Good morning, ladies and gentlemen, and welcome to Orbit Garant Drilling's fiscal 2024 third quarter results conference call and webcast. At this time, all lines are in a listen-only mode. Following the management's remark, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. Please be aware that certain information discussed today may be forward-looking and that actual results could differ materially. Certain non-IFRS financial measures will also be discussed. Please refer to the company's SEDAR filings for additional information on both risk factors and non-IFRS measures. This call is being recorded today, Thursday, May 9, 2024. I would now like to turn the conference over to Mr. Pierre Alexandre, President and CEO of Orbit Garant. Please go ahead, sir.
Thank you, Lester, and good morning, ladies and gentlemen. With me on the call is Daniel Maheu, CFO. Following my opening remarks, Daniel will review our financial results in greater detail, and I will conclude with comments on our outlook. We will then welcome questions. Our profitability improved in the third quarter compared to Q3 last year, reflecting stronger operating performance from our international operations. Our drilling activity in Chile increased year-over-year, and we have no further activity in West Africa, where we complete our final program during our second quarter. In Canada, our operations normalized during the quarter. As we previously announced, we temporarily suspend our reduced activity on certain projects during the first half of Fiscal 2024 due to customer decisions. These projects were fully resumed by January 2024, as expected.
Our drilling activity in Canada was relatively stable compared to Q3 last year and reflects continued strong demand for our services. Our revenue in the third quarter, which is seasonally slower period for our business, was CAD 48.2 million, a slight reduction from CAD 49.3 million in Q3 last year. Adjusted gross margin increased to 17.3% from 14.4% in Q3 last year, primarily reflecting the stronger performance of our international operations. We had operating earnings in our international operations of CAD 0.2 million in the quarter, compared to an operating loss of CAD 2.1 million last year.
With our West African drilling operation now seasoned, we expect our future gross margins to improve as we focus on our core Canadian gold drilling operation and pursue attractive projects in South America while carefully managing our costs. Customer demand from senior and intermediate mining companies remains generally strong, supported by near-record gold prices and rising copper prices.
Subsequent to quarter end, we secured two large contract renewals on copper drilling projects in Chile with senior mining companies. One of the contract renewals is for a term of three years, with a customer option to extend for two years, and the other, which represents our largest contract in Chile, is for a term of five years. Our operational performance in Chile has been improving, and these two large contract renewals will support our positive momentum in this important market going forward. I will now turn the call to Daniel to review our results for the third quarter. Daniel.
Thank you, Pierre, and good morning, everyone. Revenue for the quarter totaled CAD 48.2 million, a small reduction of 2.3% compared to Q3 a year ago. Canada revenue was CAD 37.2 million, a decline of 3.5% compared to Q3 last year, reflecting decreased drilling activity on certain projects. International revenue was CAD 11 million, an increase of 1.8% from Q3 last year, reflecting increased drilling activity in Chile and Guyana, partially offset by our termination of activity in Burkina Faso and Guinea. Gross profit for the quarter increased to CAD 6.2 million, or 12.8% of revenue, compared to CAD 4.6 million, or 9.4% of revenue in Q3 last year. Adjusted gross margin, excluding depreciation expenses, was 17.3% compared to 14.4% in Q3 last year.
The increase in gross profit, gross margin, and adjusted gross margin was primarily attributable to increased drilling revenue in Chile and the cessation of our activity in Burkina Faso, which was unprofitable, partially offset by reduced drilling activity in Canada and certain current costs related to the termination of drilling activity in Guinea. General and administrative expenses were CAD 3.5 million, or 7.3% of revenue in the quarter, compared to CAD 3.6 million, or 7.2% of revenue in Q3 last year. EBITDA was CAD 3.9 million, compared to CAD 4.5 million in Q3 a year ago.
The decrease primarily reflects a negative foreign exchange variance of CAD 1.8 million, partially offset by the positive operating earnings in our international operation, which Pierre noted. Net earnings for the quarter increased to CAD 2 million, or CAD 0.05 per share, compared to CAD 0.2 million, or CAD 0.01 per share, in Q3 last year. The increase reflects the positive operating earnings in our international operations and an income tax recovery of CAD 1.3 million, partially offset by the negative foreign exchange variances. Now turning to our balance sheet. We repay a net amount of CAD 1.3 million on the credit facility in Q3 this year, compared to a withdrawal of CAD 2.6 million in Q3 a year ago.
