Tél. : 506 853-9131
ROUYN-NORANDA
.cni tnaraG tibrO egaroF ed secivreS
1905, boul. Rideau, C.P. 5131
Rouyn-Noranda (Québec)
J0Z 1Y1 Canada
Tél. : 809 768-3690
ORBITGARANT.COM
CHILE
GUYANA
Orbit Garant Chile S.A.
OGD Drilling (Guyana) Inc.
Avda. Los Cerrillos 998
157 C Waterloo Street,
Cerrillos (Santiago)
North Cummingsburg,
Chile
Georgetown,
T: +56 2 2411 5900
Guyana
C: +56 9 9624 0421
Tél. au Canada : 819 824-2707
Téléc. au Canada : 819 824-2195
GUYANA
OGD Drilling (Guyana) Inc.
CHILI
31 Belair Spring
East Coast Demerara
Orbit Garant Chile S.A.
Georgetown
Avda. Los Cerrillos 998,
Guyana
Cerrillos, Santiago,
C Guyana: +592 629 6133
Chile
T Canada : 1 819 824-2707
T Chile: 562 2411-5900
F Canada : 1 819 824-1595
GHANA
WEST AFRICA
Orbit Garant Drilling Ghana Ltd.
GHANA
Plot. 35 Funko Beach
Orbit Garant Drilling Ghana Limited
Takoradi
Plot 35 Funko Beach
WQ 104 Takoradi, Ghana
P.O. Box WQ 104
Tél. au Ghana : +233 (0) 303 960 889
Takoradi
Cellulaire au Canada : 506 863-9503
Ghana
Cellulaire au Ghana : +233 (0) 270-334-162
T Ghana: +233 303 960 889
C Ghana: +233 270 334 162
BURKINA FASO
C Canada : +1 819 860-4258
Forage Orbit Garant BF SAS
BURKINA FASO
737, boulevard Tansoba-KOSSODO
12 B.P. 197 Ouagadougou 12
Forage Orbit Garant BF S.A.S.
Ouagadougou, Burkina Faso
737, boulevard Tansoba-KOSSODO
Téléphone +226 54 69 02 80
12 B.P. 197 Ouagadougou 12
Ouagadougou
Burkina Faso
PÉROU
T Burkina Faso : +226 54 69 02 80
Perforacion Orbit Garant Peru S.A.C.
T Burkina Faso : +226 76 35 88 11
Av. De La Floresta 497
C Canada : +1 819 860-4258
San Borja, Lima
Pérou
GUINEA
Tél. au Canada: 819 824-2707
Forage Orbit Garant Guinee SARLU
Téléc. au Canada: 819-824-2195
Cite chemin de fer
Immeuble Mamou C2A
Conakry
Guinea
T Guinea : +224 629 800 860
C Canada : +1 819 860-4258