ANNUAL REPORT 2024
Head Office
Regional Office
Field Operations
Headquartered in Val-d’Or, Québec, 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 188 drill rigs and
approximately 1,000 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.
PROFILE
MARKET POSITION (by percentage of revenue¹)
1. For the year ended June 30, 2024
RESOURCE EXPOSURE
Gold
Base Metals / Other
REGIONS
Canada
International
73%
66%
27%
34%
CUSTOMERS
Majors &
Intermediates
Juniors
DRILLING SERVICES
Specialized
Conventional
58%
87%
42%
13%
On behalf of Orbit Garant’s Board of Directors, management, and our team of approximately 1,000 people across
Canada and our international operations, I am pleased to present our fiscal 2024 annual report.
In May of 2023, we outlined a strategic “Five-Point Plan” to gradually improve our operating performance over
the following 15 months, which consisted of:
1. Primarily focusing on Canadian gold drilling operations;
2. Prioritizing longer-term, specialized drilling contracts with senior and intermediate customers;
3. Pursuing international contracts in stable jurisdictions that offer attractive returns, while gradually
reducing our exposure to Burkina Faso;
4. Continuing to invest in our driller training and computerized drilling technology; and
5. Building a team-oriented leadership structure that fosters collaboration and personal accountability.
We have made strong progress in executing the plan.
Despite the current low levels of gold drilling activity for junior exploration companies in Canada, we have
maintained strong contracts with senior and intermediate customers. During our second quarter of fiscal 2024,
we renewed a large, specialized drilling contract in Canada with a senior gold mining customer for a three-year
term, resulting in the continued operation of 15 to 20 of our surface and underground drill rigs on the customer’s
project sites.
Our drilling contracts with senior and intermediate mining companies represented 87% of our revenue in fiscal
2024. These companies are currently benefitting from record-high gold prices and strong copper pricing, which
provides a strong incentive to continue investing in mine development activities in both Canada and Chile.
We have significantly grown our business activity in Chile. During our fourth quarter of fiscal 2024, we renewed
two long-term drilling contracts in the country. One of the contract renewals is for a term of three years, with a
customer option to extend for two years, and the other, which represents our largest contract in Chile by revenue,
is for a term of five years.
During the second quarter of fiscal 2024, we completed our final drilling projects in Burkina Faso and Guinea and
have now exited the West African market, which was largely unprofitable for us.
We continue to focus on our computerized monitoring and control technology, and drilling innovation. We are
starting to roll out computerized surface drill rigs in Canada and, during fiscal 2024, we launched a new hands-free
automated drilling rod handling system that enhances driller efficiency and safety.
We have made solid progress on shifting our business culture towards a more team-oriented leadership structure
that fosters collaboration and personal accountability. We believe this less hierarchical business structure
empowers our people to excel and take greater responsibility for the success of Orbit Garant.
The positive impact of our five-point plan can be seen in our results for our fiscal 2024 fourth quarter, where we
generated significant growth in our gross profit and gross margin, which is our primary objective.
During the year, as part of our plan to exit Burkina Faso and Guinea, we entered into an agreement to sell
our remaining assets in West Africa and recorded a long-term account receivable totalling $7.5 million as
compensation. During our fourth quarter, we recorded a non-cash substantial modification of the receivable and
expected credit loss totalling $5.2 million. Excluding this modification, our net income would have been $4.0
million, or $0.11 per share, for the quarter.
To our shareholders,
1
We are quite pleased to have fully completed our exit from West Africa. We are now able to heighten our focus on
drilling contracts with senior and well-financed intermediate mining companies in Canada and Chile, two markets
that have been more stable and predictable for us.
Our revenue for the full year in fiscal 2024 totaled $181.2 million, a decrease of 9.8% from our record annual
revenue of $201.0 million in fiscal 2023. The decline was primarily attributable to customer decisions to
temporarily suspend or reduce drilling activity on certain projects in Canada throughout the first half of fiscal 2024.
These suspended or reduced projects were all re-started by January 2024. Our international drilling revenue was
essentially in line with fiscal 2023. Net loss for fiscal 2024, which includes the $5.2 million one-time non-cash
modification referenced above, was $1.3 million, or $0.04 per share, compared to a net loss of $0.7 million, or
$0.02 per share, in fiscal 2023.
Looking ahead, the underlying fundamentals supporting our business are solid. Gold prices remain at historically
high levels, which enables gold producers to generate strong margins, and many established producers in Canada
are focused on exploration and development spending to replace their reserves. We generated approximately
66% of our revenue from gold-related projects in fiscal 2024, so we have high exposure to this sector. In addition,
if financing conditions improve for junior exploration companies, we expect to see further demand growth for our
services in Canada.
Copper prices are also currently trading at historically high levels. Copper is needed for the ongoing electrifica
tion of the global economy, which is expected to drive strong demand for many years to come. A healthy copper
market is positive for our Chilean operations.
As a result, we believe that strong levels of mineral exploration and development spending will be maintained in
our industry for the foreseeable future. We are confident that our decision to focus our operations on Canada and
Chile will position us for stronger operating performance.
In closing, I would like to note that our Chair, Jean-Yves Laliberté, will not stand for re-election at our upcoming
annual meeting of shareholders on December 5, 2024. Jean-Yves has been a director and chair of our audit
committee since our initial public offering in 2008, and has served as Chair of our board since 2020. We sincerely
thank Jean-Yves for his invaluable contributions in governance oversight, strategic direction and financial expertise
over his many years of service.
Finally, I extend our appreciation to all our personnel, our management team, and our board for their ongoing
commitment to the success of Orbit Garant. And to our shareholders, thank you for your continued support.
Sincerely,
Pierre Alexandre
President & Chief Executive Officer
2
SEPTEMBER 19, 2024
MD&A and
Consolidated Financial
Statements
YEAR END AND FOURTH QUARTER FISCAL 2024
3
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
2
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, 2024 (“Fiscal 2024”) and June 30, 2023 (“Fiscal 2023”) and the notes thereto which are available on the
SEDAR+ website at www.sedarplus.ca.
The Company’s Fiscal 2024 audited consolidated financial statements and the accompanying notes ("Financial
Statements") were prepared in accordance with International Financial Reporting Standards (“IFRS”). All amounts in
this MD&A are in Canadian dollars, except where 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 19, 2024. 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.sedarplus.ca.
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 world economic climate as it relates
to the mining industry, the Canadian economic environment, the Company’s ability to attract and retain customers and
manage its assets and operating costs, the political situation in certain jurisdictions, and the operating environments
in which the Company operates.
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
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
4
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
3
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
Company’s actual results to materially differ from its current expectations, please refer to the Company’s Annual
Information Form dated September 19, 2024, accessible via www.sedarplus.ca.
NON-IFRS FINANCIAL MEASURES
Financial data has been prepared in conformity with IFRS. However, certain measures used in this MD&A 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. The Company uses non-IFRS measures including Adjusted Net Earnings (loss)
before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), “Adjusted EBITDA Margin”, “Adjusted Gross
Profit” and “Adjusted Gross Margin”. 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.
For a description of how Orbit Garant defines these non-IFRS Measures and for reconciliations to the nearest IFRS
measures for the periods presented in this MD&A, please see “Reconciliation of Non-IFRS Measures” on page 19.
FISCAL 2024 SUMMARY
•
Revenue totalled $181.2 million, a decrease of 9.8% compared to $201.0 million in Fiscal 2023
•
Gross margin increased to 11.2% from 9.1% in Fiscal 2023
•
Adjusted gross margin (1) increased to 16.7% from 16.2% in Fiscal 2023
•
Net loss was $1.3 million compared to $0.7 million in Fiscal 2023
•
Net loss includes a negative $5.2 million non-cash impact from the substantial modification of a receivable
and expected credit loss from the sale of assets in West Africa
•
Adjusted EBITDA (1) decreased to $14.4 million from $19.1 million in Fiscal 2023
(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 188 drill rigs and
approximately 1,000 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
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
5
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
4
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 international operating subsidiaries in Santiago,
Chile and Georgetown, Guyana to support its current international operations. Following the decision to cease its
operations in West Africa, the Company finalized its exit from West Africa in the fourth quarter of fiscal year 2024
(“Q4 2024”).
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 manufactures conventional drill rigs for
third-party customers from its facilities in Val-d’Or, Québec and Sudbury, Ontario. 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 and underground drilling).
For Fiscal 2024:
•
Specialized drilling services, which typically generate a higher gross margin than conventional drilling
services, accounted for approximately 42% of the Company’s total revenue, compared to 41% in Fiscal 2023.
•
Approximately 66% of the Company’s revenues were generated by gold related operations, and
approximately 34% were generated by base metal related and other operations, including 23% from copper
related operations.
•
Approximately 87% of Orbit Garant’s revenue was generated from major and intermediate mining company
projects, compared to 81% in Fiscal 2023. Orbit Garant’s drilling contracts with major and intermediate
customers are typically from one to five years in length.
•
Approximately 73% of Orbit Garant’s revenue was generated from domestic drilling projects, and
approximately 27% was generated from international drilling contracts, compared to 76% and 24%
respectively in Fiscal 2023.
BUSINESS STRATEGY
Orbit Garant’s goal is to be a leading Canadian-based mineral drilling company, 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
Canada and other stable jurisdictions;
•
Provide conventional, specialized, and geotechnical drilling services;
•
Manufacture customized drill rigs and equipment to fit the needs of customers;
•
Maintain a commitment to technological innovation and advanced drilling technologies, such as the
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
6
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
5
Company’s current implementation of computerized monitoring and control technologies;
•
Provide training for the Company’s personnel to continuously improve efficiency and to maintain the
availability of a skilled labour force;
•
Maintain a high level of health and safety standards throughout our operations and promote protection of the
environment in the regions where we operate;
•
Establish and maintain long-term relationships with customers; and
•
Maintain a sound balance sheet and a disciplined management of our capital resources.
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.
At the time of this report, the spot price of gold was approximately US$2,590 per ounce, representing an increase of
approximately 34% compared to a year ago and an increase of approximately 77% from its trailing five-year price low
in November 2019. During September 2024, the spot price of gold has traded at record highs near US$2,600 per
ounce.
Base Metals
Aluminum, copper, lead, nickel and zinc are the primary 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.
The spot prices of aluminum, copper and zinc are higher compared to 12 months ago, while the spot prices of nickel
and lead are lower. The spot price for copper, the metal widely considered to be the most sensitive to macroeconomic
activity, was approximately US$3.72 per pound a year ago and at the time of this report was approximately US$4.26
per pound, an increase of approximately 15%. The spot price of copper, which reached a low of approximately US$2.10
per pound in March 2020 and a record high of approximately $5.16 per pound in May 2024, is currently above the mid-
point of its trailing five-year price range. The spot prices of aluminum, lead and zinc are near the mid-points of their
respective trailing five-year price ranges, while the spot price of nickel is near the lower end of its trailing five-year price
range.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
7
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
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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
was approximately US$92 per tonne, compared to approximately US$122 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
Over the last 12 months, gold prices have been favourable for mining companies seeking to raise capital to fund
exploration and/or development activities. Prices for the primary base metals have been mixed over the last 12 months.
However, the price of copper, the flagship base metal, has remained favourable for mining companies seeking to raise
capital. Mining financing activity in the first seven months of 2024 was slightly lower than the comparable period in
2023, but the total amount of equity capital raised was higher. While gold and copper prices are currently strong, junior
mining companies continue to face challenging financing conditions.
TSX / TSX-V Mining Sector Financings (2008 to August 31, 2024)
Mining companies listed on the Toronto Stock Exchange (“TSX”) and the TSX-Venture Exchange (“TSX-V”) completed
794 financings and raised $7.9 billion of equity capital during the first eight months of 2024, according to TMX Group.
Those figures include a large $1.6 billion equity offering completed by First Quantum Minerals Ltd. By comparison,
mining companies listed on the two exchanges completed 818 financings and raised $5.1 billion of equity capital during
0
2
4
6
8
10
12
14
16
18
20
0
500
1 000
1 500
2 000
2 500
3 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD
2024
Equity Capital Raised ($Billions)
Number of Financings
Financings - TSXV
Financings - TSX
Equity Capital Raised - TSXV
Equity Capital Raised - TSX
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
8
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
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the first eight months of 2023. In the comparable period of 2022, they completed 753 financings and raised $4.8 billion
of equity capital.
According to a report from S&P Global Market Intelligence (March 2024), global exploration budgets for nonferrous
metals totaled $12.8 billion in 2023, a decline of approximately 3% from 2022 levels. Despite the year-over-year
decline, the total for 2023 represents the second highest annual level since 2013. For 2024, S&P expects nonferrous
exploration budgets to decline by approximately 5% from 2023 levels, citing concerns about global economic growth.
OVERALL PERFORMANCE
Results of operations for the year ended June 30, 2024
FISCAL YEARS ENDED JUNE 30
* ($millions)
Fiscal 2024
Fiscal 2023
2024 vs. 2023
Variance
Revenue *
181.2
201.0
(19.8)
Gross profit *
20.4
18.3
2.1
Gross margin (%)
11.2
9.1
2.1
Adjusted gross margin (%) (1)
16.7
16.2
0.5
Net earnings (loss) *
(1.3)
(0.7)
(0.5)
Net earnings (loss) per common share - Basic ($)
- Diluted ($)
(0.04)
(0.02)
(0.02)
(0.04)
(0.02)
(0.02)
Adjusted EBITDA * (2)
14.4
19.1
(4.7)
(1) Reflects gross margin, excluding depreciation expenses and write-down of inventories from restructuring in Burkina Faso. See “Reconciliation of non-IFRS
financial measures.”