Our long-term debt under the credit facility, including CAD 3 million draw from the revolving facility and the current portion, was CAD 23.4 million at quarter end, compared to CAD 22.2 million as of June 30, 2023, our fiscal year end. At quarter end, our working capital totaled CAD 48.8 million, compared to CAD 50.4 million as of June 30, 2023. I will now turn the call back to Pierre for closing comments. Pierre.
Thanks, Daniel. We were pleased to generate solid year-over-year growth in margin in the third quarter, and we believe that we are well positioned for continued growth in profitability. As we complete our exit from West Africa, we are now a leaner company focused on higher margin opportunities in Canada and South America. Our business is currently supported by very strong metal prices. Gold prices reached record highs above $2,400 per ounce last month. Copper prices have also increased significantly during this calendar year. Accordingly, we expect to see continued strong customer demand from senior mining companies and well-financed intermediates. However, financing conditions remain challenging for junior mining companies as well as some intermediates. This is impacting demand from these companies and overall contract pricing in our industry.
We recognize that these financing challenges could persist for some time, and we are prioritizing longer-term specialized drilling contracts with senior and well-financed intermediate mining companies. During the first 9 months of fiscal 2024, we generated 87% of our revenue from senior and intermediate mining company projects, up to 70% in the same period last year. Our strategy going forward has not changed. We focus on our 5-point plan, which includes primarily focusing on Canadian gold drilling operations, prioritizing longer-term specialized drilling contracts with major and intermediate customers, pursuing international contracts in South America and Chile in particular that offer attractive returns, continued investment in our driller training and computerized drilling technology, and building a team-oriented leadership structure that fosters collaboration and personal accountability. We believe that the continued advancement of this strategy will drive performance improvements and stronger returns for our shareholders.
Before opening up the line to questions, I would like to acknowledge the appointment of André Pagé to our Board of Directors yesterday. André has more than 30 years of experience in capital markets, including senior roles in institutional sales. He was formerly managing director with Desjardins Capital Markets prior to his retirement in November 2023. André's extensive capital market experience will be beneficial as we continue to advance our growth objectives and focus on building value for shareholders. That concludes our formal remarks this morning. We will now welcome any questions. Lester, please begin the question period.
Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session. If you have a question, please press star followed by the number one on your telephone keypad, and if you wish to cancel your request, please press star two . Please ensure to lift the handset if you're using a speakerphone before pressing any keys. One moment for your first question. Your first question comes from Terry Bill, a private investor. Your line is now open.
Thank you. Congratulations. It seems like the company is turning the corner in the quarter. I had a few questions. West Africa hurt EBITDA in the quarter by how much, or the sales, or was it very minimal?
Thank you first for your remark. Yes, we're turning the corner, we think. West Africa has an impact of less than CAD 1 million in the quarter.
Okay. That was for the sales or for the EBITDA?
For the EBITDA.
Okay. So EBITDA.
We incurred some expenses in Guinea for severance for employees and some in Burkina Faso in Q3, and some transportation of the equipment to send Guinea equipment to Burkina Faso, but that's it. These expenses are incurred in Q3, and technically speaking, no other expense should happen in the next quarter related to West Africa.
Okay. So do I have it correct? The CAD 3.9 million EBITDA for the quarter would have been up to CAD 1 million more had it not been for West Africa. So West Africa hurt the CAD 3.9 million. So is that correct? The CAD 3.9 million wasn't higher?
Yeah. It should be higher, not to CAD 4.9, but at least CAD 600,000 or CAD 700,000.
Okay. Following up on the Adjusted EBITDA, CAD 3.9 million and then adding CAD 1.8 million of the variance in the currency exchange, would that be an Adjusted EBITDA, or would you go over the CAD 1.8 million? Is that added to get an Adjusted EBITDA?
Yes. We actually calculate our EBITDA. We include the effect, actually, in the CAD 3.9 of the foreign exchange loss. So you're correct. If we, let's say, calculate an adjusted EBITDA, which we extract the loss of foreign exchange, we would came to a CAD 5 million EBITDA. You're right.
