Geodrill : YEAR-END MANAGEMENT’S DISCUSSION AND ANALYSIS (2024yegeodrillmdanda)

Published: 2025-03-02 23:04:03 ET GEO.TO

GEODRILL LIMITED

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2024

Management's discussion and analysis ("MD&A") is a review of the operations, the liquidity and the results of operations and capital resources of Geodrill Limited ("Geodrill") including its wholly owned subsidiaries, Geodrill Ghana Ltd, Geodrill Mauritius Limited, Geodrill Cote d'Ivoire SARL, Drilling Services Malta Limited, Vannin Resources, Unipessoal Limitada, Geodrill Sondagens LTDA, Silver Back Egypt for Mining and Drilling Services S.A.E., Geodrill for Leasing and Specialized Services Freezone LLC, Geodrill Leasing Company Limited, Geodrill Senegal SARL, Company AL-TANQIB AL-MUTAKHISFor Mining LLC, Geodrill Zambia Limited being Geodrill Limited's registered foreign Zambian operating entity, Geodrill BF being Geodrill Cote d'Ivoire SARL's registered foreign Burkina Faso operating entity, Geodrill Mali being Geodrill Cote d'Ivoire SARL's registered foreign Mali operating entity, Geodrill Mauritius Egypt Branch Limited being Geodrill Mauritius Limited's registered foreign Egypt operating entity, Recon Drilling S.A.C. of which Geodrill owns a 95% shareholding, Recon Drilling Chile SPA of which Geodrill owns a 95% shareholding and Geo-DrillSARL of which Geodrill owns a 95% shareholding, GTS Drilling Ltd a company under common control, collectively referred to as the "Group". The consolidated financial statements were prepared in accordance with IFRS Accounting Standards ("IFRS") as issued by the International Accounting Standards Board (IASB). This discussion contains forward-lookinginformation. Please see "Forward-LookingInformation" for a discussion of the risks, uncertainties and assumptions relating to this MD&A.

This MD&A should be read in conjunction with the audited annual consolidated financial statements for the years ended December 31, 2024 and 2023 and notes thereto.

This MD&A is dated March 1, 2025. Disclosure contained in this document is current to that date unless otherwise stated.

Additional information relating to Geodrill, including Geodrill's Annual Information Form, can be found on SEDAR+ at www.sedarplus.ca.

All references to "US$" are to United States dollars and all references to "CAD$" are to Canadian dollars.

FORWARD-LOOKING INFORMATION

This MD&A contains "forward-looking information" which may include, but is not limited to, statements with respect to the future financial or operating performance of the Group, future growth, results of operations, capital needs, performance, business prospects and opportunities. Often, but not always, forward-looking information can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled ", "estimates", "forecasts", "intends", "anticipates" or "believes" or variations (including negative variations) of such words or by the use of words or phrases that state that certain actions, events or results "may", "could ", "would ", "might" or "will " be taken, occur or be achieved.

Forward-looking information is based on certain assumptions and analyses made by the Group in light of its experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained in this MD&A. Although the Group has

attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in such forward-looking information, there may be other factors that may cause actions, events or results to differ from those anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize or should assumptions underlying such forward-looking information prove incorrect, actual results, performance or achievements may vary materially from those expressed or implied by the forward-looking information contained in this MD&A.

Forward-looking information contained herein is made as of the date of this MD&A and the Group disclaims any obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise, except as required by law. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Corporate Overview

The Group operates a fleet of Multi-Purpose, Core, Air-Core, Grade Control and Underground drill rigs. The multi-purpose rigs can perform both reverse circulation ("RC") and diamond core ("Core") drilling and can switch from one to the other with little effort or downtime. Multi-purpose rigs provide clients with the efficiency and high productivity of RC drilling and the depth and accuracy of Core drilling without the need to have two different drill rigs on site. The Group currently has operations in four African countries and two South American countries.

The Group's rigs and support equipment also incorporate a fleet of boosters and auxiliary compressors, which enable the Group to achieve high-quality sampling and operations to greater depths.

The state-of-the-art workshops and supply bases at Anwiankwanta, Ghana, at Bouake, Cote d'Ivoire, at Marsa Alam, Egypt, at La Serena, Chile and at Lima, Peru provide centralized locations for storage of inventory, equipment and supplies, which in turn minimizes trucking, shipping and supply costs and allows the rigs and inventory to be mobilized to drill sites with minimal delay.

Business Strategy

The Group competes with other drilling companies on the basis of price, accuracy, reliability and experience in the marketplace. The Group's competitors consist of both large public companies as well as small local operators.

Management believes that the Group has a number of attributes that result in competitive advantages including:

Africa

West Africa: The Group continues to maintain its strong presence in West Africa operating in Ghana, Cote d'Ivoire and Senegal. In 2024, the Group secured contracts totaling US$150M including two significant multi-rig multi-year contracts. Specifically, the Group successfully secured a very significant multi-rig, multi-year surface contract with a tier one miner who was an existing client that commenced drilling in Q1 2024. Effective April 1, 2024 the Group also successfully secured a very significant multi-rig, multi-year underground contract with a

tier one miner who is a new client. Both contracts were subject to a rigorous tender process in which the Group was successful on both bids. The Group believes that the secured contracts totaling US$150M will add to revenue and profitability in West Africa over the next three to five years.

Management's plans for West Africa are to add more rigs for existing clients, add new clients and to consider new countries in West Africa to operate in.

In Mali, due to security concerns the Group completed its final drill program in 2024 and has successfully redeployed its property, plant and equipment, and selective individuals to other neighboring countries by year-end. The decision to completely exit Mali in 2024 aligns with the Group's strategy of migrating towards more secure, safe countries to operate in and is consistent with the exodus from Burkina Faso in 2023.

In Burkina Faso, due to security concerns the Group completed its final drill program in 2023 and successfully redeployed its property, plant and equipment, and selective individuals to other neighboring countries by the end of 2023.

Middle East and North Africa ("MENA"):The Group continues to operate and maintain and grow its strong presence in Egypt, supported by its long term underground contract with a tier one client. In Q4 2024, the Group incorporated a company in the Kingdom of Saudi Arabia in anticipation of tendering on drilling contracts in 2025. Management's plans for MENA are to add more rigs for existing clients, add new clients and to consider new countries in MENA to operate in.

South America

Chile and Peru:The Group was able to drill in both Chile and Peru during Q1 2024, however in Q2 Chile shut down for the winter. Management's intention is to diversify its client base so it can drill throughout the winter season and to continue to add rigs and clients in Chile, Peru and other South American countries as it believes the need for specialized drilling in South America will support the Group's expansion into South America. In Q4 2024, the Group has secured contracts in Chile totaling US$49M including two very significant multi-rig, multi- year contracts and one multi-rig contract. The Group commenced drilling for these contracts in Q4 2024. In addition to Chile and Peru, the Group has a corporate entity in Brazil (although the Group is not active in Brazil) and the Group is considering other South American countries for expansion.

Market Participants and Geodrill's Client Base

The Group currently operates in Ghana, Cote d'Ivoire, Senegal, Egypt, Chile and Peru. The Group's drilling focus is still principally on gold and is still primarily in West Africa, however, the Group has diversified its geographic footprint and also provides drilling services to clients in Egypt, Chile and Peru. The Group will take advantage of drilling opportunities in other minerals, including copper, lithium, zinc, iron ore, manganese, uranium, phosphate and energy. In addition, the proximity to other Middle Eastern and African countries and other South American countries positions the Group favorably in its ability to service these markets as well, if it so chooses.

In addition, given the short-term nature of certain drilling contracts, there can be no assurance that any contract that the Group currently has will be extended or renewed on terms favorable to the Group. In the event that any of its current contracts are not extended or renewed on favorable terms, or replaced with new contracts, this could have a significant impact on the Group's operations.

For the year ended December 31, 2024, three customers contributed 40% to the Group's revenue.

For the year ended December 31, 2023, two customers contributed 30% to the Group's revenue.

OUTSTANDING SECURITIES AS OF MARCH 1, 2025

Geodrill is authorized to issue an unlimited number of Ordinary Shares. As of March 1, 2025, Geodrill has the following securities outstanding:

Number of Ordinary Shares

47,163,170

Number of Options

3,780,000

Diluted

50,943,170

For the year ended December 31, 2024, 241,770 shares were issued as a result of options being exercised, 780,000 options were issued and 33,230 options were cancelled. Subsequent to the year end and up to and including March 1, 2025, no further shares were issued as a result of options being exercised and no further options were issued.

OVERALL PERFORMANCE

The Group generated its highest ever revenue of US$143.1M for 2024, an increase of US$12.5M or 10% when compared to US$130.5M for 2023. The increase in revenue is a result of the increase in demand for the Group's drilling services. With the gold price averaging approximately US$2,400 during 2024, and closing the year at over US$2,600, global exploration spending continues to be strong. The majority of exploration spending is on gold and since the Group drills approximately 95% for clients exploring for gold, this has impacted positively on the Group resulting in an increase in its revenue. The intermediates and majors are continuing to generate sufficient cash flows from their operations and are continuing to spend on production and exploration drilling.