(2) Adjusted EBITDA = Earnings before interest, taxes, depreciation, amortization, and write-down of inventories from restructuring in Burkina Faso and the effect
of the substantial modification of a receivable and expected credit loss. See “Reconciliation of non-IFRS financial measures.”
Orbit Garant had 188 drill rigs as at June 30, 2024, compared to 212 drill rigs at the end of Fiscal 2023. During Fiscal
2024, twelve conventional drill rigs were dismantled, eleven were sold in Burkina Faso and one computerized drill rig
was sold to a current major mining customer in Chile. Orbit Garant currently has 43 drill rigs outfitted with computerized
monitoring control technology.
During Fiscal 2023, Orbit Garant made the decision to exit Burkina Faso due to the significant additional investment
required to generate an acceptable return on investment, as well as the increased security concerns within the country.
The Company completed its final drilling program in Burkina Faso during the Company’s second quarter of Fiscal 2024
(“Q2 2024”). As a result of this restructuring initiative, Orbit Garant recognized a write-down of inventories based on:
i) the fair value less cost of disposal for a portion of inventories, and ii) the estimated sales less cost to complete for
inventory expected to be consumed until the end of the contract. Fair value was determined using industry knowledge.
The restructuring resulted in a one-time, non-cash write-down of $4.2 million to reduce inventory to net realizable
value, recognized in the Company’s fourth quarter of Fiscal 2023.
Orbit Garant subsequently made the decision to not renew its drilling contract in Guinea, which was completed at the
end of Q2 2024, as the Company determined that it was no longer financially viable to maintain drilling activities in
West Africa considering its exit from Burkina Faso.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
9
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
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Sale of Assets in West Africa
During fiscal year 2024, the Company entered into an agreement to sell its inventories, for an amount of $1.2 million,
and its property, plant and equipment, for an amount of $6.3 million, located in West Africa and recorded a short-term
receivable as compensation, for an amount of $7.5 million.
As at June 30, 2024, for accounting purposes, the Company recorded a derecognition of the short-term receivable and
the recognition of a new long-term receivable of $3.9 million following a significant change in contractual payment
terms of the receivable. The effect of this substantial modification of the receivable is a loss of $3.5 million included in
the expenses of the Consolidated Statements of Loss. The Company also recognized an expected credit loss on this
receivable for an amount of $1.7 million in the Consolidated Statements of Loss.
Going forward, Orbit Garant expects to primarily focus on its operations in Canada and Chile. The Company expects
that its exit from West Africa will have a positive impact on its future gross margins.
SELECTED ANNUAL FINANCIAL INFORMATION
For the years ended June 30 *($millions)
Fiscal 2024
Fiscal 2023
Fiscal 2022
Contract revenue
Drilling Canada *
132.6
152.1
145.2
Drilling International *
48.6
48.9
50.3
Total *
181.2
201.0
195.5
Gross profit *
20.4
18.3
13.7
Gross margin (%)
11.2
9.1
7.0
Adjusted gross margin (%) (1)
16.7
16.2
12.2
Net earnings (loss) *
(1.3)
(0.7)
(6.6)
Net earnings (loss) per common share ($)
(0.04)
(0.02)
(0.18)
Net earnings (loss) per common share diluted ($)
(0.04)
(0.02)
(0.18)
Total assets *
119.9
127.6
137.1
Long-term debt including current portion *
31.4
34.3
36.9
Lease liabilities including current portion*
2.8
1.2
2.1
Adjusted EBITDA * (2)
14.4
19.1
10.0
Adjusted EBITDA margin (%) (2)
7.9
9.5
5.1
Total metres drilled (million)
1.3
1.6
1.8
(1) Reflects gross margin, excluding depreciation expenses, write-down of inventories from restructuring in Burkina Faso. See “Reconciliation of non-IFRS
financial measures.”
(2) Adjusted EBITDA = Earnings before interest, taxes, depreciation, amortization, and write-down of inventories from restructuring in Burkina Faso and the effect
of the substantial modification of a receivable and expected credit loss. See “Reconciliation of non-IFRS financial measures”.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
10
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
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RESULTS OF OPERATIONS
FISCAL 2024 COMPARED TO FISCAL 2023
Contract Revenue
Revenue in Fiscal 2024 totalled $181.2 million, a decrease of 9.8%, compared to $201.0 million in Fiscal 2023. The
decline was primarily attributable to a reduction of drilling activity on certain projects in Canada.
Canada revenue totalled $ 132.6 million in Fiscal 2024, a decrease of 12.8% compared to $152.1 million in Fiscal 2023.
The decline was primarily attributable to reduced drilling activity on certain projects in Canada due to customer
decisions to temporarily suspend or reduce drilling activity on certain projects throughout the first half of Fiscal 2024.
The Company gradually resumed operations on these drilling projects and all of these projects had fully resumed by
January 2024. Orbit Garant elected to retain its drilling personnel on these temporarily suspended or reduced drilling
projects, given the competitive workforce market and in anticipation of the gradual resumption of these projects.
International revenue totalled $48.6 million in Fiscal 2024, a decrease of 0.4%, compared to $48.9 million in
Fiscal 2023. The decline was primarily due to a reduction of drilling activity in Guinea, Burkina Faso and Guyana,
partially offset by increased drilling activity in Chile.
Gross Profit and Margins (Adjusted gross margins - see Reconciliation of non-IFRS Financial measures)
Gross profit for Fiscal 2024 was $20.4 million, compared to $18.3 million in Fiscal 2023. Gross margin was 11.2%
compared to 9.1% in Fiscal 2023. Depreciation expenses of $9.9 million are included in cost of contract revenue for
Fiscal 2024, compared to depreciation expenses and the write-down of inventories from restructuring of $10.1 million
and $4.2 million, respectively, in Fiscal 2023. Adjusted gross margin, excluding depreciation expenses, was 16.7% in
Fiscal 2024, compared to adjusted gross margin, excluding depreciation expenses and write-down of inventories from
restructuring, of 16.2% in Fiscal 2023.
The increase in gross profit, gross margin, and adjusted gross margin primarily reflects the increase in drilling revenue
in Chile and the cessation of drilling activities in West Africa, which was unprofitable, partially offset by the decline in
drilling activity on certain projects in Canada, as discussed above.
General and Administrative Expenses
General and administrative (G&A) expenses were $15.6 million, or 8.6% of revenue, in Fiscal 2024, compared to
$16.4 million or 8.2% of revenue in Fiscal 2023.
Operating Results
Earnings from operations for Fiscal 2024 were $ 8.3 million, compared to $5.7 million in Fiscal 2023.
Drilling Canada’s operating earnings totalled $6.1 million in Fiscal 2024, compared to operating earnings of
$16.2 million in Fiscal 2023. Drilling Canada’s operating earnings in Fiscal 2024 were negatively impacted by the
reduction of drilling activity in Canada during the first half of Fiscal 2024, as discussed above, and costs related to
retaining key personnel on suspended or reduced drilling projects and related project ramp-up costs.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
11
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
10
Drilling International’s operating earnings were $2.2 million in Fiscal 2024, compared to an operating loss of
$10.5 million in Fiscal 2023. The positive variance was primarily attributable to increased drilling activity in Chile and
the cessation of the drilling activity in West Africa, which was unprofitable, partially offset by certain costs related to
the termination of the drilling activity in Guinea.
Foreign Exchange Loss (Gain)
Foreign exchange loss was $1.1 million in Fiscal 2024, compared to a foreign exchange gain of $1.9 million in
Fiscal 2023.
Adjusted EBITDA (see Reconciliation of non-IFRS financial measures)
Adjusted EBITDA was $ 14.4 million for Fiscal 2024, a decrease of $4.7 million compared to adjusted EBITDA of
$19.1 million in Fiscal 2023. The decrease reflects the reduction of drilling activity in Canada due to project
suspensions or reductions during the first half of Fiscal 2024, and the costs related to retaining key personnel on these
projects and ramping them back up. The Company also had a $3.0 million negative variation in foreign exchange in
Fiscal 2024. These negative factors were partially offset by increased operating earnings in Orbit Garant’s international
drilling segment.
Financial Expenses
Interest costs related to long-term debt, lease liabilities and bank charges were $3.5 million in Fiscal 2024, compared
to $3.4 million during Fiscal 2023, reflecting general interest rate increases.
Sale of Assets in West Africa
Orbit Garant entered into an agreement to sell its inventories and its property, plant and equipment located in West
Africa and recorded a receivable totalling $7.5 million as compensation. During Q4 2024 the Company has also
recorded the effect of the substantial modification of a receivable and expected credit loss totalling $5.2 million, as
discussed above.
Income Tax (recovery)
Income tax recovery was $3.7 million in Fiscal 2024, compared to an income tax expense of $1.1 million in Fiscal
2023. The effective tax rate for Fiscal 2024 results primarily from the recognition of previously unrecognized deductible
temporary differences and tax losses of prior periods, partially offset by no deferred tax assets being recognized for
international operations.
Net Loss
Net loss for Fiscal 2024 was $1.3 million, or $0.04 per share, compared to a net loss of $0.7 million, or $0.02 per share,
in Fiscal 2023. The net loss in Fiscal 2024 reflects a $5.2 million effect of the substantial modification of a receivable
and expected credit loss on the sale of assets located in West Africa, the reduction of drilling activity in Canada due to
project suspensions or reductions and costs related to retaining key personnel on these projects and ramping the
projects back up, as discussed above. A $3.0 million negative variation in foreign exchange also factored in the net
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
12
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
11
loss. These negative factors were partially offset by a $3.7 million income tax recovery in Fiscal 2024 compared to a
$1.1 million income tax expense in Fiscal 2023.
SUMMARY OF QUARTERLY RESULTS
* ($millions)
Fiscal 2024
Fiscal 2023
June 30
Mar. 31
Dec. 31
Sept. 30
June 30
Mar. 31
Dec. 31
Sept. 30
Contract revenue *
45.3
48.2
43.4
44.3
46.8
49.3
51.6
53.3
Gross profit (1)*
7.3
6.2
2.8
4.1
0.7
4.6
6.8
6.2
Gross margin %
16.1
12.8
6.4
9.4
1.4
9.4
13.1
11.7
Net earnings (loss) *
(1.2)
2.0
(1.7)
(0.4)
(4.1)
0.2
2.1
1.1
Net earnings
(loss) per
common share ($)
- Basic
- Diluted
(0.04)
0.05
(0.05)
-
(0.11)
0.01
0.05
0.03
(0.04)
0.05
(0.05)
-
(0.11)
0.01
0.05
0.03
(1) Includes amortization and depreciation expenses related to operations and write-down of inventories from restructuring in Burkina Faso.
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 2024 (“Q4 2024”), COMPARED TO THE FOURTH QUARTER
OF FISCAL 2023 (“Q4 2023”)
Contract Revenue
Revenue for Q4 2024 totalled $45.3 million, a decrease of 3.0% compared to $46.8 million for Q4 2023.
Canada revenue totalled $32.8 million in Q4 2024, an increase of 0.9% compared to $32.6 million in Q4 2023. Canada
revenue was negatively affected by financing difficulties for the junior and intermediate mining companies, resulting in
lower drilling activity than previous years, whereas Q4 2023 was negatively impacted by project suspensions due to
forest fires.
International revenue totalled $12.5 million in Q4 2024 compared to $14.2 million in Q4 2023. The decrease was
primarily attributable to the cessation in drilling activity in West Africa, partially offset by increased drilling activity in
Chile.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
13
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
12
Gross Profit and Margins (Adjusted Gross Margins - see Reconciliation of non-IFRS financial measures)
Gross profit for Q4 2024 was $7.3 million compared to $0.7 million in Q4 2023. Gross margin for Q4 2024 was 16.1%
compared to 1.4% in Q4 2023. The increase in gross profit and gross margin reflects the $4.2 million write-down of
inventories from restructuring recorded in Q4 2023 and the improved profitability of the Company’s international
operations in Q4 2024. Depreciation expenses totalling $2.5 million, are included in the cost of contract revenue for
Q4 2024, compared to depreciation expenses and a write-down of inventories from restructuring totalling $2.6 million
and $4.2 million, respectively, for Q4 2023. Adjusted gross margin, excluding depreciation expenses, was 21.7% in
Q4 2024, compared to adjusted gross margin, excluding depreciation expenses and the write-down of inventories from
restructuring, of 15.9% in Q4 2023.
The increase in adjusted gross margin was primarily attributable to the Company’s increased drilling activity in Chile
during the quarter, and the cessation of drilling activities in West Africa, which were unprofitable.
General and Administrative Expenses
G&A expenses were $4.0 million, or 8.9% of revenue, in Q4 2024, compared to $5.1 million, or 10.9% of revenue, in
Q4 2023.
Operating Results (Loss)
Earnings from operations for Q4 2024 were $4.4 million compared to a loss from operations of $3.5 million in Q4 2023.
Drilling Canada’s operating earnings totalled $2.1 million in Q4 2024, compared to earnings of $1.3 million in Q4 2023.
Drilling International’s operating earnings totalled $2.3 million in Q4 2024, compared to an operating loss of $4.8 million
in Q4 2023. The positive variation in operating results was primarily attributable to the $4.2 million write-down of
inventories from restructuring recorded in Q4 2023, increased drilling activity in Chile and the cessation of drilling
activities in West Africa, as discussed above.
