Good morning, ladies and gentlemen. Thank you for standing by. For today's call, participants are in a listen-only mode. Following the presentation, we'll conduct a question-and-answer session. Instructions will be provided at that time for you. If at any time you have any difficulty hearing the call, please press star followed by zero for operator assistance. I would like to remind everyone that this conference call is being recorded on Tuesday, May 9th at 10:30 A.M. Eastern Daylight Time and being broadcast live via the Internet. During today's call, management will make statements regarding management's expectations for the company's future financial and operational performance. These statements are considered forward-looking statements.
Each forward-looking statement speaks only as of the date of this call. Actual results may differ materially from management expectations for a variety of reasons, including market and general economic conditions and the risks and uncertainties detailed from time to time in the company's EDGAR filings. I will now turn the call over to the President and CEO of Geodrill Ltd, Mr. Dave Harper. Please proceed.
Thank you, operator. Good morning and welcome to Geodrill's Q1 2023 quarterly results call. I will begin with an overview of our operation excuse me, and our performance for the quarter. Our CFO, Greg Borsk, will then give us a more detailed review of our first quarter financial results. After which I will discuss the outlook for the remainder of 2023. Geodrill delivered outstanding results in the first quarter of 2023. We delivered record quarterly net income from our second highest ever and our best ever Q1 revenue result. This is the result of our proven growth strategy of delivering high-quality drilling services that attract long-term contracts and provide recurring revenues and cash flow visibility. Operationally, we continue to be encouraged by the current strength in the global drilling market, a growing momentum that we expect will carry into the foreseeable future.
To add a footnote here, I'm very pleased to report that Geodrill continues to gain market share in its new territories with diversified commodity exposure in Egypt and South America, which are both performing very well for us. The gains we've made on every front can be seen in the strength of our balance sheet and our ability to return free cash flow to our shareholders in the form of continuing dividend payments and the return on equity provided to shareholders. Recall that our strategy since inception has been simply to provide diverse drilling services backstopped by unparalleled access to drill rig support and maintenance services to, as we say, keep them turning and keep them earning. Above all, to keep our customers satisfied. Evidently, this strategy is working.
I'll now turn the call over to Greg Borsk, our CFO, to review the financial highlights for Q1 in detail.
Thank you, Dave. As a reminder, all figures are reported in U.S. dollars. We generated revenue of $37.6 million, representing a 12% increase compared to $33.4 million for Q1 2022. This was our highest ever Q1 revenue and our second highest ever quarterly revenue. We increased gross profit to $12.2 million or 32% of revenue, compared to a gross profit of $9.8 million or 29% of revenue for Q1 2022. We recorded EBITDA of $10.5 million or 28% of revenue. We generated record net income for Q1 2023 of $6.1 million or $0.13 per share, compared to $6 million or $0.13 per share for Q1 2022.
It should be noted, however, that in the prior year comparable quarter, the company had a $1.1 million gain in Q1 2022 on its equity investments. If this gain was excluded from the Q1 2022 operating results, net income would have been $4.9 million and earnings per share would have been $0.11 per share in Q1 2022. Throughout the quarter, we also maintained a strong balance sheet and ended the quarter with net cash excluding lease liabilities of $9.2 million. At this point, I will turn the call back to Dave.
Thank you, Greg. Before we move to the Q&A portion of the call, I would like to provide a brief outlook for the remainder of 2023 and beyond. With 2023 already underway, our pipeline of new business is solid. We are benefiting from strong gold and commodity prices, which continues to drive the demand for our services. With that increased demand and less rigs available internationally in the global market, rig utilization is increasing. As a result of that increase, we are beginning to see pricing leverage. With the demand for drilling services remaining strong for gold and other minerals, including EV, Geodrill will continue to create for its shareholders as we focus on margin expansion, as we continue to benefit from this current upcycle, which is now well and truly underway. This concludes our prepared remarks on our financial results.
I'll now hand the call back to the operator, to see if anyone has any questions. Thank you.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star one. If you want to withdraw your question, please press star two. Your questions will be pulled in the order they are received. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please, for your first question. Your first question comes from Daryl Young from TD. Please go ahead.
Hey, good morning, everyone. Congrats on a good start to the year.
Good morning, Daryl.
My question's around the outlook for 2023 and the seasonality that you might expect. It's just become a little bit more complicated now that you've added new geographies and new longer term contracts. Just trying to get a sense of if you're expecting Q2 to be one of your stronger quarters of the year, and then the Q3 rainy season obviously a long way away, but, you know, the magnitude of the potential decline there, if you would expect it to be as big as it's been historically.
You recall that Q2 is generally our strongest quarter. You'll also recall that last year we had a slew of contracts begin in quarter two when in quarter one, we signed I think it was $130 million or $40 million in new contracts. Those contracts were had well and truly had begun in earnest in quarter two last year. I would imagine that quarter two this year will be strong. As for year-over-year performance on the previous year, I'm not expecting like a, you know, a massive gain. It'll probably be flat at best, actually. It'll still be a good quarter.
Adding to that quarter, I think you can look forward to a solid Q3 and a Q4 as well. As for Q2, looking at Q2 in isolation, I'm not expecting it's going to, it's not gonna be a massive bump over last year. It, in fact, at this point in time, I'll tell you it's probably trending more like flat.
Let me just add, Daryl, I mean, when we talk about that Q2 in 2022 was our record quarter ever. I think if you remember, we almost did $40 million. It was $39 million. To come close or to come close to that would be an exceptional Q2 2023. I think the other thing too is just as the business has expanded and diversified and we've taken on more mine related work, you see a bit of a smoothening in the Q3. In the past, Q3s dropped off quite significantly. As we've gotten more mine work, more underground work, that's kind of that kind of sharpness in the quarters has declined. If you look at last year, Q3 was exceptionally strong.
I think we did about $35 million. We've kind of We still have that seasonality in the business with Q1 and Q2 being the strongest, and then Q3 and Q4 kind of tapering off. I think the declines kind of have softened a bit as we grow.
Okay, that's great context. Thank you. Second question is just around the growth prospects. I think you've said that you might take a bit of a pause here on the rig fleet growth, just it's been so strong for so many years, and maybe digest a little bit before thinking about the next phase of growth. Just wondering if, you know, you're looking out to 2024 at this point and what you might think of for future rig fleet growth or where your plans are on that?
Well, I think the first, the first target I can see that's, you know, clearly in view is 80 + rigs. I think we're gonna get there in the next, I don't know, couple of years. You know, probably in the next, maybe in the next 12 months. You know, if we just look at rig growth and we look at the numbers that we've put on, if we look at the last five years, I think rigs have been growing at, is it like 3% or 4% per annum, Greg?
Correct. Yeah.
Yeah. I think, you know, I think it's just gonna be more of the same. We may pause, but it'll be more of a hiatus. It won't be an indefinite pause. It, you know, we need to, you know, focus on a few things in the business. One thing we are trying very hard to focus on is restoring the pricing environment to what it once was. We look at where we were in 2012. In the peak, the pricing that we were getting in 2012 or what followed is we had a seven-year down cycle. For seven years during what ensued is that pricing went from the peak to the trough. We, you know, we declined about 25%.
Industry has done a pretty good job of getting their rigs out there and getting them to work. As a result of that, global utilization has increased such that now, you know, as we read it, global utilization is approaching 50%. I think we're almost at the 50% point. Now, historically, at 50%, we start to see pricing leverage. So most of the drillers that you're talking to, I think there will be a general thematic that pricing needs to increase for the right reasons because costs have increased. I think also we do need to try and capture some of that, some of that pricing power that basically when the pendulum moved across to the customer.
Else, what will happen is we'll reach the top of this cycle in another five or six years, and of course, it'll become competitive as we come down the other side, and we'll have nowhere to go. I think, I think where we're coming from is we're just not chasing every job that comes across our table these days. We will have to increase our pricing to maintain the same margins. As a result, and as a natural function of that, I guess our bid-to-win ratio may suffer.
The result being is I do not believe in the immediate future, and I mean the immediate future as in the next 12 months, we're gonna be as aggressive on rig numbers, but we might be, you know, a little bit more aggressive on pricing, which in theory would result in perhaps a, you know, the delta between GP and top line should in theory decrease somewhat. I believe we saw the first green shoots of this in quarter one when we produced a 12% year-over-year improvement top line. We saw our GP go from, I think it was 29 up to 31, and I took that as a massive positive.
The other thing, Daryl, too, I think if you look at the annual growth over the last two years, in terms of top line, we went from $82 million in 2020 to $115 million in 2021. If you remember, that was a 40% top line growth. In 2022, we took that number from $115 million all the way up to $138 million. Another 20% top line growth. I think what you're seeing now, we're really looking at the business and looking at some of the markets we're in. Does it make sense to put rigs and add additional rigs into different markets like South America, you know, Northern Africa, et cetera. It's what Dave says.
It's still gonna be growth. Still gonna be rig additions. It's just looking at the business long term, looking at the countries we're in, the markets we're in, who we're drilling for, and where does it make sense to be adding rigs and capacity, et cetera. Where does it make sense to move rigs around, you know, so that we're well-positioned.
Got it.
Hopefully that answers your question.
No, it's, that's great color. I, like the strategy of focus on margin. Then what is the SG&A in the quarter was a little elevated? Is that a run rate or were there unique factors in the quarter?
Yeah, I think We try to budget the SG&A at about 10% of the, of revenue, we crept up to 12%. We had some share-based expenses in there related to options. Typically, we issue options in May, but this year in 2023, we did that in Q1. We did it in March. The lion's share of share-based expense fell in Q1. That'll be a timing between Q1 and Q2. Also, we just looked at some of the... Because we had a good quarter, we looked at some of the, some of our receivables, and we're pretty conservative on our provisions in that in terms of, you know, IFRS and kind of some of the aging buckets. We thought it was...
Just have a look at those and maybe provide a little bit more. Still collecting them. We've collected some subsequent, but in terms of at the quarter end, there was a little bit more in provisions. Other than that, it's again, if you look at the business going from $83 million to $115 million, call it to $140 million, we've strengthened our controls. We've added more admin people. We've added more finance people. We're in new countries like Egypt. We're expanding into in South America. We're now in Peru and Chile. There's some upfront administrative setup costs that are there. As you continue to add rigs in those markets that they will be spread out over a larger rig base, if you will.
Got it. That's great color. Thank you very much. I'll get back in the queue.
Thanks, Daryl.
Thanks, Daryl.
Thank you. Your next question comes from Gordon Lawson from Paradigm Capital. Please go ahead.
Hello, good morning. My questions are similar, just a little more detailed here. I mean, we previously talked about startup costs, particularly in Egypt. Seeing your margins once again improve year-over-year, is this level of profitability, I believe 32% gross margin, I mean, is this a reasonable assumption for Q2 and Q3? Of course, acknowledging your seasonally weak Q4.
No, I think Gord, if Gordon, if you look at just look at the history. The margins, they're kinda lockstep in term with revenue. Our high revenue quarters are our high gross margin. That's because we have a lot of fixed costs in the cost of goods sold also, in terms of senior people, senior drillers, et cetera. If you look at last year, Q1, Q2, I think were similar, 32%, 31%. When we got to Q3, when revenue tapered down closer to $30 million, the margin was 24%, and then in Q4, it came up again. We kinda, Dave and I, when we budget and when we manage the business, we manage towards a sort of overall annualized gross margin.
With that overall annualized gross margin, we know Q1 and Q2 are typically ahead of that and Q3 and Q4 are slightly below it.
Okay. Yeah. That makes sense. Thank you very much. You state in your disclosures that drilling in Peru has come to a standstill. Are you looking to expand into other South American countries? Is there a timeline at which point you'd mobilize those rigs that are Peru to help contracts, support contracts in other growth areas?
Currently, we only have two rigs in Peru, and we're receiving suddenly a number of inquiries. We're gonna leave those just there for the minute to see where that goes. We've had a bit of an expansion drive going on down in Chile. That's gone very well for us since entering that market about a year ago. We're encouraged. As a result of the job that we're doing down there, we're receiving a few inquiries around the same job. That's looking pretty good, that market. I've actually just had an inquiry from another South American country as well, and we've put a proposal on the table, so we'll see where that goes.
Again, the whole, you know, rationale of moving to South America was a diversification, you know, it was a commodity diversification strategy. It's also, you know, different country risk. It's the same time zone as a lot of our shareholders would appreciate. We're enjoying the experience in South America. I think, you know, these are the new growth markets for us. They're going very well. We've been well received, and I think the future looks pretty good there for a nice organic kick.
Gord, that's kind of our secret sauce, if you will. If you look at West Africa, the four countries we're in, we have our main bases in every country. We have our fleet of rigs in every country. Again, we're able to move rigs around from one country to another if the demand, you know, is in one country and not the other. We've been doing that very effectively in West Africa for a long time. You're seeing the same in South America. We started off very strong in Peru, and for political reasons, et cetera, Peru. Right now we're not drilling in Peru, but we're extremely busy in Chile.
We were able to mobilize some rigs from Peru to Chile to satisfy our customers and keep drilling in South America. As you keep adding more countries throughout South America, you'll be able to have that flexibility. It's something we've done extremely well. Like I said, we've been able to look at South America in 2022 and continue drilling there just in a different country.
Okay. That makes sense. Thank you very much. I appreciate it.
Thank you.
Thanks, Gord.
Thank you. Your next question comes from Ahmad Shaath from Beacon Securities. Please go ahead.
Hey, guys. Thanks for taking my question and congrats on the solid quarter. Most of my questions have been answered. I guess I just wanna clarify. It looks like from the comments that I got from you, Dave, is Q1 is the high watermark for the year, and we should be trending lower on a quarterly basis for the remainder of the year. Is that a fair statement?
I think it is actually. I think we're gonna have a blended. It'll be a good year. It's, you know, we're not looking for a 20% year-over-year improver. Again, if you recall, 2021 was a 40% year-over-year improver, where we were coming off a low base, we were coming off COVID, we were coming off down cycle. 2022 for us was a, you know, was a good year. I think that, for the reasons that I gave, just before with, you know, not chasing every job, you know, bidding more qualitatively and trying to move that pendulum back in our favor a little bit so such that we can appreciate it, you know, a slightly improved GP.
I think we will start to see a bit of pushback. You know, and I think these things, these disciplines are at points of time in a cycle are necessary to do. I would be thinking at this point, this year, this fiscal year as compared to last year would be probably closer to maybe a 10% improver. Single, you know, high single digits. If we can achieve high single digit top line, but improve the GP by a couple of percentage points, then we would have effectively ended up with the same result, if you get my meaning. That's, that's what I would...
If I was to throw a dart at where the year's gonna end at this stage, I think I'd be aiming for about high single digits. Yeah.
Got it. Fair enough. That's very helpful. Just to close the loop on the margin, it seems that you're targeting, given where the environment is in terms of pricing and industry utilization, you think you can achieve a two percentage point improvement on the gross margin at that revenue base we just spoke about?
I didn't catch all that, but just on the gross margin, if you look at the last years, we, you know, we target 30%, Ahmad. Typically, you know, we're higher than that in the first couple of quarters and then around that or slightly below in Q3. Again, we look at the margin when we do our budgeting, our forecasting, you know, how many rigs we're gonna add throughout the year, et cetera. We look at our annualized margin. Typically in Q1 and Q2, we track ahead of that. Again.
No, fair. so it sounds like the reasonable target for this year is probably about 31%, give or take, in that range.
Yeah. We, you know, we budget 30%.
Perfect.
32% in first quarter was a strong margin for us. Again, the other thing too is this is something we need to communicate. In 2020 to 2021, we grew by 40%. 2021 to 2022, we grew by 20%. This is kind of a year where we're looking at maintaining gross profit pricing. We're also looking at jurisdictions, and it's more of an investment into the future, where we're looking at certain countries we operate in, certain territories, and does it make sense to increase our presence in South America? Does it make sense to increase our presence in Northern Africa? Add more rigs in Egypt. It's.
We're still focused on margins and top line. It's also strengthening the company and diversifying it a little bit more. That's kind of what we're looking at in 2023.
That's great. I appreciate the color. Last one on the back of just on the G&A line. If I parse out the impact of the receivables and the share-based comps, it looks like your run rate on a quarterly basis in around $4 million. Is that a good number to have?
Yeah. Yeah. I'd like it to be, you know, 10% of the top line. Yeah, I think with, again, with the investments we've made into these countries and still adding rigs, it's probably $3.5 million to $4 million a quarter.
Perfect. Thanks, guys. Just wanted to my questions. Congrats again on a solid quarter.
Thanks, Ahmad.
Thanks, Ahmad.
Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Benjamin Anderson from Anderson Consulting Group. Please go ahead.
Yes. Thank you for taking my question. I have a question about the availability of rigs as the company expands. Do you foresee any problems, or are there any problems in the procurement of additional rigs in terms of their availability? Is this something you have to order years in advance? How easy are they to obtain as your business expands?
We do pretty well on that score. Where we don't buy, we build. Either way, we're always able to satisfy the demand. What we don't do is wait until the demand or the utilization of the existing fleet reaches maximum capacity before we act. We preempt that we are gonna be at 100% when we reach 70%. When we get to 70%, we naturally are out there in the market looking to either buy new equipment from manufacturers or one of the, one of the things I'm not sure how familiar you are with the history of the company, but you may be aware that the company actually has its own manufacturing facilities.
It's one of the big things that we do, I think, remarkably well at Geodrill, is that we have the ability to actually manufacture our own drilling rods, our own drilling bits, and our own drilling rigs. In the fleet currently, I think we have about six rigs that have been made at our manufacturing and fabrication facility plant in West Africa. As we speak, we have four rigs going through the workshop. Those rigs, we can speed them up or slow them down. We can always satisfy demand, basically, to answer your question.
Thank you. Very briefly, I wondered if you could talk about the political risk that the company now faces. Could you talk about Burkina Faso specifically? Does Geodrill have any commercial or governmentally provided political risk insurance?
I'll let Greg speak about insurance. I'll talk about Burkina Faso. It's a market that we've been in since 2010, so we've got some history there. At one point it was our busiest market. Currently it is actually our quietest market, that's just a natural function of the fact that less people are drilling there these days. It is, for us, a country currently under review, a decision somewhere imminently in the not-too-distant future will be taken as far as that country is concerned. The one litmus test that I always have is that I will not visit myself, where I'll not ask my people to work. Sorry, I'll say that the other way around.
I will not ask my people to work where I'm not prepared to visit. That is firstly and foremostly, our sort of litmus test in terms of whether a site is safe. Of course, Burkina has come under some negative press for, frankly, all the right reasons in recent years. For that very reason, we are currently reviewing, our situation in Burkina Faso. I think a decision will be taken, imminently, that will de-derive us a better result in terms of, you know, where we place our assets.
Just in terms of insurance, Benjamin, the group insurance, we coordinate that out of the UK and then filter it down to every country that we operate in. We're, again, very well insured. You know, we disclose the D&O insurance, but in our industry, you know, I think everybody has expat medical insurance, your general liability insurance, umbrella insurance, et cetera. Very adequately insured. Like I say, we review this semiannually with our team in the U.K., then we push that down to the operating jurisdictions.
Do you have any insurance for confiscation or nationalization of a political nature?
Expropriation, I think you're talking about.
Yeah. Right.
No, I don't think so. No, I don't think so. It's never happened in my 25 years. We've never had it. We've actually never had a situation where we've actually lost any time through drilling because of any, let's say, political coup d'état, which is fairly common throughout Africa. Where we're more exposed currently, in that country that you just mentioned and one of the other ones up there in West Africa is the terrorism situation. The, you know... That, that's more of a concern to us. Of course, a rig can always be replaced, people can't. The... Do we actually have insurance for expropriation? I think it would depend on the purpose, the reason behind the expropriation. If it was civil, if it were...
It's never happened, so I'm not even 100% sure.
The way we work with... In general, we insure wherever we can. If an insurer will not provide that, again, we go through our main broker, and there's just some things that insurers will not insure for, and a lot of this is riot and terrorism related events. What we do to kinda mitigate that is make sure we know where we're operating. The Geodrill model, we operate with most of our clients are the majors or the intermediates, so we make sure we're on very secure mine sites. you know, we're in discussions with our clients and their security protocols, our security protocols. In general. You know, wherever we can add a layer of insurance, we will.
But there are certain situations and certain circumstances where you're not able to insure. What you do is you look at how do you mitigate that. It's, it's through diversification. Like I said, we've had situations where we've had through us and our client, have maintained special security, spent a lot of money on that just to make sure assets are safe and people are safe. What you're seeing, what I mentioned earlier with Geodrill, it's investing in the business. Some of those countries that are a bit problematic now, we're pulling out of them. You know, we're pulling out of them as we can and redeploying rigs to other areas that are more favorable to operate in. Hopefully that answers your question.
It does. Thank you very much.
Thank you. Your next question comes from John Sartz from Viking Capital. Please go ahead.
Hi, guys. I'm wondering, you mentioned in your MD&A and talk about rewarding shareholders. I noticed that, despite, you know, you've spent a lot of money on new rigs in the last couple of years. Despite that, you don't seem to be able to spend all the cash you have. You've been building up cash and now have a substantial level of net cash in hand. I'm wondering, at the same time your dividend payout is less than 20%. I realize that you obviously, with dividends, you wanna be careful that you don't want to be in a position where you have to cut it. I'm wondering if perhaps you might do something.
You haven't. Of course, you haven't bought the shares back either. I'm wondering if you might contemplate buying some shares back and also perhaps pay a special dividend.
Yeah. I think, if you look at the history of Geodrill and, just kind of the last four or five years, Where we bought back shares, through our NCIB, what we do is we have an NCIB that allows us to buy back shares, and we monitor that. I think it was in 2019 and 2020 that the share price traded significantly below the book value of the company. With the share buyback, we were allowed to kind of put in a floor, and it made sense for us to buy back shares.
As we got through 2020 and through COVID and into 2021, through our investor relations people and the marketing, you know, we were told that a lot of investors wanted to invest in G-Drill and buy shares. We kinda. It's a balance thing. What we did is we adopted more of a dividend strategy. We did our first dividend in 2021. We did a small dividend, $0.01 twice, so that it was $0.02 annually. The next year, we ratcheted that up to $0.03, so it was $0.06. We just did our first one in 2023 of $0.04. What we're seeing, again, it's a balance thing.
You need to have the balance to add rigs, and continue to grow and continue to satisfy customers, but we also need to have the balance to return capital to our stakeholders. Where we've done that in the last two years is more through the dividend via the share buyback. However, we do have the share buyback in place, so it's still a lever to pull, if we need it going forward.
Great. Thank you.
Thank you. Your next question comes from Ray Gibbons, an investor. Please go ahead.
Congratulations on a good quarter, guys. I know you guys must wonder why you can't even get the... Hello? Can you guys hear me?
We can hear you. Thanks, Ray.
Yeah. Yeah. You guys must wonder why you can't even get the valuation of, like, a mining company that has one mine in the ground, cannot move it, is at the whim of the government of everything, cannot mitigate any of its risks, and yet has a healthy P/E that you guys can't seem to touch, being able to move your assets wherever you think they should be at 30% EBITDA margins. It's just an amazing world. Not to mention, these mines eventually run out of what they're looking for. From what I can tell, you guys decide when a rig is retired, and you can keep refurbishing it and optimizing it. Ultimately, you guys decide when your asset is, you know, broken down for parts or whatever it is.
It's just incredible, the valuation, confusion there. What I would ask is about, you know, you guys are talking a lot about recurring revenue now, I know your customer mix is much more Towards, miners. Miners are now saying things like, "Oh, the cheapest ounces we find are right around our mine site." You guys are the ones helping them, you know, execute that. I suppose, what percentage of your customers are majors?
Is it fair to say that if you're a major in West Africa that your pricing quartile is very low, which, you know, further goes to show you guys will be working with these guys right into the next downturn, and that recurring revenue here is something we can actually look at into, you know, into the next downturn and not say, "Okay, this is a, you know, a business that's just gonna run out of work"? Just tell us about these major miners and where you think their pricing quartile is.
That's a good question. You know, drilling is a cyclical business and it tends to go up and down depending on commodity prices and so on and so forth. I think firstly, you know, just recall that the history of the company, why I was encouraged to start Geodrill 25 years ago. This is now, by the way, our 25th year of business. We started with one rig, one contract in West Africa in Ghana 25 years ago, at a mine site. Well, sorry, at a junior exploration site that later went on to become a mine site. You know, most of the miners, what they do is they...
I think that firstly and foremostly, the thing that attracted me to West Africa was that West Africa had missed, what I thought was 50 or 60 years of modern exploration. All these things that have been drilled around North America and Australia and, you know, around the various places in the world, they had a wave of exploration that took place through the 1950s, you know, through the 1960s, the 1970s, and the 1980s. West Africa missed all of that. A bunch of exploration juniors arrived in their droves in the early 1990s, and I was part of that movement. I've been there. I've had the first you know, mover advantage since I arrived. I've never needed to really go and drill anywhere else.
There is an enormous amount of drilling that has taken place and will continue to take place. The drilling that has taken place was the drilling that was making the major discoveries. Now, please note that a mining company does not drill its 30-year mine life or 20-year mine life in its, you know, first two or three years of exploration. They tend to drill what will give them about 5 years of production at, call it 150,000 ounces per year. On the basis of that, they can generally go and do a DFS, raise some money and build a mill. They get a, you know, now they've gone from an exploration junior to a intermediate miner in the making to a miner.
Now, by this stage, they're mining, they're producing gold at, say, 150,000 ounces a year. Well, if they do that, then in five, six years, they're gonna be out of business. What happens is they take the cash which is generated from the operations, and it's usually, they work on fairly good margins out here because the grade of the resource is much higher. That speaks to the point that I mentioned, you know, that West Africa had missed 50 years of modern exploration, and you had all this low-hanging fruit out here. When they get into production, and they produce their first year's resources, well, they've taken their pit down, call it 50 m.
As they deplete the pit, and they remove gold from their balance sheet, they spend some of that free cash back into exploration, which then generates the next two or three years of results. That what happens, you have this ever-increasing momentum where the resource never ends. The recurring revenues that I can speak of on projects where we have worked, where we began as juniors, they became intermediates, have gone on to become miners, and now West Africa is dominated by names, tier one names such as Newmont, Barrick mines, Kinross mines, and Endeavour mines. These people are serious people with serious mining plans and a serious attitude towards working sustainably and building, you know, a proper ecosystem, you know, with communities in mind.