Okay. The CAD 1.8 million seemed like a high currency exchange for an EBITDA. Is that something that is abnormal, or is that something that was from some type of currency in three months suddenly changed quite a bit, or it just seems like a large number for one quarter?
Yes. Unfortunately, as you see this quarter in 2024, we have a loss of CAD 1 million. Quarter a year ago in Q3 2023, we have a gain of CAD 0.7 million. So essentially, it's related to the fluctuation between the pesos in Chile related to U.S. dollars, and it's also because it's a lot of variation in this currency, the CLP, the pesos in Chile compared to U.S. And also, we have a lot of variation with the XOF in Burkina compared to U.S. So we still have account receivable from customers, and that makes a lot of change. And also, in Canada, we have the impact of the decrease in Q3 2024 of the Canadian dollar compared to U.S. dollar. Unfortunately, that makes a lot of, let's say, noise for the result, but technically, we have to record these foreign exchange gain or loss that way.
Okay. I had two more questions. For Canadian operations, I see where the publicly traded competitors in Canada have about 600 basis points-800 basis points higher gross profit margins. They have the mid-20s gross profit margins. What is the main one or two reasons for the adjusted gross profit for Canada revenue not at the market of the industry in the mid-20%?
In Quebec, we are strong in Quebec, in the drilling area here, and we have a lot of competitors in this market in Quebec. That's why we try to target more specialized work with higher margins on the long-term contract as the one we renewed last November with a large Canadian company, and we pursued this kind of contract in Canada. And that's why, let's say, our margin actually in Canada is not so high, but we have to also consider the effect of the West Africa business, which had a negative impact on our consolidated result.
Okay. My last question is South America. When things get going and are steady in South America, is the gross profit percent and the EBITDA percent similar to Canada, or is it higher or lower?
Let's say since January 2023 till this quarter, the EBITDA percentage and the gross margin percentage are comparable to Canada. But now, the demand is higher in Chile for copper, so prices are better right now. So it gives us the possibility to increase price. And as Pierre mentioned and as it's indicated in the press release, we renewed a very large contract, two contracts, but one of them was a very large contract for our business at good margins. So that's interesting for us, for the business we have actually in Chile. And the copper price is still increasing. So the margin, actually, in Q3 of 2024 is over Canadian margin and percentage of EBITDA in Chile.
Okay. Yeah. I have one more question. I think I should ask it now in case I can't get back into the queue. It happens to be with the gold price and the copper price being very high. And what, in your opinion, is the one or two reasons for the utilization and demand 2024 not as great as when the gold price was this high 2011 or 2012 area, where the sales for the company were much higher and the utilization was much higher and so forth? The gold price is basically a little higher than back then, yet the sales for the company are and for the drilling industry, are not as high as 2011 and 2012, I mean. What would you say is the main one or two reasons for demand not as high given that the gold price is so high?
Well, it's very tricky to answer, but what we hope for the next, I would say, next quarter or next year is that investors would get back to the stock market to invest in junior companies. So this would help to get more work and grow organically. So this is our wish, but I have no crystal ball. But we don't really understand why junior financing is not there, but I hope that it will be there in the next month or next year. But of course, like I said, we have 70% of our business with major and intermediate companies, and we are focusing on these, gold and copper. And there is room in Chile to increase our operation organically with our division here in Canada. That's where we'll be focusing on.
Okay. What was the utilization this quarter or the last six months or recently for the utilization?
It turns around 55%.
Okay. So you have plenty of capacity. Maximum utilization would be 75% or so. Is that correct?
Well, if we hit 70, we'll be happy because we still have to keep in mind that we need good labor to operate rigs.
Yes. Understood.
To serve.
Yes. Exactly.
Client properly. That's something else that we're focusing on. That's the reason why we're working with intermediate and major clients because of our capacity.
Right. The safety has. Yes. Thank you for your time and answering the questions. Those were my questions. Thank you.
Okay. Have a good day, sir. Thank you for the question.
Ladies and gentlemen, as a reminder, should you have any questions, please press star followed by the number one. There are no further questions at this time. Mr. Pierre Alexandre, please proceed with your closing remarks.
Thank you, everyone, for participating today. We look forward to speaking with you again after we report our fourth quarter result. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect.