Geodrill Ltd

TSX:GEO

Good morning, everyone, and welcome to Geodrill's First Quarter 2025 Financial Results Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, May 12, 2025.

Before we begin, certain statements made on today's call by management may be forward-looking in nature and, as such, are subject to various risks and uncertainties. Please refer to the company's press release and MD&A for more details on these risks and uncertainties.

I'll now turn the call over to Mr. Dave Harper, President and CEO of Geodrill.

Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Geodrill's Q1 2025 Financial Results Call. Joining me on the call today is our Chief Financial Officer, Greg Borsk. So in the first quarter, we achieved outstanding results, setting new records for revenue and for EBITDA. These numbers are a testament to the strength of our strategy, which is working well evidently as these results do speak for themselves. Indeed, today's positive report card is the direct result of operational and repositioning efforts undertaken during '23, '24. The foundation built then is driving our exceptional financial performance today. To recap high level, Greg Borsk will speak to these in more detail later. We achieved record revenue, surpassing all historical benchmarks, which included 2 record-breaking months, one after the other, being February and March.

EBITDA was also a record, a substantial plus over 100% year-over-year improvement. Also earnings per share, $0.12 year-over-year, plus 160% improvement, just $0.01 shy of our previous record. These results significantly improved the balance sheet, also resulting in total shareholder equity of $125 million, another year-over-year improvement, 11% year-over-year improvement. Our strategy is all about balancing opportunity with risk and execution to ultimately deliver exceptional returns. Recall, key adjustments to our operating model were implemented over the past year, which were considered necessary in order to ensure the sustainability of the business. And it is pleasing that these adjustments are now fueling the momentum and validating our approach. Just to recap, these adjustments included building a diverse client portfolio of well-funded top-tier mining companies in safe jurisdictions, effectively mitigating the risk.

This strategic move has expanded into new markets and enhanced our resilience. One of the most significant achievements has been securing multi-rig contracts across both our core markets in West Africa and expanded markets of Egypt and South America. These contracts have substantially boosted our revenue visibility for the next 3 to 5 years, demonstrating our commitment to financial stability. And importantly, over the past year, we've made strategic expansion into South American market, increasing our operations to meet growing demand. Thanks to our focused execution, we are now reaping the rewards of that investment and expect continued revenue growth from this key region. These accomplishments position us for continued growth and reinforce our ability to deliver sustained value for our investors.

Our team's execution and commitment have been instrumental in driving our success, but it's also important to acknowledge the tailwinds of the strong commodity prices environment. Market conditions have amplified demand, creating a background where our positioning allows us to maximize opportunities. The synergy between strategy and favorable market dynamics continues to propel our growth. Finally, it is important to say we are insulated from the effects of tariff turmoil, ensuring stability and predictability in our operations.

I'll now turn the call over to Greg Borsk, our CFO, who will review our financial performance in detail.

Thank you, Greg.

Thank you, Dave.

I am pleased to report the financial performance for the first quarter of 2025. The company generated record revenue of $48.8 million for Q1 2025, an increase of $14.1 million or 41% when compared to $34.7 million for Q1 2024. The increase in revenue is the result of the increase in demand for Geodrill's drilling services and a robust gold price as the majority of our clients are exploring for gold. The gross profit for Q1 2025 was $13.6 million being 28% of revenue compared to a gross profit of $7.4 million or 21% of revenue for Q1 2024. We were able to considerably increase our gross margin despite inflationary pressures facing the mining sector and mining service providers. EBITDA for Q1 2025 was $13.6 million or 28% of revenue compared to only $6.7 million or 19% of revenue for Q1 2024. The net income for Q1 2025 was $5.6 million or $0.12 per share compared to a net income of $2.1 million for Q1 2024 or $0.04 per share.

In Q1 2025, we were able to increase the rig fleet, ending the quarter with 98 drill rigs. Building on Dave's comments, the record high revenue is fundamentally driven by 2 key factors: our multi-rig, multiyear contracts and record high gold prices. Multi-rig, multiyear contracts have been instrumental in boosting our financial performance. And with robust global exploration spending, we are well positioned for fiscal 2025.

At this point, I will turn the call back to Dave.

Thank you, Greg.

As we move forward, focus and adaptability remain at the heart of our strategy. The mining industry and the capital markets are constantly evolving, shaped by shifting regulations and economic pressures. To stay ahead, we are proactively navigating these changes while capitalizing on emerging opportunities. Our outlook for 2025 is exceptionally strong. We are still actively pursuing new contracts in high potential geographic regions, paving the way for the next phase of growth. The strategy between -- the synergy between our strategic long-term agreements and the booming commodities market positions us for sustained expansion, revenue growth and operational success. And this concludes our prepared remarks on our financial results.

I'll now pass back to the operator for anyone who has a question.

Thank you.

[Operator Instructions] The first question comes from Donangelo Volpe at Beacon Securities.

Congratulations on the strong results. Just looking for a break -- no problem. Just looking for a breakdown on the growth you guys are seeing by geography right now. I know we had some new contracts come in, in West Africa and South America. Just trying to pinpoint the strongest points -- strongest areas of growth you guys are seeing.

All over really at the moment, Donnie. Gold is exceptionally strong, has been since liberation day. It was doing very well before then. And so you can imagine if it averaged $2,700 through quarter 3, I believe that's the number. And now it's sort of hovering around $3,300 or it's off a bit today, I think. But even at $3,200, it's up $500 on its average from last quarter. And so strong gold, that will do it all the time, every time. We operate, we're very strong in West Africa. We're strong and we're getting stronger and bigger and more robust in Egypt. So those are essentially our gold markets. But then copper is doing very well as well. And so our South American business is actually probably where most of our growth is coming from. But really, it's a bit of both. It's a bit of both.

Yes, Donnie, let me just add, 41% quarter-on-quarter revenue increase. It was exceptional. And what Dave is saying, to get that, to achieve that, it has to come from every region we're in. So our primary markets in West Africa, in each of those 3 countries, top line grew significantly. In Egypt grew significantly. And in South America, it also grew. So it's across the board. It's related to gold, and it's also related to other commodities. So very, very strong Q1 for us here.

Actually, just to jump in there, Greg mentioned a 41% Q-over-Q increase. Actually, the Q-over-Q was 47%. It was 41% year-over-year. So like that just really is a strong indication of the momentum when you get such -- it's good to have a solid quarter-over-quarter -- sorry, year-over-year. But when you have an even more solid Q-over-Q, that really tells you something about the momentum.

Okay. I appreciate that. I guess just since we were talking about the 41% year-over-year growth, on the last earnings call, we kind of talked about being happy at a 10% to 15% year-over-year growth for the year, kind of in line with the historical growth rates you guys have seen. Were there any -- like were there any outliers for this quarter as to why year-over-year growth was so strong? Or should we kind of anticipate a bit more accelerated growth from what we've seen throughout the historical performance?

The problem with doing a 40% year-over-year improvement is everybody wants you to do it again. And I think you're asking what quarter 2 is looking like. As you know, we don't give guidance, but happy to say at this point in time, I think that -- I think that at this point in time, it's probably going to be Q-over-Q flat, but a year-over-year improvement.

And remembering that, our quarter 2 last year was a record, okay? The previous record to quarter 1, 2025 top line was quarter 2 2024. So for us to match it and beat it, as I say, it will be -- we've just put in a very, very solid quarter. I'm expecting at this point, we're probably looking at something flat maybe a slight improvement, but it will more or less be in the same ZIP code. But in terms of the year-over-year improvement, I think you can definitely -- we'll definitely be looking at a year-over-year improvement, yes, for sure.

And Donnie, if you do remember, we had a very slow start to Q1 2024. We weren't really ramping up Q1 2024 to the end of that quarter. So it is a 41% increase quarter-to-quarter. But the base was -- I think it was around $30 million, $34 million, $35 million. So to get it up this year to where we are at $48.8 million, it is 41%, but the comparable was on the lower. We had a slower start to 2024, Q1 was slower than Q2 2024.

Okay. Perfect. And then final one, if I may. Just curious on the commodity mix for the quarter, revenue by commodity.

Still predominantly, we drill for gold. And I think we communicate this on almost every call. It's the geography of where we're drilling. West Africa is predominantly all gold, where we're drilling in other parts of Africa. Where we're seeing drilling for copper, et cetera, is in South America. So the mix for us is still very heavily weighted towards drilling for gold.

90% [ coal ] gold and in the 10% is for copper. I think we put that in the MD&A actually -- Donnie.

Yes. I saw 90% and 95%. I just wanted to kind of circle in on exactly which one.

Yes. It's going to improve a bit as we move forward because what's happening is we've got more rigs going into the copper region, but they haven't really started to produce yet. So copper will become a bigger piece of what we're doing. But to what extent we're not 100% sure just yet.

The next question comes from Mark Gomes at Gomes Pipeline.

Congratulations, guys. Great to see how your decision-making and sacrifices in '23 are paying off so well. Looking at drill demand in the marketplace versus your fleet size and drill availability in the marketplace, how would you characterize how that looks right now relative to your demand and hopes to further increase your rig count?

So I think you'll see that we actually quoted our rig utilization there at 75% versus 65% a year ago. 75% for your information is more or less 100% mark. What never happens is you never get 100% of the fleet spending. And that's because usually, there's some rigs in the workshop or there's some rigs stuck in customs or mobilizing to a job or something. So we are effectively -- and when we quoted that number, we're talking about the average that was achieved for the quarter. There were some months in the quarter where we actually achieved north of 80%, I think 81% and 83%. And I think January was the quieter of the 3 months.

So we're at effectively 100% utilization. I mean it's the highest in the industry, globally, at the moment on a percentage basis. We will continue as we have always. The history has been that from cash generated from operations, we add rigs, we grow revenues, we continue to grow the profit. And that -- whilst the demand is there, and if anything, it's increasing, I think that pattern is just going to continue until at some point in time, we decide we've got enough rigs and we make that decision, well maybe we'll start backing off on the rig growth and just turn Geodrill into a cash generator. And that time is actually coming.

It's something that we talk about all the time at these Board meetings. And it's coming and it's coming soon. But for the moment, we're just in a very, very strong environment. There's an enormous amount of demand. And we've got to keep our customers satisfied, too. So in part, what we're doing is largely defensive as well.

And just, Mark, that utilization, the 75%, that's the group number. But behind that, we are busy in each region. And that kind of echoes the answer I gave on the revenue. The utilization and the revenue go hand in hand. So there's demand for our rigs in every country where we're operating. So it's a good problem to have in Q2 also, very busy.

Right. And I took note of that 75% number and do consider that to be effectively 100% in terms of what is possible, which is -- leads me to ask how does it looks out there in terms of your ability to acquire more rigs? Is it a tight environment to find more rigs out there? I noticed that you are leasing one. How does that look?

It's improving. I mean we were leasing 3 and now we're leasing 1, and that's because our own rigs are coming to come -- we're able to replace the leased rigs with our own. And rigs are still available, and we're still building rigs in our workshop. And where there's a will there's a way, there's manufacturing -- there's a rig manufacturing industry out there. And we actually have -- we have additional rigs in the pipeline as we speak, actually, Mark. We're going to -- somewhere in the not-too-distant future, we'll be reporting that we've got north of 100 rigs. So it's a work in progress...

Right, right. Any sense as to where you'd like to take that number this year?

Not at this point. I've got no idea. There's too many variables in there that manufacturers can let us down. And I mean, at the moment, we've done pretty well. We've moved up from -- we ended last year with 84 rigs or we started last year with 84 rigs and here we are with 98 rigs. I mean, we're considering all of this growth is organic and funded from cash generated from operations. It's as good as it's going to get, but I wouldn't like to put a hard number against it and knowing that there's just too many variables out there. We'll be north of 100, I imagine this year.

Yes. And Mark, we do that. As you know, we're able to do that from cash flow from operations, for the last -- as long as I can remember, anything we generate any cash, we put right back into PPE. And as long as there's client demand, where if we're at full utilization and there's a need with our Tier 1 customers or with some of our other accounts, if they're looking for more rigs, we're very fortunate in that we're also able to manufacture rigs. So between our workshop, between rig suppliers in the different countries where we're operating in. So far, we've been able to deliver and keep our customers happy.

Well, your execution has been outstanding. Congratulations and thanks as a shareholder.

The next question comes from Kris Tuttle at Blue Caterpillar.

I echo Mark's congratulations. A couple of questions for you. One is just on the receivables kind of just looking at that line versus last year, it seems higher. I mean it's not aged receivables. But I'm just curious if that has -- big portions of that have been collected or that's kind of the new run rate? I want some insight on that.

Yes. Good question, [ Mark. ] The receivables, they're really a reflection of how busy we were in the back half of the quarter, predominantly February and March. As Dave said, usually, January it takes a little bit of time to ramp up. So by the time we hit March, if not early April, most of the January receivables have been collected. So you're seeing the 30- to 60-day receivables that you're seeing at March 31, those are kind of current receivables, and they're reflecting how busy we were in February and March. And then what we try to do just to give comfort, is we break down the aging of those receivables. So out of the $49 million, almost $50 million in receivables, very little are aged over 90 days this quarter. And that's a function of shifting the business, shifting the business over the last couple of years towards Tier 1 miners and just people with the ability to pay their receivables on time, which helps us. But naturally, the -- our Q1 and Q2 are the busy quarters. So the receivables do ramp up Q1 and Q2, okay?

