Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Geodrill Limited Year-End Financial Results Conference Call. For today's call, phone participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session, and instructions will be provided at that time on how to queue up. If anyone has any difficulties hearing the call, please press star 0 for operator assistance at any time. I would like to remind everyone that this conference call is being recorded today, March the 6th, 2023 at 10:00 A.M. Eastern Standard Time and is 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's 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 SEDAR filings. I would now like to turn the call over to the President and CEO of Geodrill Limited, Mr. Dave Harper. Please go ahead, sir.
Thank you, operator. Good morning and welcome to Geodrill's Q4 and 2022 fiscal year-end results call. I will begin with an overview of our operational performance for the year. Our CFO, Gregory Borsk, will then give us a more detailed review of our financial results. After which I'll be happy to discuss our outlook for Q1 2023 and beyond. We achieved a number of financial and operational milestones this year. Operationally, not only have we been able to expand our drill rig fleet count to 76, we have also expanded globally on West Africa to Egypt and to South America. The strategic decision to diversify geographically has been critical to Geodrill's growth trajectory. Recall that we were awarded three significant long-term contracts with major exploration partners, which provides future cash flow and recurring revenues and visibility.
While two of these contracts were renewals, the new one in Egypt added $10 million to our 2022 revenue. Collectively, these among other contracts, drove another record year and the best metrics in the industry. Greg will speak to this in more detail a little later. Yeah, high level, we increased our revenue year-over-year by 20%, our net income by 34%. EBITDA was up 30% year-over-year. We also achieved a Return on Capital Employed of 25% and a Return on Equity of 18%. Included in all of this, we also delivered throughout the year CAD 0.06 in dividends to our investors.
Now this was up from 2 cents the previous year, and I'm pleased to announce that we will be taking this up again. As mentioned, we continued to develop our diversified geographical and commodity strategy, drilling for copper, zinc, lithium, and we expanded into Egypt and into Chile. We also ended the year with net cash at $9.8 million. We recorded our best-in-class debt-to-equity ratio of 4%. Finally, we completed listing on the OTCQX with the goal of increasing shareholder visibility. Our sharp focus on executing on our growth strategy has put us in a strong position to continue to benefit from the strong demand of our services, and as we also remain focused on the operational excellence which continues to drive profitability.
At this point, I'll hand the call, I'll discuss our quarter one 2023 after Greg reviews our financial performances. I'll hand over to Greg. Thank you.
Thank you, Dave. As a reminder, all figures are reported in US dollars. Geodrill achieved record key financial metrics in 2022. Record revenue, record EBITDA, and record net income. On the back of continued strong demand in all geographical locations for our drilling services. The company generated revenue of $138.6 million for 2022, an increase of $23.4 million or 20% when compared to $115.2 million for 2021. The increase in revenue was a result of the increase in demand for the company's drilling services. With the gold price averaging approximately $1,800 per ounce during 2022, global gold exploration spending continues to be strong.
The company has invested a significant amount of capital into its drill rig fleet and has advantages in the form of experience, accuracy, reliability, and safety, all which have been key factors in the awarding of contracts and form the basis for the increase in the company's revenue. The company has also been successful in expanding its client base to include a mix of majors, intermediates and juniors, which has contributed to the increase in overall drilling activity and a well-balanced mix of drilling clients and services. The gross profit for 2022 was $40.6 million, being 29% of revenue, compared to a gross profit of $30.1 million, being 26% of revenue for 2021.
EBITDA for 2022 was $38.4 million, being 28% of revenue, compared to $29.5 million, being 26% of revenue for 2021. The net income for 2022 was $18.9 million, or $0.41 per share, compared to $14.1 million, or $0.31 per share for 2021. Lastly, on the back of the record financial results and the outlook for 2023, the company has announced that it has increased its semi-annual dividend to CAD 0.04 per share. At this point, I will turn the call back to Dave.
Thank you, Greg. In short, the outlook for 2023 remains very strong. The significant growth in our financial metrics does not truly reflect the real and growing momentum that we're currently that we're continuing to experience on the ground. With 2023 already underway, our financial our performance remains very robust. Our pipeline for new business is exciting, and we look forward to sharing updates with the market as they transpire. This is not only as the outlook for gold exploration remains strong, but also the potential for new metals such as lithium exploration and development in West Africa, which is really only just starting to be understood. Little exploration for lithium has been done in this region, a district which is really renowned for its gold, therefore the blue sky potential remains completely untapped.
With significant global demand for lithium to power EV car battery forecasts and current mine supply well short of its ability to meet it, West Africa could play a significant role in decarbonization of the planet through lithium supply. Geodrill is present, ready and able to work with not only gold producers, but those also seeking these metals critical for a greener future. Also, our expansion into new geographical regions as part of our growth strategy is pivotal to both revenue and profit growth going forward. We expect to see this momentum continue into 2023 and beyond. We believe that juniors will continue to be able to secure financings for exploration projects.
As mentioned, we have also expanded our presence into South America, where we were recently awarded our first-ever contract in Chile, which began in quarter four, 2022. The company now operates in two countries in South America, where base- metals, copper, zinc exploration is prevalent. We continue to develop a diversified geographical and commodity strategy while maintaining our strong balance sheet. The company still expects the robust mining and exploration cycle will continue into 2023 and beyond. With an established business model, an impressive financial record, and a discounted stock valuation, we believe Geodrill is strategically positioned to create more value than other industry players. At this point, I'd like to thank everybody for participating in today's call.
I'll now be happy to hand the call over to the operator, at this point, to, if anybody should wish to ask a question. Thank you.
Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If your question has been answered and you would like to withdraw from the queue, please press star followed by two. If you are using a speakerphone, please lift your handset before pressing any keys. One moment while we compile the roster. Your first question will come from Gordon Lawson at Paradigm Capital. Please go ahead.
Good morning. Congratulations on another great quarter. Thanks for taking my call.
Thank you.
Your margins continued to improve in 2022 from last year. Could you provide any more color on your cost structure to give us a sense of guidance for 2023?
Sure. Okay, if you look at the margin, I think we went over this. It went from 26% up to 29%. There's really a few factors in there. One is economies of scale, Gordon. If you look, the revenue went up 20%, 2022 over 2021. Also, in 2021, kind of the tail end there, we had some investments, kind of start-up costs, et cetera, in some of the newer regions. You're starting to see like a full year of operations in Egypt for us. You're seeing, as Dave mentioned, the expansion into two countries in South America. Some of our kind of upfront costs that were there in 2021 and impacted the margins are being smoothed a bit in 2022.
I think lastly, you're starting to see just some pricing. Pricing with utilization across the industry picking up. We do have some increased costs, but you're also able to offset that and see better pricing. Really, there's a few things just in summary. The margin increases is really economies of scale, full kind of full smoothing for 2022, and then you're also seeing a pricing impact here.
Okay. That's great. Thank you very much. One more, if I may. In terms of shareholder returns, I mean, it's nice to see another dividend increase, how would you prioritize debt repayment versus share buybacks?
Well, the debt repayment we have, there's really a few different types of facilities. One, we have a credit line which is revolving, and we use that. That's more just for cash flow purposes. When we need it, we'll take it, and then we repay that. If you look at the company's credit line throughout the year, we use that and usually by when we come to Q4, the end of the year, we don't need that. At the end of the year, 2022, there was nothing withdrawn on the credit line. The other component of debt are medium-term loans, and those are more backed versus equipment purchases. If we're gonna buy—a nd these were, I think, in 2020, maybe 2021.
If we're gonna buy significant amount of rigs, we're able to finance those over a three-year term. It allows us to kinda match the debt payment with the cash flow from those new rigs. There's no—w hat we do, we repay our credit line when it's available because that's revolving. Then the two medium-term loans, at the end of the year, we only had $4.6 million on those. Again, they're just termed out over a period of time.
Okay, great. That's very helpful. Thank you very much.
You're welcome.
Thanks, Gordon. Cheers.
Your next question comes from Daryl Young at TD Securities. Please go ahead.
Hey, good morning, everyone.
Morning.
First question is just around, I mean, great quarter and better than I had anticipated. I think, you know, I was looking for more weakness around the rainy season. Just curious if you were able to make that up in the back half of the quarter or, you know, where some of the strength came from in the quarter?