Now, the result being for us, we've been able to build a business model which started with one rig, one contract and 100% debt, so zero equity 25 years ago, to today what is a company which has at this morning's count, $112 million in total shareholder equity. I think that's an enormous result. The best part about it is all the projects that we are currently working on are the projects that have been going now for 15, 20 years. They still have another 15 or 20 years of mine life. By the time we get to the end of that 15 years or 20 years of mine life, I expect they would have drilled the next 15 or 20 years of mine life.
It's a great business model. It's why I started in West Africa. The result being, if you wanna look at how much gold is now coming from West Africa as a result of all this drilling that we perform and other companies perform, please note, we are not the only drillers here. As a result of all this drilling activity, West Africa is now producing 450 metric tons of gold per annum. Just to put that number into perspective, China, the largest producer in the world on a country basis, produces 350 metric tons. There's 50% more gold coming from six of the 12 West African countries in a footprint in an area which would fit inside of China twice. I think the recurring...
You know, what this company has been very successful in doing is identifying a region, getting the first mover ex-advantage, building a network of support facilities to support our high performance rigs and generating cash flow. From that operating cash flow, we then take the cash generated from operations of each and every one of these rigs, and the next thing we do is we just reinvest it into another rig. People... This cycle has been going on. We're now approaching 80 rigs as we inexorably move in the direction of what will eventually become probably 100 and north of 100 rigs. What's the best use of our cash generated from operations? People often ask, "Why don't you buy the shares back? Why don't you pay more dividends?
Why don't you pay special dividends?" I think we just had that question on the call earlier today. Well, I will tell you the best thing we can do with the cash generated from our operations is just put it back into another rig. I don't have to buy someone's business. I don't have to pay, you know, diluted multiples to expand into other markets. I just take my rigs, my cash, I add rigs into the exact same market where there is an appetite for our equipment. That business model is now expanding beyond West Africa into these other strategic markets for us. We're essentially doing in Egypt today exactly what we were doing in Ghana and exactly what we were doing in Ivory Coast 10 or 20 years ago. We just start with two or three rigs.
We get in there, we keep the customer satisfied, that's all you gotta do in this business, just keep your customer satisfied. We are first and foremostly a service provider. That's what we do, we have to provide service. That's how we do it. That's the story. The Geodrill story. Holes R Us. We drill holes, lots of them.
Thank you for your efforts, guys. Well done.
As for the share price, I can't help you with that one. That's where we sing, that's where we sing the serenity prayer.
Yeah.
I think we're just in the lap of the gods. You've got to believe that the market, the cycles will change. This is a cyclical business. What we have done is we've taken a cyclical business and, you know, the share prices of drilling companies and mining companies alike tend to suffer, you know, through the peaks and the troughs. We're, you know, we're collateral damage in that respect. I do think that what Geodrill's done probably better than most is we have managed to take a cyclical business and flatten out the cycle such that even in the troughs, we're still profitable. We're just less profitable than when we are in the peaks. Now we're evidently in an upcycle. This upcycle, I believe, began in earnest two years ago.
Based on the last downcycle, I will tell you, I'm confident this upcycle is good for seven years. We're two years in. We've got five years to look forward to. It's gonna be, it's gonna be game on.
Yeah. Just on the share price, Ray, you know, diversification, I think is going to help in the long run. Adding more capacity in South America, adding more capacity in Egypt and some of the other North African countries. We've invested in. We added the over the counter QX listing last year to kind of cater to more U.S. investors that would like to invest in Geodrill. Last year, Dave, all of the C-level, we basically reinvested about $2.5 million into the business. You know, like Dave said, we're kind of at the mercy of the stock market. In terms of paying dividends, diversifying the business, for us to continue to reinvest, you know, no one C-level has never sold a share.
We believe in this business and, you know, we believe it in the long run. We'll keep doing what we're doing.
I definitely think there's a correlation between the share volumes and the dividend. As the dividend increases, more and more people will be forced to look at this business. What business can sustain this particular dividend? They'll look under the hood, and they'll be like, "Incredible business," you know. Maybe now people think, "Oh, private equity was involved in this drill, in this mineral exploration business. They took on a bunch of debt. They ran aground. Lots of people lost money," you know, part of the backing for the cyclical element of it. You're better than a mine, you know. It's way better than a mine. It's way better than even two or three mines. Like, it's just, it should have a higher valuation than the mining industry, you know. You just have all of the flexibility.
You almost have what royalty companies have. You know, royalty companies talk about, you know, how many, how diversified they are, how they don't participate in the costs of a mine. They just sit around and collect cash. You know, you're in a lot of low quartile mines. Like, you'll be working for them right through the next cycle. Like why can't you be valued at 20x EBITDA like the minimum royalty company? Instead, we sit around grateful that you're at 3x EBITDA, and then you get asked questions where, wow, if we don't, if we don't grow at 15%, we might lose our 3x EBITDA valuation. Incredible. Anyways, love your business. Love it all.
No, I...
Thank you.
I'm with you. I agree with everything you're saying. I'm trying to figure out how an assay laboratory, who are effectively our cousins. You know, they say that the driller is the proverbial canary in the coal mine, right? That's because we spend for the largest of the exploration budgets. Approximately 50% of all exploration budgets goes to exploration drilling. You would think that we would spink for the lion's share of the multiple of the picks and shovels. Not so. Oddly, assay companies, the companies that take the samples that we produce and assay them, they traded 12x, 13x, 14x multiples. Look them up. You know, just check if my intel is correct on that. I don't understand that because you know what?
If I wanna move one of my rigs out of the jurisdiction 'cause I'm uncomfortable there, you know what I do? I just fetch a truck and I stick it on the truck and I drive it out. We've done this many times before. We will do it many times in the future. If we don't like a place, we just move. You cannot move an assay lab. It's bolted to the ground. It's a building. If you're in a jurisdiction that you don't like, you're stuck there. I just do not get, I don't get that, the assay companies, aside the fact that they are billion-dollar companies and there's this whole argument about liquidity, you know, versus illiquidity, and I get that. I totally get that. Look, you gotta firstly and foremostly believe in the cycles.
We are not in an upcycle yet, but we're evidently approaching an upcycle. In the last upcycle, we traded at 4.5-5x EBITDA. Currently, we trade at 3x EBITDA. You can say that our share price has had a good run in the last two years, and it has. It's increased by 50%. Our operational and financial performance has outpaced that. Our share price performance and our multiple has actually lagged compared to our financial performance. I would argue that the underlying value of the stock is as well valued as it has ever been. Good, you know, well done and for those loyal shareholders that were with us back when we were trading at $2.50.
Really, the intrinsic value of this stock, if we were just to get back to a 4.5x multiple, that takes us at kind of, I don't know, $5.50 or something. That's where we should be. You know what's gonna happen? That's not gonna happen overnight. When the markets do kick in and when we are getting that 4.5x multiple valuation, well, what's gonna happen in the meantime? You know what's moving is the EBITDA. If you look at our EBITDA over the last five years, it has grown at a CAGR 19%. I can afford to be quite patient. You know, I'm not a seller. I'm a buyer, as Greg said. Last year, I exercised, I think it was...
What was the number I exercised last year, Greg? It was a telephone.
Yeah.
I pumped $600,000-$700,000 back into the business last year in share options that were trading pretty much at market value. You know, they weren't giveaway options. They were $2.14 options. I think they were actually $0.01 or $0.02 under when I exercised them at. I believe in the business. I believe in the business. This is. I believe.
Certainly, the last down cycle wasn't bad for you guys. I mean, you doubled your size. I mean, you go into this next one in a lot of different jurisdictions, you outperform your competition, pick up whatever's there, and you wake up in the next upcycle, double the size still. Why, why not? You know, you've created a business model with the moat that people talk about.
I argue-
We all want things to happen faster than that.
Those growth through acquisition, I just love that. The whole organic thing, it just works so well for us. You know, we just don't have to buy someone else's problems. We just muscle in with some of our rigs and we, you know, we pummel the opposition and we just take market share, and the next thing you come back to that country in a few years' time, and we will be the, you know, the preeminent driller in that country. We've done this in many countries.
Love it. Love it.
We operate in West Africa. Now we're making a name for ourselves in Egypt, and we're doing very well in South America.
Thank you, guys.
I had more of a statement than a question, I should add, but thank you. I'm glad someone actually jumps on these calls and actually supports me in what I'm, what I've been saying for the longest time. Thanks. Thanks very much.
Thank you, guys. Bye now.
Thanks, Ray.
Cheers. Thank you. Thank you very much.
Thank you. There are no further questions at this time. You may proceed.
Thank you. Well, if there's no further calls, we'll thank everyone for being on the call today. Have a great day. Thank you.
Thank you.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Thank you.