The gross profit for 2024 was US$34.7M, being 24% of revenue compared to a gross profit of US$30.6M, being 23% of revenue for 2023. The gross profit increase is a result of the increase in revenue of US$12.5M and the increase in cost of sales of US$8.4M. Despite inflationary pressures facing the mining sector and mining service providers, the Group has been able to increase its gross profit for 2024 compared to 2023. See "Supplementary Disclosure - Non IFRS Measures" on page 16.

The selling, general and administrative ("SG&A") expenses for 2024 was US$16.6M, being 12% of revenue compared to SG&A of US$15.1M, being 12% of revenue for 2023.

The expected lifetime credit recovery for 2024 was US$3.9M compared to an expected lifetime credit loss of US$(5.4M) for 2023. The expected lifetime credit loss decreased in 2024 as a large trade receivable was settled via shares resulting in the reversal of the non-cash expected credit loss provision of approximately US$4.2M, whereas in 2023, the Group recorded non-cash expected credit loss provisions of approximately US$5.4M relating to the aging of the Group's trade receivables.

The foreign exchange loss for 2024 was US$(1.2)M compared to a foreign exchange gain of US$0.2M for 2023 as a result of fluctuations in foreign currencies.

Other loss for 2024 was US$(2.4)M compared to an other loss of US$(0.8)M for 2023 relating to losses on listed equity investments held at fair value through profit and loss that the Group holds.

The EBIT (as defined herein) for 2024 was US$18.3M, compared to EBIT of US$9.4M for 2023. See "Supplementary Disclosure - Non - IFRS Measures" on page 16.

EBITDA (as defined herein) for 2024 was US$31.1M, being 22% of revenue compared to US$20.6M, 16% of revenue for 2023. See "Supplementary Disclosure - Non-IFRS Measures" on page 16.

The net income for 2024 was US$9.1M or US$0.20 per Ordinary Share (US$0.19 per Ordinary Share diluted), compared to US$3.8M for 2023 or US$0.08 per Ordinary Share (US$0.08 per Ordinary Share diluted).

RESULTS OF OPERATIONS

SELECTED FINANCIAL INFORMATION

Fiscal Year Ended

% Change

(in US$ 000s)

2024

2023

2024 vs 2023

Revenue

143,054

130,545

10%

Cost of Sales

(108,377)

(99,957)

Cost of Sales (%)

76%

77%

Gross Profit

34,677

30,588

13%

Gross Profit Margin (%)

24%

23%

Selling, General and Administrative Expenses

(16,647)

(15,122)

10%

Selling, General and Administrative Expenses (%)

12%

Expected Lifetime Credit Recovery / (Loss)

3,878

(5,363)

Foreign Exchange (Loss) / Gain

(1,210)

163

Other Loss

(2,416)

(819)

Profit from Operating Activities

18,282

9,446

94%

Profit from Operating Activities (%)

13%

EBIT*

18,282

9,446

94%

EBIT (%)

13%

Finance Income

Finance Cost

(1,076)

(927)

Finance Cost (%)

Profit Before Taxation

17,263

8,519

103%

Profit Before Taxation (%)

12%

Income Tax Expense

(8,199)

(4,755)

Income Tax Expense (%)

Net Income

9,064

3,764

141%

Net Income (%)

EBITDA **

31,101

20,558

51%

EBITDA (%)

22%

16%

Income Per Share

Basic

0.20

0.08

Diluted

0.19

0.08

Total Assets

161,492

148,609

Total Long - Term Liabilities

4,579

3,038

Cash Dividend Declared ***

NIL

0.04

See "Supplementary Disclosure - Non-IFRS Measures" on page 16. *EBIT = Earnings before interest and taxes.

**EBITDA = Earnings before interest, taxes, depreciation and amortization.

*** A CAD$0.04 was declared on March 4, 2023.

RESULTS OF OPERATIONS

FISCAL 2024 COMPARED TO FISCAL 2023

Revenue

The Group achieved record revenue of US$143.1M for 2024, compared to US$130.5M for 2023, representing an increase of 10%. The Group continues to generate significant revenue and was able to increase revenue from the three primary countries in which the Group operates being Ghana, Cote d'Ivoire and Egypt. In 2024, the Group was also able to increase its revenue in Chile, Peru and Senegal. In Mali, revenue decreased, as due to security concerns, the Group has wound up all its drill programs in Q4 2024 and has redeployed drilling rigs and ancillary equipment to other countries. Despite the strategic decisions to exit Burkina Faso in 2023 and to exit Mali in 2024, the Group has been able to more than replace the lost revenue from these countries and has achieved record revenue for 2024.