Yeah. It was a funny sort of a quarter. The rainy season that normally occurs in quarter three was very late. It actually extended into quarter four. We had a strong, probably stronger than expected quarter three. At the beginning of quarter four, we thought it was actually gonna be a weak quarter. As it turned out, it was actually quite a robust quarter. It did get off to a slow start. October was quiet. November was a record. December, first half of December, very strong and then of course it just tapered off for Christmas as it normally does.
That all bodes very well for 2023 because we've just chalked up, you know, very strong results for January and February. Now. Sorry, does that answer your question? I think really what happened is the wet season eventually arrived. It just arrived late. We just, you know, it kind of just somewhat skewed what would've normally been a, you know, a Q3, Q4 result. What effectively got shifted from one bucket just got shifted into the next. The overall result for the year I thought was great. The wet season came and left, just, you know, probably a month later than it normally does.
Yeah. No, that's good context. I guess the second part of my question was gonna parlay into what you just alluded to is the results are were very, very strong obviously in November, December then, and have continued into 23. Just trying to get a sense of what you think top line could look like in 2023 and what kind of growth is on the horizon, just given some of these monthly results seem like they're quite strong at the end of last year, start of this year.
It's actually a really good question. I just, I think I spoke to it a little bit in the on the on the call. I think it's important to note that of the 20% growth that we saw through 2022, a lot of that was, you know, renewed business. One, one particular contract, one new contract added, call it $10 million to that top line growth. Now, as that rolls forward, that will not be a new contract in 2023. It is an existing contract and therefore I would just, you know, caution to, you know, I hasten to add that that will not be new business in 2023. If you're looking for 20% year-over-year improvement this year, I think you're gonna be disappointed. The number would probably be probably closer to half of that, I'm guessing.
Got you. Okay, that's great.
That's not a reflection on the business. That's not a reflection of the business doing poorly, not at all. In fact, the business is doing very well. It's just that that was, you know, new business, and that new business is a renewal in this current year that we're in as we speak. If you look at it and say, well, we had winding the clock back a little further, 2021 was a, well, 40% year-over-year improvement. A stomping result by any standards. To turn around and do a 20% in 2022 is by definition a stomping result in itself.
If we can close out 2023 and see single digits to say 10% improvement on the back of increased utilization across the fleet and a slightly enlarging fleet and some pricing leverage, then I think that in itself, considering that we're seeing, you know, an environment, a backdrop of increased pricing, increased costs as well. I think if we can achieve that, I think that's gonna be a great result.
Got you. Okay, that's great. That's great color, and congrats on a blockbuster year, guys.
Thanks very much.
Thanks, Dave. Yeah. Good.
Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one at this time. Your next question will come from Ahmad Shaath at Beacon Securities. Please go ahead.
Morning, Ahmad.
Hi, Dave. Congrats on a good quarter. Maybe on the quarter itself, on gross margin, maybe given the revenue level and the surprise, at least to my number, I expected a better gross margin performance. Anything we should be aware of on the margin performance? Or is it just with the new nature of business with some exposure to the production drilling and all that's what we should anticipate in Q4 margins going forward?
No, Ahmad, if you look at the gross margin for Q4, it was the same as prior year. It dips down to about 24%. I mean, that it's just, it's the nature of our business with the seasonality in December. It would happen. I would, I get some comfort in the fact that gross margin, Q4 over Q4 is consistent. We know why. It relates to December and, and shutdown. Clients, you know, shutting down for the holidays. I mean, overall, I would focus on the annual gross margin at 29% because if you look through the quarters, you know, our gross margin in Q1 and Q2 are extremely high, and then we move through wet season in Q4, it comes down. I would look at the annual margins.
I mean—
Fair enough.
I'm looking at EBIT down 24% for quarter four. It's not a train smash. It's like that's a pretty good result.
No. Fair, fair enough. Just trying to understand, the year-over-year revenue growth is there, just, gross margin expansion wasn't there just given, the operational leverage, maybe you expect a little bit more. That's helpful overall. I guess on a level, expanding margins. Good to see. Dave, maybe, follow up on the new contract. You started a new one in Chile. Maybe give us an idea of the size of that, if you're able to, and the potential expansion into that market. What are your thoughts there?
We are really liking Chile at the moment. Here's the thing. It's a large copper producing nation, and we were wooed to put a couple of rigs there on a copper project, which had, you know, a lot of potential, we thought. We mobilized two rigs, which happened to be sitting idle in Peru at the time because of the political situation there. I understand that the customer has made a major discovery, and I am encouraged by the fact that that customer has increased their requirement for drilling two or threefold. We're busy just figuring out how we're gonna get some rigs over there at the moment and get them down there and get them spinning. All good.
Only positive things to report in South America. You know, it has had a few problems in Peru with the—w hat was it? The, you know, the impeachment and so on and so forth. We had basically went from a situation where we had zero utilization at the midpoint of the year to, well, effectively took two of the rigs that of the four rigs that were sitting in Peru and, moved them down to Chile. Now it looks like the other two will go down and we'll actually add some additional rigs on top of that. This is all happening at a time when Peru seems to be sorting out its problems, and now we're starting to get a lot of inquiries there as well.
rt through the midpoint of the year in South America. A very strong finish and very, very encouraging that one of our customers has made a major copper discovery there based on. And also from an operational point of view, you know, this is a project that other drilling companies had problems being able to succeed operationally. And we were able to get some holes down beyond a challenging zone and through the drilling zone and drill some directional drilling underneath that.
Without getting too technical, it's really been a technical and operational success for us, and I think that that's gonna transcend into a financial performance, a financial success, yeah.
That's it. Did I hear that right? So th e contract now utilizing the two rigs that you had previously locked up in Peru, and you're looking for more and essentially up that up to five or six rigs, if things go according to plan this year?
That would be the case. That is actually the case. That is actually the case. The four rigs will be fully spoken for. We're just looking at trying to add another couple of rigs.
Okay. That's great color. That's, appreciate that, Dave. That's all for my questions. I'll jump back in—
Having said we're gonna do that, it won't happen overnight. These things are not, you know, nothing happens overnight. You know, it's, it's all, it's all good. It's, it's gonna, it's gonna take time to put the plan in place. In the meantime, we've got the two rigs spinning. The third rig has actually just arrived. It's coming through customs at the moment. I believe we're just figuring out where we're gonna get the fourth and fifth and sixth rigs. The other interesting thing that's happened actually as a result of that, you know, being able to sort out that, call it technical or operational issue, is we've actually had a flood of inquiries as a result of that. I think, it's all looking good in South America for us at the moment, yeah.
Yeah. Ahmad, it's key to point out, I mean, entering into that second country, you know, this is the success of Geodrill in West Africa, and Africa is having multiple countries. It's an investment on our behalf. It takes time, resources, capital, money. You know, having two operations in two countries now, having the base in Peru and in Chile just gives us more flexibility. And as Dave said, you know, we had idle rigs sitting there. We're able to get them operational in Chile and things are really looking good for both in Chile and hopefully something will happen with Peru also going forward. It's really, you know, multiple countries on a continent really helps us. That's kind of the push we have on for South America.
We're also loving Egypt at the moment. That's the other thing that we probably didn't speak enough about on the call. We secured late last year or early this year a very large underground contract at one of the oldest, most established mines there. From the time of signing the contract to actually boots on the ground and drilling, we were drilling at the end of Q1. Like signing a contract to actually drilling the first hole, boots on the ground, people trained up workforce was weeks. The transition from signing of contract to drilling the first hole to adding $10 million to the P&L, I've never seen this ever happen so quickly. It's a real credit to the team and the guys out there in Egypt.
The other thing that's happened as a result of being in Egypt, which we're also starting to experience just here now in Chile, is whenever there's a new driller in town, there's always. It's a bit like there's a new restaurant in town, everybody wants to give you a go. We're seeing, you know, we've got really, really positive things to say about Egypt at the moment. And just generally, in general about that Nubian Shield area, we think it's completely underexplored, completely under-drilled. All the same themes that sort of attracted us to West Africa many years ago. I think that, just in these two new markets, there's enormous growth potential.
This is on the back of what is already a robust operating and financial environment with 25 years, this is now our 25th year, by the way, of building a brand in West Africa. Stepping up, stepping out, and doing it in very, you know, substantial and quantitative and profitable ways. Yeah.
Your next question comes from Brad Verbitsky at Equinox Partners. Please go ahead.
Morning, Brad.
Hi. Good afternoon, guys. thanks for—
Morning.
Thanks for giving me a chance to ask a question. Congrats on the great results. I wanted to get a sense of how hot or how, or if you could sort of give any sort of color around the market for drilling rigs in West Africa. Like if a customer wanted a rig today, would it take 6 months or a year to get it? Do you still have, you know, rigs available? How are you thinking about pricing? Are you able to push 10% plus pricing on your customers or it's more like a smaller number than that? For your margins, do you expect to be able to hold your margins this year or expand them? Do you think you'll see margin pressure given the inflationary environment?
Good questions. First of all, if you want a rig today, you won't get one. You'll have to, y ou know, there's a backlog of— I think it's the same across the industry. Most drillers are probably busy at the moment. Geodrill's current utilization as of this morning was 77%. It was 70% average through the average of the 12 months of 2022. In quarter four, I think it was about 70%. It's, you know, it's indicative of a very strong start to the year.
Now, most folks that would be drilling, let's say, in April, would've been talking to us about drills in probably January and trying to get deals signed in February, then this is where it is currently, is there'd probably be a month, maybe six weeks. That, that kind of works out okay because most of our customers have their operational issues to deal with as well. You know, get bulldozers out there and clear tracks and so on and so forth, get their teams in place. It kinda works out. As the industry continues to hot, you know, gather momentum, and other drilling companies start to, you know, increase their utilization and the industry as a whole, the industry utilization increases.
It just becomes more increasingly difficult. Customers who are looking for rigs tend to get in there and order them a little sooner. They do actually expect to pay a little more because it's, you know, it's supply-demand sort of situation. This is on the back of rising costs as well. It's, you know, generally what happens is drilling prices go up. You would hope to keep pace with the also increasing cost base. Probably such that you could probably get a little bit ahead of the game. I think your other question, Darryl, was about pricing.
What happens with drilling prices is, well, historically, as the global utilization of the drilling fleet across the world reaches, say, an inflection point of 50%, we start to see pricing move north. That's, that's just a normal supply/demand-driven thing. We're kind of there now. I would say that the industry is, if not at 50%, we will be at 50% sometime this year. That's the, that's the global average industry I'm average utilization I'm talking about there. Sorry, what was your third question again?
For margins for your company, do you expect to be able to hold or increase them next year or March—
I'm gonna hand that one over to Greg because he's more involved in the costs and so on and so forth. My short answer would be yes.
Yeah. No, what—e xactly. I think the pricing pressure that we experience, that, you know, with the biggest cost of our COGS is consumables and labor. And I think everyone across the industry is seeing an increase in that. What you saw in 2022, the increase in margin was, as I mentioned earlier, economies of scale. Also just some of the investments we made in terms of expanding geographically and putting people in place and moving kit around. You only had a small revenue component of that, and in 2022, you're seeing almost a full year. Yeah, we don't expect margins to come under pressure.
I think just one thing to add on the rigs, your question on rig. What you have to remember with Geodrill, probably our biggest competitive advantage is our workshops and our bases. These are the investments that we've made in the countries. If you look at Ghana, our workshop in Anwiankwanta, we have a two-pronged strategy with rigs. One is we're always ordering new rigs. Those are kinda more customer-focused. If we have a customer that needs a special type of rig or an additional rig, et cetera, we can order that and get it through the system. As Dave said, that takes a period of time. The other advantage Geodrill has is we have rigs coming out of our own workshop.
We have our, you know, out of the 76 rigs we have, we always have those consistently going in, getting tuned up, et cetera, so they're ready to get back out. We're fortunate in that we have, you know, we have the relationship with the manufacturers to get new rigs, but we also have our own skill set and our own bases and our own team to make sure rigs are continually getting upgraded and are available for use, so. Just wanted to remind you about that, Brad.
Yeah. Thank you. If I could just follow up on that. I'm curious sort of what you're how you're thinking about adding to your rig fleet, how many rigs you plan to add this year, and how whether there's a long lead time for you to get new rigs. Also, I guess I'm surprised that the industry isn't slowing down a little bit given the sort of the poor equity markets for gold mining stocks in the last year or so. If you could just comment on those, on those two things, I'd appreciate it.
The—
Well, you—s orry.
No, I was just gonna say it's customer-focused, and it's also geographic. If you look at the areas where we're operating, there's certain geographical areas where we would like to add additional rigs. Just again, it's economies of scale, expanding our footprint in those countries. There's other countries where, you know, we may not be looking to add rigs, but deploy those rigs into other jurisdictions. The way Dave's grown this business from, you know, over 25 years, it's really customer-focused. We listen to the customer. If they need additional rigs, we'll figure out how to balance that with either our existing fleet or with getting more rigs out of the workshop, rigs from suppliers.
We always manage. I think you're right. You're seeing even our competitors with high utilization. If you look, everyone's continuing to add rigs. It's, some are retiring rigs and adding rigs, so they're kind of flat. With Geodrill, we add net rigs. We continue to increase the number. Without repeating myself, it's really customer-focused and geographically focused.
Brad, if I could just jump in there. I'm just looking at our 5-year CAGR rig growth, and it's 6%. If you're looking for like a number to crunch or to put something against, you could safely say that we'll probably end this year, probably gonna end this year with, I don't know, call it 80 rigs. Next year, you know, probably just keep growing the rig fleet. Historically, that's what we've done. I'm not expecting too much is gonna change that. Yeah. There was another half to your question, actually. I didn't quite remember what the other one was.
Oh, yeah.
Can you just give me?
Thank you. Thank you. Yeah. The just the last thing for me is, the equity markets for gold companies have been poor f or a year or so now.
Yeah, yeah. You spoke about.
Yeah.
Sorry. Yeah. You mentioned equity markets. Look, what happens in the equity markets is one thing, but, you know, you gotta remember that most of our customers are miners. They're producing gold and/or producing whatever they're producing. You know, for every year, they take a year's gold production, and they put it, you know, they take that ore and turn it into gold and sell it. Effectively, they've depleted, whatever it is, you know, 100,000, 200,000 ounces off their balance sheet. They need to replace it. What's actually driving a large part of our business at the moment is just that. It's depletion.
As mining companies deplete, typically what happens is a mining company will go to, go to market with 1 million or 1.5 million ounces, 100,000 ounces a year at, 10-15 years of mine life. Well, as they deplete their first year, the thing is, they're one year closer to someone standing at the podium and saying, "Now we've got to talk about a mine closure." Well, that never really happens in reality. What actually happens is they then take some of the cash that's generated from operations and put it straight back into drilling. To do what? To grow the resource that they've just depleted. By example, some mines that I was just doing some presentation work down in the U.S. a little while ago, pitching to, oil and gas, audiences.
You know, it's a very different audience. Went to great lengths to explain how some of the mines that we were working on 25 years ago, this is now Geodrill's 25th year of business, the projects that we were drilling that had 1 million ounces of gold and 15 years of mine life, we are still drilling today, having never left those, never left those projects. They have been producing gold at the targeted rate that they stated they were going to produce way back when. What they've done is increase their resources, and they still have 15 years of mining life ahead of them. This is the thing that I think a lot of folks overlook when they look at drilling.
They think it's something that stops every time there's a boom or a bust. Can't be the case. As long as mining companies continue to mine, they need to drill. They have to drill. They have no choice. That's what's, you know, this is a big part of this story and why it's so attractive, is the recurring revenues and the cash that's generated from those recurring revenues, if the particular driller that you invest in is a profitable driller. I hope that answers your question. Now, sorry, back to the capital markets. The only pushback we have seen recently is I think juniors were having a tough time through 2022 in the back half. I think that seems to be changing at the moment. I'm seeing a lot of financings going through.
we actually stated on our call today that we believe the junior market is improving and will continue to improve. At least that's what we're seeing at the moment anyway.
Thank you. That was helpful. Appreciate it.
Thank you, bud. Cheers.
Thanks, Brad.
Your next question comes from Ray Gibbens, a private investor. Please go ahead.
Hi, Ray.
Hey, guys. It's amazing to view your results. Incredible business. By far the best business I've ever owned a share of. When I think of the things you guys have tackled over the last years, and then I see the valuation, it just blows my mind. I mean, it's 2 x, 2.5 x EBITDA valuation, and people are like, "You missed margins by a shade there. What's the story?" Blows my mind. I guess, like when I think about what makes up the valuation, I think, you know, over 20% Return on Equity, you grew top line, your customer mix, like you just explained, is much more of a minor than a junior. I mean, you're a totally different business.
Not to mention, like, through the last cycle, if people are gonna point to you and say, "You're such a cyclical business," you double the size of your rig fleet through the last cycle. I just don't know what you have to prove to people. On the ESG side, you know, you take these local guys from the, you know, the grease brush all the way to drilling. You make them masters of the highest-end machinery they could be masters of. Incredible skills. Like, what else could you do for the area than what you're doing? And I guess my question is, what is the inflection point on the dividend that will make people wake up and understand the business that you have built, different from all of your competitors, like the true business that you have built?
Is there a level at which people just have to pay attention and they can no longer assign a 6x P/E and to have 2.5 x EBITDA? Like, is there? Are your bankers telling you that there's a point at which you can blow people away because, you know, EBITDA or, you know, operating cash flow minus CapEx is $8 million U.S. You have the, you know, you have the money to make people really question what they're doing, like, when they look at your business.
I don't have the answer to that question. I really don't, Ray. I think all we can do is do what we do best, and that's just. Thank you for all those comments. That's very kind of you. Look, we're just gonna keep on growing this business the way that we always have. We're just gonna keep on keeping on. We're just gonna keep drilling holes. That's what we're very good at. I, you know, I get asked this question a lot, why the valuation? I've got to put it down to the fact that we're illiquid, we're small, so we don't attract the big firms, right? The value, I mean, is there.
If you look at investing, what happens is, you know, what usually happens is best investments are usually found by smart retail that then basically eventually in the next rotation ends up with, you know, ends up with institutional and then institutional sell it to big retail. That's usually how the cycle works. I think that this is a very overlooked story. I'm just looking at the numbers, some of the numbers that you've quoted. They're absolutely correct. You've obviously done your analysis. Mine comes out this morning that we're trading at basically 2.4x EBITDA. You know, if you wanna look at value, gee whiz, you know, we're trading under book value. We are trading below our replacement value for all of those assets.
Those assets actually in today's market are even themselves.
Yeah, it's incredible.
If you could get it, you could actually sell it. If you put a for sale sign on to—l et's just say there was a—i t was the end of a gold rush and, you know, it was a ghost town and, you know, there's a tumbleweed sort of, you know, blowing through and, you know, the saloon doors, you can hear them creak and, you know, there's a little rattlesnake there running under the, you know, sneaking under the rig there. You know, you imagine all these rigs are just completely parked up and doing nothing, but nothing could be further from the truth. This is 24/7, 365 days a year, churning out $140 million a year in revenue and increasing and growing at whatever rate we're growing at.
I think, Look, eventually what will happen is something will happen. You know, either we'll get taken out or whatever. I just don't know. What I do know is this. In the last upcycle, which is called a 2012, 2013, we traded at 4.5x EBITDA. That was our average. We're currently trading at 2.5. People say—t he other thing is people say, "I just own too much of this story 'cause I own 40% of it." That is an asset, okay? It's an asset because, you know, when we do eventually get to a stage where we're talking to someone about doing something, it certainly won't be at 2.5x or 3x EBITDA. It'd be more like where we were in the last upcycle.
Then there'll be a premium. You know, because owning 40% of the stock, no one can take this unless it has my blessing. Do you think I'm gonna give that away? That's just not gonna be the case.
Yeah.
That, all of that said, certainly, you know, I think most would agree we are currently in an upcycle. I would tell you at this point in time, based on my industry experience, which goes back 35 years. I believe we're two years into an upcycle, and I think the upcycle is gonna be good for seven or eight years. I say that with some confidence because the downcycle was seven years, and what happens is the upside tends to mirror the downside either side of the parabolic, and it seems to add a year each time it goes, and that's why it's northward moving. Now, I believe we're two years in. I think we've probably got six or seven to run. Look, somewhere in the next few years, you know, I'm sure that phone call's gonna come and something will happen.
I think there's the value for the patient people that wanna get on the story and just continue to enjoy what is based on today's release that Greg announced before the, you know, the CAD 0.04 semiannual. That's a 2%, 2.6% yield. You know, you've got the yield, you've got the growth, until this finite situation develops, and it hasn't yet, but I'm sure it will at some point in time. We're just gonna keep on keeping on and keep rewarding our shareholders with dividends consistent with something that they would've been earning at the bank. Probably not as competitive as we could be right now, but we've just gotta keep some money in the tin for growth as well.
The other side of it is the growth. You know, the stock has moved in the last year. We've, you know, had a nice 50% bump or something or another, but we still have not kept pace with our operational and financial performance. That side is still lacking. The value is still there. It's still definitely there.
The other thing, Dave.
Is there a chance for a follow-up question?
On the value to rate the, you know, the C-level, if you look at Dave's holdings, Terry Burling, our COO, myself. None of us have ever sold a share. We agree. We, you know, we believe in this business. We believe in the value. Actually, in 2022, we all wrote some pretty large checks and reinvested in the business. Yeah, we're with you on value. There's, you know, as Dave said, you just. What we do is drill holes, and we keep our clients happy, and we just have to keep doing that. Just keep our nose to the grind, drill holes and manage. It's about balance. You know, balancing shareholders' wants with a dividend. We just put the dividend in 2021.
You know, we started at CAD 0.01 semiannual. 2022, we took it up to CAD 0.03. 2024, we're gonna take it to CAD 0.04. You have to balance that with, you know, adding new rigs and, you know.
Well, we—
It takes a balance and we believe in the business. We're with you.
Did you have a follow-up there, Ray?
Is there a chance to follow up there?
Yeah, sure.
Hello. Can you guys still hear me?
Yeah.
Yeah, sure.
Yeah. Yeah, as long as you guys aren't fatiguing, I'm happy to, you know, just stick it out with the, you know, the best deployer of capital and land and labor that I've, you know, been a part of. When it comes to, like, West Africa, like, the things you guys have dealt with, you know. Like, obviously COVID and then, you know, not to mention, you know, the terrorist attack, and then you have, you know, Ebola and you in and out of some of these tough jurisdictions. I mean, you really have done everything you could. You know, in a place where people have to go now to find their 3 million ounce deposits. Like, they have to go where you are. So you're in, you're actually in the place to be, so. Thank you all for your efforts.
I'll just throw in. Thank you. Thank you very much. I'll just throw in, actually. Just, that's a good point that you just raised. I don't know a lot of folks that get this, but where is all the gold coming from at the moment? Like, you think China's the largest producer in the world, you'd be absolutely correct. The next is Australia, then there's Russia. The average between them, they produce 330,000 metric ton each of them per annum. Well, there's 456 metric ton coming from West Africa at the moment. That's the official numbers. From seven of the 12 countries. If you wind the clock back 25 years ago to when I started, that was a fraction of that number.
I identified this when I was getting started as a region that had been completely under-drilled, and it needed a lot of exploration. The result of that exploration is that mines have been, you know, basically sprung to life. Those mines that are now producing are depleting. They're depleting all of them on average at a rate of probably 120,000 ounces per year. That's on average. Some are doing a lot better, of course. Guess what? All that depletion has to be drilled. It's all gotta be drilled. The point is, if you want elephants, you've got to come to Africa. That's, you know, pardon the pun.
Yeah. Yeah. Well done. Thank you, guys. All the best.
Thanks. That's all right. Thanks so much.
Thanks, Ray.
At this time, there are no further questions on the phone lines. I will turn the conference back to Mr. Harper for any closing remarks.
No, at this point, there are none. Thank you, everybody, for being on today's call. We wish everybody a successful PDAC and enjoy the rest of your day. Thank you.
Thank you.
Ladies and gentlemen, this does indeed conclude your conference call for this morning. We thank you all for your participation and ask you to please disconnect your lines.