Foreign Exchange (Gain) Loss
Foreign exchange gain was $0.4 million in Q4 2024, compared to a foreign exchange loss of $0.8 million in Q4 2023.
Adjusted EBITDA (see Reconciliation of non-IFRS financial measures)
Adjusted EBITDA totalled $6.4 million in Q4 2024, compared to adjusted EBITDA of $1.8 million in Q4 2023. The
increase was primarily attributable to increased operating earnings from the international drilling segment.
Financial Expenses
Interest costs related to long-term debt and bank charges were $0.8 million in Q4 2024, compared to $0.9 million in
Q4 2023.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
14
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
13
Sale of Assets in West Africa
During Q4 2024, the Company has also recorded the effect of the substantial modification of a receivable and expected
credit loss totalling $5.2 million, as discussed above.
Income Tax (recovery)
Income tax recovery was $1.2 million in Q4 2024, compared to a tax recovery of $2.1 million in Q4 2023. The effective
tax rate for Q4 2024 results primarily from no deferred tax assets being recognized for international operations partially
offset by the recognition of previously unrecognized deductible temporary differences and tax losses of prior periods
Net Loss
Net loss for Q4 2024 was $1.2 million, or $0.04 per share, compared to a net loss of $4.1 million, or $0.11 per share,
in Q4 2023. The net loss in Q4 2024 was primarily attributable to the $5.2 million effect of the substantial modification
of a receivable and expected credit loss, as discussed above.
EFFECT OF EXCHANGE RATE
The Company realizes portions of its business activities in the following foreign currencies: US dollars (“US $”), Chilean
Pesos (“CLP”), 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, 2024, and 2023, 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, 2024 (millions)
US $
CLP
GHS
XOF
GNF
Cash
0.1
60.5
-
7.9
0.9
Accounts receivable
0.5
6,138.5
-
-
-
EBIT impact +/- 10% CAD$
0.1
-
-
-
-
As at June 30, 2023 (millions)
US $
CLP
GHS
XOF
GNF
Cash
0.2
177.6
-
565.7
2,566.9
Accounts receivable
0.4
2,797.3
-
182.7
7,036.2
EBIT impact +/- 10% CAD$
(0.1)
0.2
-
0.1
-
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 $12.7 million in Fiscal 2024, compared to $18.8 million in Fiscal 2023.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
15
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
14
The change in non-cash operating working capital items was an outflow of $0.1 million, compared to an outflow of
$0.7 million in Fiscal 2023. The change in non-cash operating working capital in Fiscal 2024 was primarily attributable
to:
•
$3.0 million related to an increase in accounts receivable,
•
$0.3 million related to a decrease in accounts payable, partially offset by
•
$2.9 million related to a decrease in inventory, and
•
$0.3 million related to a decrease in prepaid expenses.
Investing Activities
Cash used in investing activities totalled $6.0 million in Fiscal 2024, compared to $8.4 million in Fiscal 2023. During
Fiscal 2024, $8.7 million was used for the acquisition of property, plant and equipment and intangible assets, partially
offset by a cash inflow of $2.6 million on disposal of investments, property plant and equipment. During Fiscal 2023,
$9.4 million was used for the acquisition of property, plant and equipment, intangible assets and for deposits on
purchased equipment, partially offset by a cash inflow of $1.0 million on disposal of investments, property, plant and
equipment.
Financing Activities
During Fiscal 2024, the Company repaid a net amount of $5.3 million of its factoring liability, long-term debt and lease
liabilities, compared to $4.4 million during Fiscal 2023.
Orbit Garant’s primary sources of liquidity are cash flows from operations and borrowings under a credit facility (the
“Credit Facility”) with National Bank of Canada Inc., in its capacity as agent (“National Bank”). On November 2, 2023,
the Company entered into a fifth amended and restated credit agreement with National Bank in respect of the Credit
Facility (the “Credit Agreement”) and on March 26, 2024, the Company and National Bank entered into an amendment
to the Credit Agreement. The Credit Facility consists of a $30.0 million revolving credit facility, and a US$5.0 million
revolving credit facility guaranteed by Export Development Canada (“EDC”). The Credit Facility expires on
November 2, 2026.
Orbit Garant repaid a net amount of $0.7 million in Fiscal 2024 on its Credit Facility, compared to $9.3 million in Fiscal
2023. The Company’s long-term debt, under the Credit Facility, including US$3.0 million ($4.1 million) drawn from the
US$5.0 million revolving credit facility and the current portion, was $21.5 as at June 30, 2024, compared to
$22.2 million as at June 30, 2023.
As at June 30, 2024, the Company’s working capital totalled $48.9 million, compared to $50.4 million as at
June 30, 2023. Orbit Garant’s working capital requirements are primarily related to the funding of inventory and the
financing of accounts receivable.
The Company believes that it will be able to generate sufficient cash flow to meet its current and future needs for
capital expenditures and repayment of its debt obligations. Orbit Garant’s principal capital expenditures are related to
the acquisition of drill rigs and related drilling equipment.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
16
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
15
Sources of Financing
As at June 30, 2024, the Company complied with all covenants in the Credit Agreement, in the loan agreement with
EDC (the “EDC Loan”) and in the loan agreement (the “BDC Loan Agreement”) with the Business Development Bank
of Canada (“BDC”). The Company expects that availability under the Credit Facility will continue to provide it with
sufficient liquidity to fund its working capital and capital asset acquisition requirements.
Orbit Garant’s primary sources of liquidity are cash flows from operations and borrowings under its Credit Facility. The
Credit Facility matures on November 2, 2026. As at June 30, 2024, the Company had drawn $21.5 million ($22.2 million
as at June 30, 2023) under the Credit Facility.
Availability 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. Except as noted below, 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. As at June 30, 2024, the borrowing base for the Credit
Facility was 27.4 million and US$5.0 million and the undrawn amounts were $10.0 million and US$0.3 million.
The Credit Agreement contains covenants that limit Orbit Garant’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 Agreement also contains a number of financial covenants that the Company
must comply with.
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’s
long-term debt under this financing agreement, including current portion, amounted to $2.1 million as at June 30, 2024
($2.5 million as at June 30, 2023).
On September 9, 2022, Orbit Garant entered into the BDC Loan Agreement, which provides for a term loan in the
principal amount of $8.47 million. This loan bears interest at a fixed rate of 6.50% per year, has a 20-year term and is
repayable by way of 240 consecutive monthly payments from November 2022 until October 2042. The fixed interest
rate was reduced by 0.20% in November 2023, following the Company’s compliance with certain financial covenants.
Orbit Garant’s obligations under the BDC Loan Agreement are: (a) secured by a first ranking immovable hypothec on
the building serving as the Company’s head office in Val-d'Or, Quebec; and (b) guaranteed on a solidary (joint and
several) basis by certain of the Company’s subsidiaries. Orbit Garant’s long-term debt under the BDC Loan Agreement,
including the current portion, amounted to $8.1 million as at June 30, 2024 ($8.3 million as at June 30, 2023).
Orbit Garant believes that it will continue to meet its payment obligations under its credit facilities and have sufficient
resources to carry on its business operations.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
17
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
16
As at June 30, 2024, the Company had future contractual obligations as follows:
($000s)
Total
Within 1 year
2-3 years
4-5 years
Subsequent years
Long-term debt
37,637
1,036
23,578
2,976
10,047
Lease liabilities
3,120
1,236
1,484
400
-
Short-term leases
274
270
4
-
-
Total
41,031
2,542
25,066
3,376
10,047
OUTSTANDING SECURITIES AS AT SEPTEMBER 19, 2024
During Fiscal 2024, the Company issued 590,000 options and cancelled 360,000 options.
RELATED PARTY TRANSACTIONS
The Company is related to Dynamitage Castonguay Ltd., a company in which a director of the Company has an
interest.
During Fiscal 2024, and Fiscal 2023, the Company entered into the following transactions with its related company
and with persons related to directors:
($000s)
Fiscal 2024
Fiscal 2023
Revenue
151
35
Expenses
24
96
As at June 30, 2024, a negligible amount was a receivable resulting from these transactions (a negligible amount as
at June 30, 2023)
All these related party transactions are made in the normal course of business and 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.
Number of common shares
37,372,756
Number of options
2,190,000
Fully diluted
39,562,756
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
18
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
17
Compensation paid to key management personnel and directors is as follows:
($000s)
Fiscal 2024
Fiscal 2023
Salaries and fees
995
1,195
Share-based compensation
104
62
Total
1,099
1,257
CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGMENTS
The material accounting policies information is described in note 2 of the Fiscal 2024 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
Long-term receivable
On initial recognition, the Company recognizes the long-term receivable at fair value, estimated as the present value
of contractual cash flows over the agreement term, discounted using a rate that reflects the risk associated to the
counterparty and rates prevailing on the market for such instruments.
The carrying amount of the long-term receivable is presented net of an allowance for expected credit loss. The
probability of default considered in the estimate is based on historical data for comparable entities. Loss given default
(LGD) reflects the Company’s ability to execute its right to take possession of the assets given in guarantee under the
contract. The amount and timing of cash flows expected to be recovered upon a default event is based on probability-
weighted scenarios and the actual cash shortfall may differ from the resulting estimated expected credit loss.
Management will review the appropriateness of the allowance for expected credit loss at the earliest of each reporting
period, or when new information becomes available that may give rise to a change in conditions or assumptions initially
used in the estimation.
Income taxes and deferred income taxes
The Company determines its income tax expense and its income tax assets and liabilities based on its interpretation
of applicable tax legislation, including tax treaties between the various countries in which it operates, as well as
underlying rules and regulations. Such interpretations involve judgments and estimates that may be challenged in
government tax audits, to which the Company is regularly subject. New information may also become available, which
would cause the Company to change its judgment regarding the adequacy of existing income tax assets and liabilities.
Any such changes will have an impact on net loss for the period in which they occur.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
19
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
18
In the calculation of income taxes and deferred tax assets and liabilities, estimates must be used to determine the
appropriate rates and amounts, and to take into account the probability of realization of tax assets. Deferred tax assets
also reflect the benefit of unused tax losses and deductions that can be carried forward to reduce current income taxes
in future years. This assessment requires the Company to make significant estimates in determining whether or not it
is probable that the deferred tax assets can be recovered from future taxable income and therefore, that they can be
recognized in the Company's consolidated financial statements. The Company relies, among other things, on its past
experience to make this assessment.
B- JUDGMENTS
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. Consequently, the impact on the Consolidated Financial Statements of future periods could
be material.
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.
STANDARDS AND INTERPRETATIONS ADOPTED AND NOT YET ADOPTED
A) Adopted
The following standards and amendments to existing standards have been adopted by the Company on July 1, 2023
and have had no significant impact on the Company’s Consolidated Financial Statements:
1) IAS 1 (amended) – Presentation of Financial Statements – (amendment – disclosure of material versus
significant policies)
2) IAS 8 (amended) – Accounting Policies, Changes in Accounting Estimates and Errors – (amendment –
definition of accounting estimates)
3) IAS 12 (amended) – Income Taxes - (amendment – deferred tax related to assets and liabilities arising from
a single transaction)
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
20
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
19
B) Not yet adopted
The Company has not applied the following IASB standard amendment that has been issued, but is not yet effective:
1) IAS 1 (amended) – Presentation of Financial Statements – (amendment – Classification of liabilities as
Current or Non-Current and Non-current Liabilities with Covenants, effective for periods beginning on or after
January 1, 2024)
The Company is currently in the process of assessing the impact the adoption of the above amendment will have on
the Consolidated Financial Statements.
RECONCILIATION OF NON - IFRS FINANCIAL MEASURES
EBITDA, adjusted EBITDA and
adjusted EBITDA margin:
EBITDA is defined as net earnings (loss) before interest, taxes, depreciation and
amortization. Adjusted EBITDA is defined as EBITDA excluding the impact of (i)
the write-down of inventories from restructuring in Burkina Faso and (ii) the effect
of the substantial modification of a receivable and expected credit loss. Adjusted
EBITDA margin is defined as the percentage of adjusted EBITDA to contract
revenue.
Adjusted gross profit and
adjusted gross margin:
Adjusted gross profit is defined as gross profit excluding depreciation and write-
down of inventories from restructuring in Burkina Faso. Adjusted gross margin is
defined as the percentage of adjusted gross profit to contract revenue.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
Management believes that EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are an important measure when
analyzing its operating profitability, as it removes the impact of financing costs, certain non-cash items, income taxes
and restructuring costs. As a result, Management considers these measures as useful and comparable benchmarks
for evaluating the Company’s performance, as companies rarely have the same capital and financing structure.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
21
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
20
Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
(unaudited)
(in millions of dollars)
Q4 2024
Q4 2023
Fiscal 2024
Fiscal 2023
Fiscal 2022
Net loss for the period
(1.2)
(4.1)
(1.3)
(0.7)
(6.6)
Add:
Finance costs
0.8
0.9
3.5
3.4
2.2
Income tax expense
(recovery)
(1.2)
(2.1)
(3.7)
1.1
3.2
Depreciation and
amortization
2.8
2.9
10.7
11.1
11.2
EBITDA
1.2
(2.4)
9.2
14.9
10.0
Write-down of
inventories from
restructuring in
Burkina Faso
Effect of the
substantial
modification of a
receivable and
expected credit loss
-
5.2
4.2
-
-
5.2
4.2
-
-
-
Adjusted EBITDA
6.4
1.8
14.4
19.1
10.0
Contract revenue
45.3
46.8
181.2
201.0
195.5
Adjusted EBITDA
margin (%) (1)
14.1
3.8
7.9
9.5
5.1
(1) Adjusted EBITDA, divided by contract revenue X 100
Adjusted Gross Profit and Adjusted Gross Margin
Although adjusted gross profit and adjusted gross 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 Adjusted Gross Margin
(unaudited)
(in millions of dollars)
Q4 2024
Q4 2023
Fiscal 2024
Fiscal 2023
Fiscal 2022
Contract revenue
45.3
46.8
181.2
201.0
195.5
Cost of contract revenue
38.0
46.2
160.9
182.7
181.7
Less:
depreciation
write-down of inventories from
restructuring in Burkina Faso
(2.5)
-
(2.6)
(4.2)
(9.9)
-
(10.1)
(4.2)
(10.0)
-
Direct costs
35.5
39.4
151.0
168.4
171.7
Adjusted gross profit
9.8
7.4
30.2
32.6
23.8
Adjusted gross margin (%) (1)
21.7
15.9
16.7
16.2
12.2
(1) Adjusted gross profit, divided by contract revenue X 100
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
22
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
21
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 19, 2024. 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 occur, the business, financial condition,
liquidity and results of operations of the Company could be affected materially and adversely.
Pandemics, Force Majeure, and Natural Disasters
The Company may be affected by pandemics such as the COVID-19 coronavirus, force majeure events and natural
disasters. The likelihood and magnitude of such events are inherently difficult to predict, and their significance is highly
uncertain and may depend on factors beyond the Company and its control. A prolonged economic disruption, following
such an event or disaster, including the COVID-19 outbreak, may have a material and adverse impact on revenues,
cash flow and profitability of the Company, including, without limitation, by compromising employee health and
productivity in the workplace, disruption of supply chains and the business of the Company's customers.
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.
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
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
23
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
22
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 a number of 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
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
24
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
23
tax expenses and liabilities, including interest and penalties. Moreover, there is a risk in which the countries where the
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, 2026. 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 may, from time to time, consider 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.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
25
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
24
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.
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 several 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 could 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.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
26
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
25
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 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
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, GHS, XOF and GNF and is thus exposed to foreign exchange
fluctuations. As at June 30, 2024, the Company had the following currency risk exposure related to financial assets
and liabilities in US $, CLP, GHS, XOF, and GNF of approximately: $1.1, $0.5, $0.2, $(0.6) and $(0.5) million,
respectively ($(1.0), $2.7, $0.0, $0.9 and $0.6 million, in Canadian dollars respectively in Canadian dollars as at
June 30, 2023). This exposure could change in the future and a significant portion of our revenue could potentially be
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
27
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
26
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 because 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
including forest fires. 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.
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
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
28
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
27
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 including
forest fires, 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 always 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.
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
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
29
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
28
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 at September 19, 2024, Pierre Alexandre, President and CEO, holds or controls, directly or indirectly, approximately
24% 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
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.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
30
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
29
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.
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, 2024, the amount of the insurance coverage from EDC represents
4% of the accounts receivable (4% as at June 30, 2023).
As at June 30, 2024, 78% (72% as at June 30, 2023) of the trade accounts receivable are aged as current and 4% are
impaired (3% as at June 30, 2023).
Two major customers represent more than 10% of the trade accounts receivable, at 41% of the trade accounts
receivable as at June 30, 2024 (three major customers represented 41% as at June 30, 2023).
Two major customers represent more than 10% of total contract revenue, at 33% of the contract revenue for the year
ended June 30, 2024 (for the year ended June 30, 2023, one major customer represented 18% 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 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, 2024, the Company estimates that a 100-basis point increase or decrease in interest rates would have
caused a corresponding annual variation in net earnings (loss) and comprehensive earnings (loss) of $ 0.2 million
($0.2 million as at June 30, 2023).
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
31
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
30
Equity Market Risk
The Company is subject to equity market risk by owning common shares of publicly traded companies.
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 the long-term receivable is determined using an evaluation of the estimated market value using a
discount rate, adjusted for the customer's own credit risk, that reflects current market conditions.
The fair value of the long-term debt is determined using an evaluation of the estimated market value using a discount
rate, adjusted for the Company’s own credit risk, that reflects current market conditions.
OUTLOOK
Customer demand from major and intermediate mining companies for mineral drilling services in Canada remains
generally strong, while demand from junior exploration and some intermediate mining companies is being negatively
impacted by current macroeconomic factors which have restricted their access to capital. The strong sustained demand
from major and intermediate mining companies has resulted in increased wage costs for experienced drillers in
Canada. Global inflation in costs for supplies and materials has also impacted the mineral drilling industry. To offset
increased wage costs in Canada and the higher costs of supplies and materials globally, the Company was able to
adjust its pricing on several of its drilling contracts during the first half of Fiscal 2023. However, customer pricing
pressure has since limited the Company’s ability to negotiate pricing. Management believes the current weakness in
demand from junior exploration companies is having a negative impact on industry pricing.
Management believes that the long-term outlook for drilling in the gold industry is positive, as many mining companies
are facing declining reserves. Accordingly, increased spending on exploration and mine development will be required
for the industry to remain viable. The current strong price of gold supports exploration and development spending on
gold projects. Management believes that Orbit Garant is well positioned to benefit from increased drilling services
demand in the gold sector as it generated approximately 66% of its revenue from gold related projects during Fiscal
2024.
S&P Global Market Intelligence forecasts that gold production in Canada will rise at a compound annual growth rate
of 9% between 2023 and 2027. Orbit Garant generated approximately 73% of its revenue from its Canadian operations
in Fiscal 2024 and 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 Canadian dollars and their revenues are denominated in US
dollars. At the time of this report, the value of the Canadian dollar was approximately $0.74 US dollars.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
32
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
31
The long-term market sentiment for copper is positive due to tight supply-demand fundamentals and its important role
in the electrification of the global economy. Many industry analysts expect that declining global copper reserves may
necessitate increased exploration and development spending for copper over the coming years. Orbit Garant is well
positioned for increased spending on copper exploration and development projects due to its presence in Chile, which
is the global leader in copper production.
Orbit Garant’s international operations provide enhanced market, customer and commodity diversification, as well as
increased access to higher-margin specialized drilling activity. The Company is currently working on projects in Chile
and Guyana in South America. During Q4 2024, the Company renewed two large copper drilling contracts in Chile with
senior mining companies. One of these contract renewals is for a period of three years, with a customer option to
extend the contract for an additional two years. The other contract renewal, which represents Orbit Garant’s largest
contract in Chile, is for a period of five years.
Orbit Garant completed its final drilling contracts in Burkina Faso and Guinea in West Africa during Q2 2024 and
thereafter entered into an agreement to sell its remaining equipment in the region to a local drilling company and
recorded a receivable as compensation, for an amount of $7.5 million. The Company subsequently recorded a
substantial modification of a receivable and expected credit loss totalling $5.2 million. Management expects that the
Company’s exit from West Africa will have a positive impact on operating margins.
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
training and 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.
Looking ahead, Orbit Garant intends to primarily focus on its drilling operations in Canada and Chile, prioritizing longer-
term, specialized drilling contracts with major and intermediate customers. The Company will continue to focus on:
disciplined management of its variable cost structure and cash, optimizing its drill rig utilization, increasing productivity
rates, technology innovation, driller training, retaining key personnel, and maintaining strong health and safety
standards.
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.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
33
YEAR END AND FOURTH QUARTER 2024
MANAGEMENT’S DISCUSSION AND ANALYSIS Orbit Garant Drilling Inc.
32
As at June 30, 2024, 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, 2024.
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
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 2024, 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 at June 30, 2024, 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.
Year End and Fourth Quarter 2024
Management’s Discussion and Analysis
Orbit Garant Drilling Inc.
34
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.
KPMG LLP
Tour KPMG
600 de Maisonneuve Blvd West, Suite 1500
Montréal, QC H3A 0A3
Canada
Telephone 514 840 2100
Fax 514 840 2187
INDEPENDENT AUDITOR’S 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, 2024 and June 30, 2023;
•
the consolidated statements of loss and comprehensive 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 material accounting
policy information
(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, 2024 and June 30, 2023, and its
consolidated financial performance and its consolidated cash flows for the years then ended in
accordance with IFRS Accounting Standards as issued by the International Accounting Standards
Board.
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 "Auditor’s
Responsibilities for the Audit of the Financial Statements" section of our auditor’s 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.
Page 2
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 30th, 2024. 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.
We have determined the matters described below to be the key audit matters to be communicated
in our auditor’s report.
Assessment of the Accuracy of Mining Sites Inventories
Description of the matter
We draw attention to Note 3 and Note 7 to the consolidated financial statements.
The Entity’s inventories mainly include spare parts and consumables. As at June 30, 2024, the
Entity holds inventories of $42.96 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 over the first-in, first-out cost basis of the mining sites 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 sites inventories by items and by location, to calculate movements during the
year for items held in inventory at year-end. We performed substantive analytical procedures over
the first-in, first-out cost basis for these items, using data including purchase costs and mining sites
inventories 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 sites 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.
36
Page 3
Evaluation of the fair value and expected credit loss of a long-term receivable
substantially modified
Description of the matter
We draw attention to Notes 3, 4, 9, 10 and 23 to the consolidated financial statements.
During the fiscal year 2024, the Entity entered into an asset sale agreement for the sale of
inventories, property, plant and equipment for a total consideration amounting to $7,501, for which
a short-term receivable was initially recognized. As at June 30, 2024, the Entity recorded the
derecognition of the short-term receivable balance of $7,428 and the recognition of a new long-
term receivable of $3,888 following a significant change in contractual payment terms of the
receivable. The Company also recognized an expected credit loss (“ECL”) on this receivable for
an amount of $1,644 in the Consolidated Statements of Loss.
Significant assumptions in determining the fair value of the long-term receivable on the date of
substantial modification included the discount rate.
Significant assumptions in determining the ECL included:
•
Probability of default
•
Probability-weighting and amount of expected cash shortfall under each scenario considered
by the Entity, including reflecting the Entity’s ability to execute its right to take procession of the
asset given in guaranty under the contract.
Why the matter is a key audit matter
We identified the evaluation of the fair value and ECL of a long-term receivable substantially
modified as a key audit matter. This matter represented an area of significant risk of material
misstatement given the high degree of estimation uncertainty in determining the fair value and ECL
of the long-term receivable substantially modified. In addition, significant auditor judgment was
required in evaluating the results of our audit procedures due to the sensitivity of the Entity’s
determination of the fair value of the long-term receivable and ECL to minor changes to certain
significant assumptions.
How the matter was addressed in the audit
The following are the primary procedures we performed to address this key audit matter:
We compared the amount of the monthly expected cash receipts of the long-term receivable to
actual monthly installments received from the buyer subsequent to the modification date and to the
Entity’s documentation of the modified payment terms agreed with the buyer.
We assessed that the timing of the expected cash receipts of the substantially modified long-term
receivable and that the probability-weighting assumption of the scenarios considered by the Entity
to determine the ECL were consistent with the information obtained from reading the Entity’s
internal communications to management and the Board of Directors.
37
Page 4
We involved valuation professionals with specialized skills and knowledge, who assisted in
evaluating the appropriateness of the Entity’s:
•
discount rate assumption used in its determination of the fair value the long-term receivable, by
comparing it against a discount rate range that was independently developed using publicly
available market data for comparable entities
•
probability of default assumption used in its determination of the ECL on the long-term
receivable, by comparing it against publicly available default rate data for comparable entities.
We compared the amount of expected cash shortfalls assumption used by the Entity’s in its
determination of the ECL under the scenario that the Entity would execute its right to take
procession of the asset given in guaranty under the contract to source documents of similar sale of
assets transactions, as adjusted to take into account a liquidation basis.
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 auditor’s 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.
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 auditor’s 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 auditor’s report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditor’s 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 auditor’s 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.
38
Page 5
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 IFRS Accounting Standards as issued by the International Accounting Standards
Board, 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.
Auditor’s 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 auditor’s
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.
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 from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
39
Page 6
•
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 auditor’s 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 auditor’s 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.
•
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.
40
*CPA auditor, public accountancy permit No. A131681
Page 7
•
Determine, from the matters communicated with those charged with governance, those matters
that were of most significance in the audit of the financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless
law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our auditor’s report
because the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
The engagement partner on the audit resulting in this auditor’s report is Marie David.
Montréal, Canada
September 19, 2024
41
ORBIT GARANT DRILLING INC.
Consolidated Statements of Loss
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share)
June 30
June 30
Notes
2024
2023
$
$
Contract revenue
24
181,240
200,976
Cost of contract revenue
Write-down of inventories from restructuring in Burkina Faso
6, 7
-
4,187
Other cost of contract revenue
6
160,872
178,459
160,872
182,646
Gross profit
20,368
18,330
Expenses
General and administrative expenses
6
15,640
16,444
Foreign exchange loss (gain)
1,110
(1,892)
Finance costs
6
3,474
3,349
9
5,184
-
6
25,408
17,901
(5,040)
429
Income tax expense (recovery)
17
Current
187
475
Deferred
(3,910)
623
(3,723)
1,098
Net loss
(1,317)
(669)
Net loss per share
16
Basic
(0.04)
(0.02)
Diluted
(0.04)
(0.02)
(Loss) earnings before income taxes
Effect of the substantial modification of a receivable and expected credit loss
See accompanying notes to consolidated financial statements.
Page 9
42
ORBIT GARANT DRILLING INC.
Consolidated Statements of Comprehensive Loss
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars)
June 30
June 30
2024
2023
$
$
Net loss
(1,317)
(669)
Cumulative translation adjustments, net of income tax of $14 (June 30, 2023 : $62)
(244)
(275)
Other comprehensive loss
(244)
(275)
Comprehensive loss
(1,561)
(944)
Other comprehensive loss
See accompanying notes to consolidated financial statements.
Page 10
43
ORBIT GARANT DRILLING INC.
Consolidated Statements of Changes in Equity
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars)
Year ended June 30, 2024
Accumulated
other
Equity-settled
Retained
comprehensive
Shareholders'
Share capital
reserve
earnings
loss
equity
$
$
$
$
$
(Note 16)
Balance as at July 1, 2023
59,204
981
5,786
(4,327)
61,644
Total comprehensive loss
Net loss
-
-
(1,317)
-
(1,317)
Other comprehensive loss
Cumulative translation adjustments
-
-
-
(244)
(244)
Other comprehensive loss
-
-
-
(244)
(244)
Transactions with shareholders, recorded directly in equity
Share-based compensation
(Note 16)
-
146
-
-
146
Stock options cancelled
-
(204)
204
-
-
Total transactions with shareholders
-
(58)
204
-
146
Balance as at June 30, 2024
59,204
923
4,673
(4,571)
60,229
Year ended June 30, 2023
Accumulated
other
Equity-settled
Retained
comprehensive
Shareholders'
Share capital
reserve
earnings
loss
equity
$
$
$
$
$
(Note 16)
Balance as at July 1, 2022
59,204
1,624
5,729
(4,052)
62,505
Total comprehensive loss
Net loss
-
-
(669)
-
(669)
Other comprehensive loss
Cumulative translation adjustments
-
-
-
(275)
(275)
Other comprehensive loss
-
-
-
(275)
(275)
Transactions with shareholders, recorded directly in equity
Share-based compensation
(Note 16)
-
83
-
-
83
Stock options cancelled
-
(726)
726
-
-
Total transactions with shareholders
-
(643)
726
-
83
Balance as at June 30, 2023
59,204
981
5,786
(4,327)
61,644
See accompanying notes to consolidated financial statements.
Page 11
44
ORBIT GARANT DRILLING INC.
Consolidated Statements of Financial Position
As at June 30, 2024 and June 30, 2023
(in thousands of Canadian dollars)
June 30
June 30
Notes
2024
2023
$
$
ASSETS
Current assets
Cash and cash equivalents
332
2,181
Trade and other receivables
30,530
30,538
Inventories
7
42,964
47,674
Income taxes receivable
537
580
Prepaid expenses
734
1,017
Current portion of long-term receivable
9
552
-
75,649
81,990
Non-current assets
Investments
8
1,411
320
Long-term receivable
9
1,692
-
Property, plant and equipment
10
33,394
41,156
Right-of-use assets
11
3,211
1,925
Intangible assets
12
211
296
Deferred tax assets
17
4,309
1,876
Total assets
119,877
127,563
LIABILITIES
Current liabilities
Trade and other payables
25,410
27,621
Income taxes payable
117
1
Factoring liability
23
-
1,449
Current portion of long-term debt
13
450
1,994
Current portion of lease liabilities
14
1,060
528
27,037
31,593
Non-current liabilities
Deferred tax liabilities
17
-
1,291
Long-term debt
13
30,909
32,344
Lease liabilities
14
1,702
691
59,648
65,919
EQUITY
Share capital
16
59,204
59,204
Equity-settled reserve
923
981
Retained earnings
4,673
5,786
Accumulated other comprehensive loss
(4,571)
(4,327)
Equity attributable to shareholders
60,229
61,644
Total liabilities and equity
119,877
127,563
Contingencies and commitments (notes 19 and 20)
APPROVED BY THE BOARD
Pierre Alexandre, Director
Nicole Veilleux, Director
See accompanying notes to consolidated financial statements.
Page 12
(signed) Nicole Veilleux
(signed) Pierre Alexandre
45
ORBIT GARANT DRILLING INC.
Consolidated Statements of Cash Flows
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars)
June 30
June 30
Notes
2024
2023
$
$
OPERATING ACTIVITIES
(Loss) earnings before income taxes
(5,040)
429
Items not affecting cash
Depreciation of property, plant and equipment
10
9,928
10,372
Depreciation of right-of-use assets
11
656
516
Amortization of intangible assets
12
147
207
Gain on disposal of property, plant and equipment
10
(2,195)
(484)
Loss on disposal of right-of-use assets
11
17
-
9
5,184
-
Derecognition of right-of-use assets and lease liabilities
11, 14
-
(132)
Share-based compensation
16
146
83
Write-down of inventories from restructuring in Burkina Faso
6, 7
-
4,187
Finance costs
6
3,474
3,349
Net change in fair value of investments
8
341
311
12,658
18,838
Changes in non-cash operating working capital items
18
(76)
(700)
Income taxes paid
(50)
(433)
Finance costs paid
(3,309)
(3,189)
9,223
14,516
INVESTING ACTIVITIES
Proceeds from disposal of investments
8
68
-
Collection of long-term receivable
9
71
-
Acquisition of property, plant and equipment
10
(8,673)
(9,257)
Proceeds from disposal of property, plant and equipment
2,623
996
Acquisition of intangible assets
12
(69)
(179)
(5,980)
(8,440)
FINANCING ACTIVITIES
Proceeds from factoring
17,003
16,633
Repayment on factoring
(18,328)
(16,798)
Proceeds from long-term debt
98,315
113,260
Repayment of long-term debt
(101,171)
(116,627)
Financing fees paid
(217)
(163)
Repayment of lease liabilities
(1,160)
(900)
(5,558)
(4,595)
Effect of exchange rate variation on cash and cash equivalent
466
(318)
(Decrease) increase in cash and cash equivalent
(1,849)
1,163
Cash and cash equivalents, beginning of period
2,181
1,018
Cash and cash equivalents, end of period
332
2,181
Effect of the substantial modification of a receivable and expected credit loss
See accompanying notes to consolidated financial statements.
Page 13
46
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
1.
DESCRIPTION OF BUSINESS
% of voting rights
Orbit Garant Drilling Services Inc.
100%
9116-9300 Québec inc. (dissolved on Febuary 1st, 2024)
100%
Drift Exploration Drilling Inc.
100%
Drift de Mexico SA de CV
100%
Orbit Garant Chile S.A.
100%
Orbit Garant Drilling Ghana Limited
100%
Perforación Orbit Garant Peru S.A.C.
100%
OGD Drilling (Guyana) Inc.
100%
Forage Orbit Garant BF S.A.S.
100%
Forage Orbit Garant Guinée SARLU
100%
Sarliaq-Orbit Garant Inc.
49%
2.
Basis of presentation
Orbit Garant Drilling Inc. (the "Company"), incorporated under the Canada Business Corporations Act , mainly operates a surface and underground
diamond drilling business. The Company has operations in Canada, the United States, 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:
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 is 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.
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 4.
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.
BASIS OF PREPARATION
These consolidated financial statements were approved for issue by the Board of Directors of Orbit Garant Drilling Inc. on September 19, 2024.
Page 14
47
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
3.
Principles of consolidation
Foreign currency translation
Financial instruments
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 Other comprehensive loss (“OCL”) under "Cumulative translation adjustments" and are accumulated in equity. The
accumulated amount of exchange differences is reclassified in net loss upon loss of control of a foreign operation. Additionally, foreign exchange gains and
losses related to certain intercompany loans that are permanent in nature are included in OCL under "Cumulative translation adjustments" and are
accumulated in equity.
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.
Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statements of loss from the effective date of
acquisition to the effective date of disposal, as appropriate. Intercompany transactions and balances are eliminated on 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.
MATERIAL ACCOUNTING POLICIES INFORMATION
The functional currency of the Company is the Canadian dollar. Transactions denominated in a currency other than the functional currency of the
Company or of a foreign subsidiary, 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 loss in the period during which they occur.
Page 15
48
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
3.
Financial instruments (continued)
Asset/Liability
Classification
Cash and cash equivalents
Amortized cost
Trade and other receivables
Amortized cost
Long-term receivable
Amortized cost
Investments
Fair value through profit or loss
Trade and other payables
Amortized cost
Factoring liability
Amortized cost
Long-term debt
Amortized cost
Financial assets measured at amortized cost
Financial assets measured at fair value
Financial liabilities measured at amortized cost
Financial liabilities measured at fair value
Amortized cost and effective interest method
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.
These assets are measured at fair value and changes therein, including any interest or dividend income, are recognized in net loss. 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 reclassified to net
income, and no impairment is recognized in net income.
A financial liability is subsequently measured at amortized cost, using the effective interest method.
MATERIAL ACCOUNTING POLICIES INFORMATION (continued)
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.
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.
Financial liabilities measured at fair value are initially recognized at fair value and are remeasured at each reporting date with any changes therein
recognized in net loss. The Company has no financial liabilities measured at fair value.
Page 16
49
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
3.
Trade and other receivables and Long term receivable
Impairment of financial assets
Useful life
Residual value
5 to 40 years
-
5 to 10 years
0 - 20%
5 years
-
3 to 10 years
-
MATERIAL ACCOUNTING POLICIES INFORMATION (continued)
Buildings and components
Trade and other receivables consist of amounts due from normal business activities. Long term receivables include amounts due outside the normal
course of business whose term exceeds 12 months. An allowance for expected credit losses is maintained to reflect an impairment risk for trade and other
receivables and long term receivable based on an expected credit loss model which factors in changes in credit quality since the initial recognition of
receivable based on customer risk categories. Credit loss are also provided for based on collection history and specific risks identified on a customer-by-
customer basis.
Drilling equipment
Vehicles
Other
The Company recognizes loss allowances for expected credit loss on financial assets measured at amortized cost.
The Company measures loss allowances at an amount equal to lifetime expected credit loss, except for debt securities that are determined to have low
credit risk at the reporting date and other debt securities for which credit risk (the risk of default occurring over the expected life of the financial instrument)
has not increased significantly since initial recognition, which are measured at 12-month expected credit loss. Loss allowances for trade receivables and
contract assets are always measured at an amount equal to lifetime expected credit loss.
The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Company considers a
financial asset to be in default when:
– the debtor is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realizing security (if any is
held); or
– the financial asset is more than 90 days past due.
Expected credit loss is a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all discounted
cash shortfalls (the difference between the cash inflows due to the Company in accordance with the contract and the cash inflows that the
Company expects to receive). Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the
assets.
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.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost represents the
acquisition costs, net of government grants and investment tax credits, or manufacturing costs, including preparation, installation and testing costs. The
manufacturing costs for drilling equipment include the material, direct labour and indirect specific costs.
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:
Page 17
50
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
3.
Property, plant and equipment (continued)
Impairment of non-financial assets
Income taxes
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.
An impairment loss recognized in prior periods for non-financial assets with finite useful lives and intangible assets having an indefinite useful life, can be
reversed through the consolidated statements of 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.
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.
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 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.
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.
An impairment loss is recognized in the amount by which the carrying amount of an asset or a CGU exceeds its recoverable amount. 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.
MATERIAL ACCOUNTING POLICIES INFORMATION (continued)
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.
Page 18
51
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
3.
Leases
Right-of-use assets on leases
Lease liabilities
Revenue recognition
Share options
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 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 3 to 5 years for land and buildings
and from 1 to 5 years for vehicles.
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.
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.
MATERIAL ACCOUNTING POLICIES INFORMATION (continued)
The Company performs various types of drilling services within the mining and minerals industry. Contracts entered into cover services that involve
different processes and continuous drilling services activities in a sequential set of mobilization, drilling, and demobilization activities, which are invoiced to
the customer as those activities progress. These activities and processes are accounted for as separate performance obligations.
Revenue from services rendered is recognized in the Consolidated Statement of Operations over time. The Company has a contractual right to
consideration from a customer for an amount that corresponds directly with the value to the customer of the performance completed to date. As a result,
the Company recognizes revenue based on the actual activities performed at the related contract rate.
Revenue is measured at the fair value of the consideration received or receivable, net of discounts and value-added taxes.
Contract prepayments are recorded as deferred revenue until performance is achieved and are credited against contract billings in accordance with the
contract terms.
Customers are generally invoiced on a semi-monthly or monthly basis. Payment is received according to standard payment terms, which range generally
between 30 to 60 days.
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.
Page 19
52
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
4.
Long-term receivable
Income taxes and deferred income tax assets
Impairment of non-financial assets
Functional currency
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
CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGMENTS
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. Consequently, the impact on the
Consolidated Financial Statements of future periods could be material.
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.
The Company determines its income tax expense and its income tax assets and liabilities based on its interpretation of applicable tax legislation, including
tax treaties between the various countries in which it operates, as well as underlying rules and regulations. Such interpretations involve judgments and
estimates that may be challenged in government tax audits, to which the Company is regularly subject. New information may also become available, which
would cause the Company to change its judgment regarding the adequacy of existing income tax assets and liabilities. Any such changes will have an
impact on net loss for the period in which they occur.
B) JUDGMENTS
On initial recognition, the Company recognizes the long-term receivable at fair value, estimated as the present value of contractual cash flows over the
agreement term, discounted using a rate that reflects the risk associated to the counterparty and rates prevailing on the market for such instruments.
In the calculation of income taxes and deferred tax assets and liabilities, estimates must be used to determine the appropriate rates and amounts, and to
take into account the probability of realization of tax assets. Deferred tax assets also reflect the benefit of unused tax losses and deductions that can be
carried forward to reduce current income taxes in future years. This assessment requires the Company to make significant estimates in determining
whether or not it is probable that the deferred tax assets can be recovered from future taxable income and therefore, that they can be recognized in the
Company's consolidated financial statements. The Company relies, among other things, on its past experience to make this assessment.
The carrying amount of the long-term receivable is presented net of an allowance for expected credit loss. The probability of default considered in the
estimate is based on historical data for comparable entities. Loss given default (LGD) reflects the Company’s ability to execute its right to take possession
of the assets given in guarantee under the contract. The amount and timing of cash flows expected to be recovered upon a default event is based on
probability-weighted scenarios and the actual cash shortfall may differ from the resulting estimated expected credit loss. Management will review the
appropriateness of the allowance for expected credit loss at the earliest of each reporting period, or when new information becomes available that may
give rise to a change in conditions or assumptions initially used in the estimation.
Page 20
53
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
5.
A) ADOPTED
1)
2)
3)
B) NOT YET ADOPTED
1)
6.
EXPENSES BY NATURE
June 30
June 30
2024
2023
$
$
Cost of contract revenue
9,815
10,069
General and administrative expenses
916
1,026
Total depreciation and amortization
10,731
11,095
The following standards and amendments to existing standards have been adopted by the Company on July 1, 2023 and have had no significant impact
on the Company’s Consolidated Financial Statements:
Detail of the depreciation and amortization expenses
The Company has not applied the following IASB standard amendment that has been issued, but is not yet effective:
IAS 1 (amended) – Presentation of Financial Statements – (amendment – Classification of liabilities as Current or Non-Current and Non-current
Liabilities with Covenants, effective for periods beginning on or after January 1, 2024)
The Company is currently in the process of assessing the impact the adoption of the above amendment will have on the Consolidated Financial
Statements.
STANDARDS AND INTERPRETATIONS ADOPTED AND NOT YET ADOPTED
The depreciation expense of property, plant and equipment and right-of-use assets and the amortization expense of intangible assets have been charged
to the consolidated statements of loss as follows:
IAS 1 (amended) – Presentation of Financial Statements – (amendment – disclosure of material versus significant policies)
IAS 8 (amended) – Accounting Policies, Changes in Accounting Estimates and Errors – (amendment – definition of accounting estimates)
IAS 12 (amended) – Income Taxes - (amendment – deferred tax related to assets and liabilities arising from a single transaction)
Page 21
54
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
6.
EXPENSES BY NATURE (continued)
June 30
June 30
2024
2023
$
$
Depreciation and amortization
10,731
11,095
Employee benefits expense
93,108
102,494
Cost of inventories
40,415
44,305
Lease expense (a)
10,824
9,469
Write-down of inventories from restructuring in Burkina Faso
-
4,187
5,184
-
Interest on long-term debt
3,144
2,908
Interest on lease liabilities
185
92
Factoring charges and other interest
145
349
Other expenses
22,544
25,648
Total cost of contract revenue and expenses
186,280
200,547
Cost of contract revenue
160,872
182,646
Other expenses
25,408
17,901
Total cost of contract revenue and expenses
186,280
200,547
(a)
7.
INVENTORIES
June 30
June 30
2024
2023
$
$
Spare parts
14,410
17,019
Consumables
27,507
30,132
Other
1,047
523
42,964
47,674
June 30
June 30
2024
2023
$
$
40,415
44,305
The cost of inventories recognized as an expense and included in cost of contract revenue has been recorded as follows:
Spare parts mainly include motors and machine parts. Consumables mainly include limited life tools, rods, hammers, wire lines and casings.
During the year, an amount of nil (2023: $4,187) has been accounted for as a write-down of inventories in Burkina Faso as a result of net realizable value
being lower than cost. As at June 30, 2024 and 2023, no amount has been accounted as a reversal of a write-down of inventory.
Cost of contract revenue, general and administrative expenses, foreign exchange loss (gain) and finance costs by nature are as follows:
Effect of the substantial modification of a receivable and expected credit loss
The Company's credit facilities are in part secured by a general assignment of the Company's inventories.
Principal expenses by nature
This amount consists of lease payments related with short term lease agreements. 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.
Page 22
55
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
8.
INVESTMENTS
June 30
June 30
2024
2023
$
$
Investments in public companies, beginning of the year
320
146
Conversion of trade receivables
1,500
485
Proceeds from disposal of investments
(68)
-
Change in fair value of investments measured at fair value through profit or loss
(341)
(311)
Investments in public companies, end of the year
1,411
320
9.
LONG-TERM RECEIVABLE
The summary of the activity related to the long-term receivable for the years ended June 30, 2024 is as follows:
June 30
2024
$
Long-term receivable, beginning of year
-
Proceeds from disposal of inventories, property, plant and equipment (a)
7,501
Collection of long-term receivable
(71)
Effect of the subtantial modification of a receivable (b)
(3,540)
Expected credit loss on long-term receivable (b)
(1,644)
Foreign exchange differences
(2)
2,244
Current portion
552
Balance, end of year
1,692
(a)
(b)
During fiscal year 2024, the Company entered into an agreement to sell inventories for an amount of $1,161, and property, plant and equipment, for
an amount of $6,340, located in West Africa and recorded a short-term receivable as compensation, for an amount of $7,501. A gain on disposal of
property, plant and equipment totalling $296 is included in cost of contract revenue related to this transaction. This information is presented as a
non-monetary transaction in the consolidated statements of cash flows.
As at June 30, 2024, the Company recorded the derecognition of the short-term receivable of $7,428 and the recognition of a new long-term
receivable of $3,888 following a significant change in contractual payment terms of the receivable. The new contractual terms provide monthly
instalments of US$135 bearing no interests, which were discounted using a rate of 45%, representing the market risk and using a duration equal to
the number of monthly instalments necessary to recover the full amount of the initial compensation. The effect of this substantial modification of the
receivable is a loss of $3,540 included in the expenses of the Consolidated Statements of Loss. The Company also recognized an expected credit
loss on this receivable for an amount of $1,644 in the Consolidated Statements of Loss.
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 original cost is $2,385 ($940 as at June 30, 2023).
As at June 30, 2024, the carrying value of the long-term receivable before expected credit loss is $3,888 and the allowance for expected credit loss is
$1,644. The long-term receivable is not past due.
Page 23
56
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
10.
PROPERTY, PLANT AND EQUIPMENT
Buildings and
Drilling
Land
components
equipment
Vehicles
Other
Total
Cost
$
$
$
$
$
$
Balance as at July 1, 2023
2,466
11,691
95,877
25,148
2,083
137,265
Additions
-
178
4,587
3,784
124
8,673
Transfer from right-of-use assets (note 11)
-
-
-
1,042
-
1,042
Disposals and write-offs (1)
-
(182)
(15,671)
(3,482)
(342)
(19,677)
Effect of movements in exchange rates
(208)
(97)
(1,481)
(196)
(33)
(2,015)
Balance as at June 30, 2024
2,258
11,590
83,312
26,296
1,832
125,288
Accumulated Depreciation
Balance as at July 1, 2023
-
6,563
70,306
17,432
1,808
96,109
Depreciation
-
416
6,152
3,287
73
9,928
Transfer from right-of-use assets (note 11)
-
-
-
280
-
280
Disposals and write-offs (1)
-
(159)
(9,650)
(2,779)
(308)
(12,896)
Effect of movements in exchange rates
-
(34)
(1,318)
(144)
(31)
(1,527)
Balance as at June 30, 2024
-
6,786
65,490
18,076
1,542
91,894
Buildings and
Drilling
Land
components
equipment
Vehicles
Other
Total
Cost
$
$
$
$
$
$
Balance as at July 1, 2022
2,206
11,433
91,093
22,094
2,063
128,889
Additions
-
224
4,031
4,961
41
9,257
Transfer from right-of-use assets (note 11)
-
-
170
29
-
199
Disposals and write-offs (1)
-
(92)
(2,664)
(2,034)
(90)
(4,880)
Effect of movements in exchange rates
260
126
3,247
98
69
3,800
Balance as at June 30, 2023
2,466
11,691
95,877
25,148
2,083
137,265
Accumulated Depreciation
Balance as at July 1, 2022
-
6,182
63,257
16,305
1,742
87,486
Depreciation
-
422
6,976
2,875
99
10,372
Transfer from right-of-use assets (note 11)
-
-
41
29
-
70
Disposals and write-offs (1)
-
(83)
(2,280)
(1,915)
(90)
(4,368)
Effect of movements in exchange rates
-
42
2,312
138
57
2,549
Balance as at June 30, 2023
-
6,563
70,306
17,432
1,808
96,109
June 30, 2023:
Net book value
2,466
5,128
25,571
7,716
275
41,156
June 30, 2024:
Net book value
2,258
4,804
17,822
8,220
290
33,394
(1)
A gain on disposal of property, plant and equipment totalling $2,195 for the year ended June 30, 2024 (a gain of $484 for the year ended June 30, 2023)
is included in cost of contract revenue.
Drilling equipment includes construction work in progress for an amount of $474 ($225 as at June 30, 2023).
A disposal cost of $14,753 and accumulated depreciation of $8,709 are related to the disposal of property, plant and equipment located in West Africa
(Note 9).
Page 24
57
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
11.
RIGHT-OF-USE ASSETS
Buildings and
components
Vehicles
Total
Cost
$
$
$
Balance as at July 1, 2023
1,037
2,249
3,286
Additions
1,256
1,514
2,770
Disposals and write-offs
(933)
-
(933)
Variable lease payment adjustment
-
5
5
Reassessment of the lease term
-
(69)
(69)
Transferred to property, plant and equipment
(Note 10)
-
(1,042)
(1,042)
Effect of movements in exchange rates
-
(23)
(23)
Balance as at June 30, 2024
1,360
2,634
3,994
Accumulated Depreciation
Balance as at July 1, 2023
917
444
1,361
Depreciation
249
407
656
Disposals and write-offs
(933)
-
(933)
Transferred to property, plant and equipment
(Note 10)
-
(280)
(280)
Effect of movements in exchange rates
-
(21)
(21)
Balance as at June 30, 2024
233
550
783
Buildings and
components
Vehicles
Total
Cost
$
$
$
Balance as at July 1, 2022
1,671
1,625
3,296
Additions
-
852
852
Disposals and write-offs
-
(62)
(62)
Variable lease payment adjustment
-
6
6
Reassessment of the lease term
(634)
-
(634)
Transferred to property, plant and equipment
(Note 10)
-
(199)
(199)
Effect of movements in exchange rates
-
27
27
Balance as at June 30, 2023
1,037
2,249
3,286
Accumulated Depreciation
Balance as at July 1, 2022
592
316
908
Depreciation
270
246
516
Disposals and write-offs
-
(62)
(62)
Reassessment of the lease term
55
-
55
Transferred to property, plant and equipment
(Note 10)
-
(70)
(70)
Effect of movements in exchange rates
-
14
14
Balance as at June 30, 2023
917
444
1,361
June 30, 2023:
Net book value
120
1,805
1,925
June 30, 2024:
Net book value
1,127
2,084
3,211
A Loss on disposal of right-of-use-assets totalling $17 for the year ended June 30, 2024 ($0 for the year ended June 30, 2023) is included in cost
of contract revenue.
Page 25
58
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
12.
INTANGIBLE ASSETS
Software
Patents
Total
Cost
$
$
$
Balance as at July 1, 2023
2,449
48
2,497
Additions
53
16
69
Disposals and write-offs
(22)
-
(22)
Effect of movements in exchange rates
(14)
-
(14)
Balance as at June 30, 2024
2,466
64
2,530
Accumulated Depreciation
Balance as at July 1, 2023
2,187
14
2,201
Depreciation
140
7
147
Disposals and write-offs
(17)
-
(17)
Effect of movements in exchange rates
(12)
-
(12)
Balance as at June 30, 2024
2,298
21
2,319
Software
Patents
Total
Cost
$
$
$
Balance as at July 1, 2022
2,254
48
2,302
Additions
179
-
179
Effect of movements in exchange rates
16
-
16
Balance as at June 30, 2023
2,449
48
2,497
Accumulated Depreciation
Balance as at July 1, 2022
1,974
8
1,982
Depreciation
201
6
207
Effect of movements in exchange rates
12
-
12
Balance as at June 30, 2023
2,187
14
2,201
June 30, 2023:
Net book value
262
34
296
June 30, 2024:
Net book value
168
43
211
Page 26
59
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
13.
June 30
June 30
2024
2023
$
$
4,106
2,648
17,189
19,454
7,996
8,212
-
1,536
2,068
2,488
31,359
34,338
Current portion
(450)
(1,994)
30,909
32,344
(a)
(b)
(c)
(d) On March 26, 2024, the Company signed an amendment to the fifth amended and restated credit agreement with National Bank of Canada in respect
of the Credit Facility. The Credit Facility consists of a revolving credit facility in the amount of $30,000 along with a revolving credit facility in the
amount of US$5,000, that will expire November 2, 2026. In addition, the Company’s obligations under the US$5,000 revolving credit facility are
guaranteed by EDC. Availability under Credit Facility is subject to borrowing base that is determined by the value of the Company's inventory,
accounts receivable and real estate. As at June 30, 2024, the borrowing base for the Credit Facility was $27,440 and US$5,000 and the undrawn
amounts were $10,040 and US$345.
The Revolving credit facility bears interest at either (a) the bank's prime rate plus an applicable margin based on a financial covenant or (b) the
banker's acceptance rate plus an applicable margin based on a financial covenant. In addition, the Corporation incurs commitment fees, varying
between 0.35% to 0.84%. The rate is variable based on the quarterly calculation of a financial ratio and can vary from (a) prime rate plus 0.50% to
2.75% or (b) banker’s acceptance rate plus 1.50% to 3.75%.
As at June 30, 2024, an unamortized amount of $114 ($121 as at June 30, 2023), 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.
As at June 30, 2024, an unamortized amount of $211 ($146 as at June 30, 2023), 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.
Loan of US$1,160 as at June 30, 2023, bearing interest at prime rate plus 2.75%,
effective rate as at June 30, 2023 of 11.00%
Loan of CLF 39 (June 30, 2023: CLF 42), bearing interest at rates of 3.30%,
payable in monthly instalments of $22 (CLF 0.43), maturing in February 2028,
secured by land and building. (g)
Loan, bearing interest at 6.50%, payable in monthly instalments of $63, maturing in
October 2042, secured by a first rank hypothec on a land and building (c) (f)
Revolving credit facility authorized for a maximum amount of $30,000, bearing
interest at prime rate plus 2.00%, effective rate as at June 30, 2024 of 8.95%
(June 30, 2023: interest at prime rate plus 1.50%, effective rate of 8.45%), maturing
in November 2026, secured by a first rank hypothec on the universality of all
present and future assets, except for those noted below (a) (b) (d)
Revolving credit facility of US$3,000 (June 30, 2023: US$2,000) authorized for a
maximum amount of $6,844 (US$5,000), bearing interest at base rate plus 0.25%,
effective rate as at June 30, 2024 of 9.25% (June 30, 2023: interest at base rate
plus 0.25%, effective rate of 9.00%), maturing in November 2026, secured by a first
rank hypothec on the universality of all present and future assets, except for those
noted below (d) (e)
LONG-TERM DEBT
Page 27
60
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
13.
(e)
(f)
(g)
As at June 30, 2024, principal payments required in the next years are as follows:
$
Within one year
450
Later than one year and no later than five years
24,507
More than five years
6,750
31,707
Later than one
As at June 30, 2024
Within
but no later than
Later than
$000s
Total
one year
five years
five years
$
$
$
$
CAN
25,510
238
18,522
6,750
US (US$3,000)
4,106
-
4,106
-
Chilean UF (CLF 39)
2,091
212
1,879
-
31,707
450
24,507
6,750
2024
2023
$
$
Balance, beginning of year
34,338
36,924
Net change in the revolving credit facility
(859)
(9,318)
Increase in other long-term debts
-
8,470
Repayment of other long-term debts
(1,997)
(2,519)
Financing fees related to loans
(217)
(163)
Amortization of financing fees related to loans
165
160
Impact of the change in foreign exchange rates on the foreign currency debts
(71)
784
Balance, end of year
31,359
34,338
On September 9, 2022, the Company entered into a additional loan agreement with the Business Development Bank of Canada (the “BDC Loan
Agreement”) for a term loan in the principal amount of $8,470. The loan bears interest at a fixed rate of 6.50% per year since November 2023, has a
duration of 240 consecutive monthly payments from November 2022 until October 2042.The Company's obligations under the BDC Loan Agreement
are secured by a first ranking hypothec on the land and building serving as the Company's head office located in Val-d'Or.
LONG-TERM DEBT (continued)
Long-term debt before unamortized financing costs by currency and by term are as follows:
As at June 30, 2024, an unamortized amount of $23 ($34 as at June 30, 2023), 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.
As at June 30, 2024, the prime rate in Canada was 6.95% for Canadian loans (6.95% as at June 30, 2023) and the prime rate in United States was 8.50%
and the base rate in the United States was 9.00% for US loans (8.25% and 8.75% respectively as at June 30, 2023).
Under the terms of the long-term debt agreements, the Company must satisfy certain restrictive covenants as to minimum financial ratios (Note 15). As at
June 30, 2024, the Company was compliant with its financial covenants (June 30, 2023: the Company was compliant with its financial covenants).
As at June 30, 2024, the Company had utilized US$1,655 (June 30, 2023: US$932) of this facility for outstanding stand-by letters of credit.
Reconciliation of movements of long-term debt to cash flows arising from financing activities:
Page 28
61
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
14.
The summary of of the activity related to the lease liabilities for the years ended June 30, 2024 and 2023 is as follows:
2024
2023
$
$
Lease liabilities recognized, beginning of year
1,219
2,066
Additions
2,770
852
Finance costs
185
92
Payment of lease liabilities, including related finance costs
(1,345)
(992)
Variable lease payment adjustment
5
6
Reassessment of lease term
(69)
(821)
Foreign exchange differences
(3)
16
2,762
1,219
Current portion
1,060
528
Balance, end of year
1,702
691
Lease payments required in the next years are as follows:
June 30
2024
$
Within one year
1,236
Later than one year and no later than five years
1,884
Later than five years
-
3,120
Less: discounting impact
(358)
Present value of lease payments
2,762
LEASE LIABILITIES
Page 29
62
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
15.
June 30
June 30
2024
2023
$
$
Long-term debt
31,359
34,338
Lease liabilities
2,762
1,219
Factoring liability
-
1,449
Share capital
59,204
59,204
Equity-settled reserve
923
981
Retained earnings
4,673
5,786
Accumulated other comprehensive loss
(4,571)
(4,327)
Cash and cash equivalents
(332)
(2,181)
94,018
96,469
The Company includes long-term debt, lease liabilities, factoring liability, share capital, equity-settled reserve, retained earnings, accumulated other
comprehensive loss and cash and cash equivalents in its definition of capital.
The Company's capital structure is as follows:
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, 2024, as mentioned in Note 13, the Company complied with its financial covenants (June 30, 2023: the Company was
compliant with its financial covenants).
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.
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.
CAPITAL MANAGEMENT
Page 30
63
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
16. SHARE CAPITAL
Authorized, an unlimited number of common and preferred shares:
Number of
Number of
Common shares
shares
$
shares
$
Balance, beginning of the year
37,372,756
59,204
37,372,756
59,204
Shares issued:
-
-
-
-
Balance, end of the year
37,372,756
59,204
37,372,756
59,204
Net loss per share
June 30
June 30
Net loss per share - basic
2024
2023
(1,317)
$
(669)
$
common shares outstanding
37,372,756
37,372,756
Net loss per share - basic
(0.04)
$
(0.02)
$
June 30
June 30
Net loss per share - diluted
2024
2023
(1,317)
$
(669)
$
common shares outstanding
37,372,756
37,372,756
share - stock options
-
-
common shares outstanding
37,372,756
37,372,756
Net loss per share - diluted
(0.04)
$
(0.02)
$
June 30, 2023
Preferred shares rights privileges, restrictions and conditions must be adopted before their issuance by a resolution of the Board of Directors of the
Company.
shareholders
shareholders
Weighted average basic number of
Net loss attributable to common
Net loss attributable to common
Diluted net loss per common share was calculated based on net loss divided by the average number of common shares outstanding using the treasury
stock method. For 2023 and 2024, stock options are not included in the computation of diluted net loss per share as their inclusion would be anti-dilutive.
June 30, 2024
Common shares, participating and voting, without nominal or par value
Weighted average basic number of
Adjustment to average number of common
Weighted average diluted number of
Page 31
64
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
16. SHARE CAPITAL (continued)
Stock option plan
Number
Weighted average
Number
Weighted average
of options
exercise price
of options
exercise price
$
$
Outstanding at the beginning of the year
1,960,000
0.95
3,243,500
1.24
Granted during the year
590,000
0.57
550,000
0.53
Cancelled during the year
(360,000)
1.74
(1,833,500)
1.34
Outstanding at end of the year
2,190,000
0.72
1,960,000
0.95
Exercisable at end of the year
1,253,331
0.84
1,202,005
1.13
All stock options outstanding are granted to directors, officers and employees. Details regarding the stock options outstanding are as follows:
June 30, 2023
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 Stock 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.
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 Stock 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.
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 Stock 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 the Company 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.
June 30, 2024
Page 32
65
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
16. SHARE CAPITAL (continued)
The following table summarizes information on share options outstanding as at June 30, 2024:
Range of
Number of options
outstanding at
Weighted average
Weighted average
Number of options
exercisable at
Weighted average
exercise price
June 30, 2024
remaining life
exercise price
June 30, 2024
exercise price
$
(years)
$
$
0.50 - 1.49
2,190,000
2.64
0.72
1,253,331
0.84
2,190,000
1,253,331
Granted
Granted
in 2024
in 2023
Risk-free interest rate
3.54% to 3.87%
2.99% to 3.52%
Expected life (years)
3
3
Expected volatility (based on historical volatility)
61.75% to 66.76%
61.89% to 72.29%
Expected dividend yield
0%
0%
Fair value of options granted
$0.38 to $0.44
$0.25 to $0.30
June 30
June 30
2024
2023
$
$
146
83
Expense related to share-based compensation
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:
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:
Page 33
66
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
17. INCOME TAXES
June 30
June 30
2024
2023
Current tax
$
$
Current year
157
419
Prior years adjustments
30
56
187
475
Deferred tax
Current year
(3,887)
646
Prior years adjustements
(23)
(23)
(3,910)
623
(3,723)
1,098
June 30
June 30
2024
2023
$
$
(5,040)
429
Statutory rates
26.50%
26.50%
Income taxes based on statutory rates
(1,336)
114
Non-deductible expenses
84
71
Non-deductible share-based
compensation expense
38
22
Difference of income tax rates between territories
(171)
39
Withholding taxes
22
355
Income tax assets unrecognized
2,908
1,107
differences and tax losses of prior periods
(5,283)
(643)
Non-taxable portion of capital gain
8
(6)
Prior years adjustments
7
33
Other
-
6
Total income tax expense
(3,723)
1,098
Increase (decrease) of income taxes due
(Loss) earnings before income taxes
Recognition of previously unrecognized deductible temporary
to the following:
Income tax expense (recovery) comprises the following:
Page 34
67
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
17. INCOME TAXES (continued)
Recognized in
July 1
statements of
Exchange
June 30
2023
loss
rate variation
2024
$
$
$
$
Deferred income tax assets:
Intangible assets
23
(4)
-
19
Loss carried forward
369
3,899
-
4,268
Non-deductible provisions
1,705
136
(241)
1,600
Investments
83
47
-
130
Total deferred income tax assets
2,180
4,078
(241)
6,017
Deferred income tax liabilities:
Property, plant and equipment
1,595
168
(55)
1,708
Total deferred income tax liabilities
1,595
168
(55)
1,708
Net deferred income tax assets
585
3,910
(186)
4,309
Recognized in
July 1
statements of
Exchange
June 30
2022
loss
rate variation
2023
$
$
$
$
Deferred income tax assets:
Intangible assets
29
(6)
-
23
Loss carried forward
639
(270)
-
369
Non-deductible provisions
1,519
(78)
264
1,705
Investments
41
42
-
83
Total deferred income tax assets
2,228
(312)
264
2,180
Deferred income tax liabilities:
Property, plant and equipment
1,249
311
35
1,595
Total deferred income tax liabilities
1,249
311
35
1,595
Net deferred income tax assets
979
(623)
229
585
June 30
June 30
2024
2023
$
$
Deferred tax assets
4,309
1,876
Deferred tax liabilities
-
(1,291)
Net deferred tax assets
4,309
585
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:
As at June 30, 2024, no deferred tax liability was recognized for temporary differences arising from investments in subsidiaries because the Company
controls the decisions affecting the realization of such liabilities and it is probable that the temporary differences will not reverse in the foreseeable future.
The Company recognized a deferred income tax asset on certain non-capital losses because it is probable that sufficient taxable profit will be available
from future oprations.
As presented in the consolidated statements of financial position:
Page 35
68
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
17. INCOME TAXES (continued)
Tax losses, for which no deferred tax assets were recognized, expire as follows:
Ghana
Guinea
Burkina Faso
$
$
$
June 30, 2025
-
2,590
5,854
June 30, 2027
-
2,415
8,606
June 30, 2028
83
-
3,972
June 30, 2029
64
-
3,265
18. ADDITIONAL INFORMATION RELATING TO THE STATEMENTS OF CASH FLOWS
June 30
June 30
2024
2023
$
$
Trade and other receivables
(2,957)
9,565
Inventories
2,901
(1,583)
Prepaid expenses
277
88
Trade and other payables
(297)
(8,770)
(76)
(700)
19. CONTINGENCIES
20. COMMITMENTS AND GUARANTEES
Commitments
As at June 30, 2024, the Company issued some bank guarantees in favor of customers for a total amount of $3,434 (year ended June 30, 2023: $762),
maturing beetween August 2024 and May 2025. For the years ended June 30, 2023 and 2024, the Company has not made any payments in connection
with these guarantees.
Guarantees
Changes in non-cash operating working capital items:
The Company has entered into short-term and low asset value lease agreements expiring beetween 2025 and 2026 which call for total lease payments of
$233 for the rental of offices and $41 for the rental of drilling equipment. None of the lease agreements contain renewal or purchase options or escalation
clauses or any restrictions.The lease payments under these lease agreements for the next two years amount to $270 for 2025 and $4 for 2026.
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.
During fiscal year 2024, the Company received common shares from a publicly traded company as settlement for its trade and other receivables account
in the amount of $1,500. This information is presented as a non-monetary transaction in the consolidated statements of cash flows.
Page 36
69
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
21. RELATED AND ASSOCIATE PARTY TRANSACTIONS
Transactions with related parties
June 30
June 30
2024
2023
$
$
Revenues
151
35
Expenses
24
96
Transactions with an associate party
June 30
June 30
2024
2023
$
$
Revenues
33,308
35,845
22. KEY MANAGEMENT COMPENSATION
June 30
June 30
2024
2023
$
$
Salaries and fees
995
1,195
Share-based compensation
104
62
1,099
1,257
23. FINANCIAL INSTRUMENTS
The Company entered into the following transactions with its related companies and with persons related to directors:
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.
The compensation recognized for key management remuneration and director's fees is as follows:
As at June 30, 2024, investment in an associate totalling nil in financial statement (June 30, 2023: nil).
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.
The Company is related to Dynamitage Castonguay Ltd., a company in which a director has an interest.
As at June 30, 2024, trade and other receivables included an amount receivable of $2,801 from Sarliaq-Orbit Garant Inc. (June 30, 2023: $3,612).
The Company entered into the following transactions with Sarliaq-Orbit Garant Inc.:
As at June 30, 2024, an amount of $6 was receivable resulting from these transactions (June 30, 2023: nil).
In addition, for the twelve-month period ended June 30, 2024, repayments of a lease liability totalling $93 were made to Dynamitage Castonguay Ltd.
(June 30, 2023 : $84).
Page 37
70
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
23. FINANCIAL INSTRUMENTS (continued)
Currency risk
US $
CLP
GHS cedi
XOF
GNF
$000s
$000s
000s
000s
000s
Cash and equivalents
107
60,524
-
7,858
881
Trade receivables
461
6,138,539
-
-
-
Current portion of long-term receivable
403
-
-
-
-
Accounts payable and accrued liabilities
(178)
(1,884,308)
-
(287,032)
(3,061,140)
Current portion of long-term debt and lease liabilities
-
(312,297)
-
-
-
Net balance exposure
793
4,002,458
-
(279,174)
(3,060,259)
Equivalent in Canadian dollars
1,085
5,776 0
-
(624)
(480)
US $
CLP
GHS cedi
XOF
GNF
Change in net earnings (loss)
80
-
-
-
-
Change in other comprehensive income (loss)
-
425
-
(21)
(35)
Net exposure in Canadian dollars
80
425
-
(21)
(35)
US $
CLP
GHS cedi
XOF
GNF
$000s
$000s
000s
000s
000s
Cash and equivalents
209
177,555
35
565,705
2,566,859
Trade receivables
405
2,797,346
-
182,741
7,036,228
Accounts payable and accrued liabilities
(203)
(1,207,881)
(18)
(354,793)
(5,865,745)
Current portion of long-term debt and lease liabilities
(1,181)
(160,996)
-
-
-
Net balance exposure
(770)
1,606,024
17
393,653
3,737,342
Equivalent in Canadian dollars
(1,019)
2,650
-
865
568
US $
CLP
GHS cedi
XOF
GNF
Change in net earnings (loss)
(75)
-
-
-
-
Change in other comprehensive income (loss)
-
195
-
64
42
Net exposure in Canadian dollars
(75)
195
-
64
42
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.
The Company realizes a part of its activities in US dollars (US $), in Chiliean Pesos (CLP), in Ghanaian 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, 2024:
The Company has estimated that a 10% variation in the foreign exchange rates would have caused a corresponding annual change in net loss and
comprehensive loss of:
The Company's exposure to currency risk on its consolidated financial statements was as follows as at June 30, 2023:
The Company has estimated that a 10% variation in the above foreign exchange rates would have caused a corresponding annual change in net loss
and comprehensive loss of:
Page 38
71
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
23. FINANCIAL INSTRUMENTS (continued)
Credit risk
June 30
June 30
2024
2023
$
$
Current
23,668
21,989
Past due 0-30 days
3,919
2,955
Past due more than 30 days
1,996
3,913
Total trade receivables
29,583
28,857
Less: allowance for expected credit loss
980
905
28,603
27,952
June 30
June 30
2024
2023
$
$
Balance at beginning of year
905
281
Change in allowance, other than write-offs and recoveries
225
930
Write-offs of accounts receivable
-
(273)
Recoveries
-
(26)
Foreign exchange translation differences
(150)
(7)
Balance at end of year
980
905
The allowance for expected credit loss 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 expected credit loss. The Company is also exposed to credit risk on the gross long-term receivable (note 9).
The aging of trade receivable balances and the allowance for expected credit loss as at June 30, 2024 and June 30, 2023 were as follows:
As at June 30, 2024, 78% (June 30, 2023: 72%) of the trade and other receivables are aged as current and 4% are impaired (June 30, 2023: 3%). Given
that expected credit losses are minimal, the expected credit losses by trade accounts receivable aging have not been presented.
Two major customers represent more than 10% of the trade accounts receivable, 41% as at June 30, 2024 (June 30, 2023, Three majors customers
represented 41% of trade accounts receivable).
The change in the allowance for expected credit loss on trade receivables is detailed below:
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, 2024, the amount of the insurance coverage from EDC represents 4% of the accounts receivable (4% as at June 30, 2023).
The carrying amounts for accounts receivable are net of allowances for expected credit loss, which are estimated based on aging analysis of receivables,
past experience, current conditions and forecasts of future economic conditions as well as specific risks associated with the customer, including
information of a forward-looking nature and other relevant information. The maximum exposure to credit risk is the carrying value of the financial assets.
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.
Page 39
72
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
23. FINANCIAL INSTRUMENTS (continued)
Credit risk (continued)
Interest rate risk
The Company does not enter into derivatives to manage credit risk.
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.
Two majors customers represent more than 10% of total contract revenue, at 33% for the year ended June 30, 2024 (year ended June 30, 2023, one
major customer represented 18%).
Fair value
The fair value of cash and cash 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.
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.
As at June 30, 2024, the Company has estimated that a 100 basis point increase or decrease in interest rates would have caused a corresponding annual
variation in net loss and comprehensive loss of $158 (June 30, 2023, $175).
The fair value of the long-term debt is determined using an evaluation of the estimated market value using a discount rate, adjusted for the Company’s
own credit risk, that reflects current market conditions.
The Company is subject to interest rate risk since a significant part of the long-term debt bears interest at variable rates.
The Company is subject to equity market risk by owning common shares of publicly traded companies.
The fair value of the long-term receivable is determined using an evaluation of the estimated market value using a discount rate, adjusted for the
customer's own credit risk, that reflects current market conditions.
Page 40
73
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
23.
FINANCIAL INSTRUMENTS (continued)
Level
Basis for determination of fair value
Level 1
Level 2
Level 3
As at June 30, 2024
Carrying value
Fair value
Level 1
Level 2
Level 3
$
$
$
$
$
Financial assets measured at amortized cost
Cash and cash equivalents
332
332
Trade and other receivables
30,530
30,530
Long-term receivable
2,244
2,244
Financial assets measured at fair value
Investments
1,411
1,411
1,411
-
-
Financial liabilities measured at amortized cost
Trade and other payables
25,410
25,410
Long-term debt
31,359
30,585
-
30,585
-
As at June 30, 2023
Carrying value
Fair value
Level 1
Level 2
Level 3
$
$
$
$
$
Financial assets measured at amortized cost
Cash and cash equivalents
2,181
2,181
Trade and other receivables
30,538
30,538
Financial assets measured at fair value
Investments
320
320
320
-
-
Financial liabilities measured at amortized cost
Trade and other payables
27,621
27,621
Factoring liability
1,449
1,449
Long-term debt
34,338
33,494
-
33,494
-
There were no transfers of amounts between Level 1, Level 2 and Level 3 financial instruments for the year ended June 30, 2024.
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, 2024, 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.
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:
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.
Page 41
74
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
23. FINANCIAL INSTRUMENTS (continued)
Total
0 - 1 year
2 - 3 years
4 - 5 years
More than 5 years
$
$
$
$
$
Trade and other payables
25,410
25,410
-
-
-
Long-term debt
37,637
1,036
23,578
2,976
10,047
Lease liabilities
3,120
1,236
1,484
400
-
66,167
27,682
25,062
3,376
10,047
24. SEGMENTED INFORMATION
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.
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.
The following table present the undiscounted contractual cash flows including principal and interest payments for the financial liabilities based on their
remaining contractual maturities:
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 13 are details of undrawn facilities that the
Company has at its disposal to further reduce liquidity risk.
Liquidity risk arises from the Company’s management of working capital, the finance costs and principal repayments on its debt instruments. It is the risk
that the Company will not be able to meet its financial obligations as they fall due.
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 0.60% and 1.23%. As at
June 30, 2024, trade receivables include nil related to factored accounts ($1,449 as at June 30, 2023).
As at June 30, 2024
Page 42
75
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
24. SEGMENTED INFORMATION (continued)
June 30
June 30
2024
2023
Contract revenue
$
$
Canada
132,598
152,134
International (1)
48,642
48,842
181,240
200,976
Earnings (loss) from operations
Canada
6,118
16,235
International (including write-down of inventory from restructuring
in Burkina Faso of nil in 2024 ($4,187 in 2023))
2,230
(10,570)
8,348
5,665
General and corporate expenses related to head office(2)
4,730
1,887
Finance costs
3,474
3,349
Effect of the substantial modification of a receivable and expected credit loss
5,184
-
Income tax expense
(3,723)
1,098
9,665
6,334
Net loss
(1,317)
(669)
(1)
Chilean revenue
39,571
30,091
(2)
Depreciation and amortization
Canada
7,526
6,743
International
2,289
3,326
Total depreciation and amortization included in earnings
(loss) from operations
9,815
10,069
Unallocated and corporate assets
916
1,026
Total depreciation and amortization
10,731
11,095
General and corporate expenses include expenses for corporate offices, share options, foreign exchange loss (gain) and certain unallocated costs.
The International operating segment included
Data relating to each of the Company's reportable operating segments are presented as follows:
Page 43
76
ORBIT GARANT DRILLING INC.
Notes to Consolidated Financial Statements
For the years ended June 30, 2024 and 2023
(in thousands of Canadian dollars, except for data per share and option data)
24. SEGMENTED INFORMATION (continued)
As at
As at
June 30, 2024
June 30, 2023
$
$
Identifiable assets
Canada
89,881
89,456
Chile
23,591
20,476
International - Other (3)
6,405
17,631
119,877
127,563
Property, plant and equipment
Canada
27,359
27,386
Chile
5,704
6,297
International - Other (3)
331
7,473
33,394
41,156
Right-of-use assets
Canada
2,686
1,850
Chile
294
41
International - Other (3)
231
34
3,211
1,925
Intangible assets
Canada
204
256
Chile
7
30
International - Other (3)
-
10
211
296
(3)
June 30
June 30
2024
2023
$
$
Non-current assets acquisitions
Canada
9,044
8,779
International
2,200
1,065
Unallocated and corporate assets
268
444
11,512
10,288
The amounts for West Africa in the comparative period have been recast with the amounts of International - Other.
Page 44
77
Notes
78
Notes
79
Notes
80
Shareholder Information
Orbit Garant Drilling Inc.
Directors
Jean-Yves Laliberté 1, 2
Corporate Director and Consultant
Chair of the Board of Directors
Mario Jacob 1, 2
Corporate Director and Consultant
André Pagé 1, 2
Corporate Director and Consultant
Pierre Rougeau 1, 2*
Corporate Director and Consultant
Nicole Veilleux 1*, 2
Corporate Director and Consultant
Pierre 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
Pierre Alexandre
President and Chief Executive Officer
Sylvain Laroche
Chief Operating Officer
Daniel Maheu
Chief Financial Officer and Corporate Secretary
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, 2024)
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
1700-1190 Avenue des Canadiens-de-Montréal
Montreal, QC
H3B 0G7
Tel: 1-800-387-0825
www.tsxtrust.com
General Counsel
Gowling WLG (Canada) LLP
Auditors
KPMG LLP
Annual Meeting
Thursday, December 5, 2024
Orbit Garant Head Office
3200 Jean-Jacques Cossette Blvd.
Val-d’Or, Quebec
The meeting will commence at 10:00 a.m. (ET)
ORBITGARANT.COM
CONTACT
Should you have any questions regarding Orbit Garant Drilling and its operations, please
do not hesitate to contact us at one of our offices listed below. It will be our pleasure
to assist you and we look forward to working with you to address your specific needs.
HEAD OFFICE
Orbit Garant Drilling Inc.
3200 Jean-Jacques Cossette Blvd.
Val-d’Or (Québec)
J9P 6Y6
Canada
T: 819-824-2707
T: 866-824-2707
info@orbitgarant.com
CANADA
QUEBEC
Orbit Garant Drilling Services Inc.
3200 Jean-Jacques Cossette Blvd.
Val-d’Or (Québec)
J9P 6Y6
Canada
T : 819 824-2707
T: 866 824-2707
ONTARIO
Orbit Garant Drilling Services Inc.
640 Garson Coniston Road
Sudbury (Ontario)
P3L 1R3
Canada
T: 705 694-5959
Orbit Garant Drilling Services Inc.
22642 Concession Road 1
Zephyr (Ontario)
L0E 1T0
Canada
T: 905 478-2243
NEW BRUNSWICK
Orbit Garant Drilling Services Inc.
398 Dover Road
Dieppe (New Brunswick)
E1A 7L6
Canada
T: 506 853-9131
SOUTH AMERICA
CHILE
Orbit Garant Chile S.A.
Avda. Los Cerrillos 998
Cerrillos (Santiago)
Chile
T: +56 2 2411 5900
C: +56 9 9624 0421
GUYANA
OGD Drilling (Guyana) Inc.
31 Belair Spring
East Coast Demerara
Georgetown
Guyana
C Guyana: +592 629 6133