Cost of Sales and Gross Profit

Cost of Sales for 2024 were US$108.4M, compared to US$100.0M for 2023, being an increase of US$8.4M and reflects the following:

The gross profit for 2024 was US$34.7M, compared to a gross profit of US$30.6M for 2023, being an increase of US$4.1M. The gross profit percentage for 2024 was 24% and the gross profit percentage for 2023 was 23%. Despite inflationary pressures facing the mining sector and mining service providers, the Group has been able to increase its gross profit for 2024 compared to 2023.

Selling, General and Administrative Expenses

SG&A expenses for 2024 were US$16.6M, compared to US$15.1M for 2023, being an increase of US$1.5M and reflects the following:

Expected Lifetime Credit Recovery / (Loss)

Foreign Exchange (Loss) / Gain

Foreign exchange loss for 2024 was US$(1.2)M compared to a foreign exchange gain of US$0.2M in 2023 as a result of fluctuations in foreign currencies.

Other Loss

Other loss for 2024 was US$(2.4)M compared to an other loss of US$(0.8)M in 2023 relating to losses and gains on listed equity investments held at fair value through profit and loss that the Group holds.

Income from Operating Activities

Income from operating activities (after cost of sales, SG&A expenses, foreign exchange gain or loss and other loss) for 2024 was US$18.3M, compared to US$9.4M in 2023.

EBIT and EBIT Margin (see "Supplementary Disclosure - Non-IFRS Measures" on page 16)

EBIT was US$18.3M for 2024 or 13% compared to US$9.4M or 7% for 2023.

EBITDA and EBITDA Margin (see "Supplementary Disclosure - Non-IFRS Measures" on page 16)

EBITDA was US$31.1M for 2024 or 22% compared to US$20.6M or 16% for 2023.

Depreciation

Depreciation for 2024 was US$12.8M (US$11.3M in cost of sales and US$1.5M in SG&A) compared to US$11.1M (US$9.6M in cost of sales and US$1.5M in SG&A) for 2023.

Income Tax Expense

Income tax expense for 2024 was US$8.2M compared to income tax expense of US$4.8M for 2023. The income tax expense of US$8.2M was comprised of US$6.0M relating to tax expense on taxable income, US$2.0M relating to withholding tax and US$0.2M relating to a deferred tax expense. Income tax expense has increased in the year ended December 31, 2024 compared to the year ended December 31, 2023, due to the Group's increase in profit before tax.

Net income

The net income for 2024 was US$9.1M, or US$0.20 per Ordinary Share (US$0.19 per Ordinary Share diluted), compared to US$3.8M for 2023, or US$0.08 per Ordinary Share (US$0.08 per Ordinary Share diluted).

SELECTED FINANCIAL INFORMATION

Fourth Quarter Ended

% Change

Dec 31

(in US$ 000s)

2024

2023

2024 vs 2023

Revenue

33,119

30,062

10%

Cost of Sales

(26,959)

(25,212)

Cost of Sales (%)

81%

84%

Gross Profit

6,160

4,850

27%

Gross Profit Margin (%)

19%

16%

Selling, General and Administrative Expenses

(4,454)

(3,899)

14%

Selling, General and Administrative Expenses (%)

13%

Expected Lifetime Credit Recovery / (Loss)

4,471

(510)

Foreign Exchange Loss

(984)

(221)

Other Income Loss

(2,497)

(106)

Profit from Operating Activities

2,695

113

Profit from Operating Activities (%)

EBIT*

2,695

113

EBIT (%)

Finance Income

Finance Cost

(284)

(298)

Finance Income / Cost (%)

Profit / (Loss) Before Taxation

2,427

(185)

Profit / (Loss) Before Taxation (%)

(1%)

Income Tax Expense

(2,926)

(1,192)

Income Tax Expense (%)

Net Loss

(499)

(1,377)

64%

Net Loss (%)

(2%)

(5%)

EBITDA **

6,144

3,250

89%

EBITDA (%)

19%

11%

Loss Per Share

Basic

(0.01)

(0.03)

Diluted

(0.01)

(0.03)

Total Assets

161,492

148,609

Total Long - Term Liabilities

4,579

3,038

Cash Dividend Declared***

NIL

See "Supplementary Disclosure - Non-IFRS Measures" on page 16.

*EBIT = Earnings before interest and taxes.

**EBITDA = Earnings before interest, tax, depreciation and amortization.

Disclaimer

Geodrill Ltd. published this content on March 02, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on March 03, 2025 at 04:03:03.217.