Okay. Yes. Got it. I did see -- yes, in the longer -- the consolidated statements. So makes sense.

My second question is just so great results, and I do the math kind of looking at the current margins and a sustainable business. And correct me if I'm wrong, but it seems like you are going to be in a position to have a considerable amount of free cash flow, perhaps in excess of what you need. And I'm wondering like what's your attitude around using that capital either for dividends or buybacks? Or am I missing the opportunity to maybe make more investments than I'm aware of? Just wanted to get your thinking on that now that you guys have hit such a...

Glad you asked that question, Kris, because you're actually talking to the largest shareholder here. Dave up here. So yes, look, we have this conversation all the time, what point do we have enough rigs and at what point should we start backing off on the growth? Firstly, we've never had any free cash since inception, since 1998 when we started with 1 rig and one contract, this has been a 100% growth -- organic growth story. But I'm a big believer and at some point in time, we've got to sort of encash that opportunity that comes from all that revenue. So if you look at our operating cash that we spin off, we spin off about 15%.

And then usually, all of that goes back into CapEx and half of that is expansionary CapEx and the other half is recurring CapEx. So if we were to back off on that expansionary CapEx at a point in time, it would give us the opportunity to, one, dividend, shore up the balance sheet by putting a bit of cash there and buy some stock back. So we plan to do all of those 3 things on balance, and that will tick everybody's box because not everybody wants dividends. Not everybody wants share buybacks. So how do you keep everyone happy? And I think the approach is just a balanced approach, a little bit of everything.

The third thing we would like to see is just some cash on the balance sheet. We can also retire some debt. We've got debt on the books, and that's expensive debt. We paid 10-odd percent, which is expensive by Western standards, certainly. And so we certainly plan to do that. And that times are coming. I think the first thing that we want to do is just hit that milestone of 100 rigs and then figure out how many more rigs do we want to go? At what point in time should we maybe change the paradigm in terms of what companies do is they just grow, grow, grow, grow and then get bought.

Well, another -- thinking about it another way, you can just turn this thing into a cash-generating business and reward the loyal shareholders that we've had on the books for so long. And I'm very much in favor of that. So great that you're asking the question. I just can't give you a definitive answer on that today other than we are continuing to -- and we will continue to spit out operating cash. And at a point in time, we will start to back off on the expansionary CapEx and reward the shareholders somehow...

And Kris, the other way to look at it, you look at the balance sheet, the total balance sheet we have $125 million in total equity and the different buckets, they shift. So usually in Q1, a lot of that total equity, if you will, is tied up in receivables. And then as naturally through Q2, Q3, Q4, that shifts into more cash, et cetera. So we just -- I think in Q1, Q2, we just make sure we're continuing to add total equity, and then it will work its way out into more liquid current assets in Q3 and Q4. And I think the other point to make is just it's significant. We've been increasing the total equity quarter-over-quarter.

So if you look at where we are now, the total equity, USD 125 million we're still trading at less than our book value, okay? The book value, if you take the shares divided by the total equity, our book value is about CAD 3.80. So we're still despite record revenue, $0.12 in earnings, we did $0.12 in earnings in Q1. Last year, for the whole year, we only did -- we did $0.20 in earnings. So we're about 60% of the way there through Q1. But as I said, that money, because we are extremely busy, it's kind of in different buckets where it has to work its way into the cash bucket, okay?

The next question comes from Dave Kegler, an investor.

Great quarter, gentlemen. Just a quick question. I believe a few quarters back, you were issued shares by a company that you had done some work for in lieu of cash. Can you tell me what you've done with those shares? Are you able to share anything if they've been cashed or if you still hold them?

Yes, they're still on the balance sheet, and it's not just one -- what we do is we have a portfolio of investments. It shows up in the balance sheet under a strange name. It's financial assets at fair value through profit and loss. But we have a note on that. And it's really just equity investments that we've had over the years. And depending on -- we look at a number of factors. We look at the underlying company that we're invested on. Is there liquidity? Are we able to sell some of this, et cetera?

And in the quarter, in the quarter, that number actually increased for us. So we went from about $6.5 million up to $6.7 million. So that portfolio increased in value, and we were also able to get off some of the underlying equity. And that helps us that, that's able to turn the equity investments into cash. So it's -- hopefully, I'm explaining. It's kind of a long-term process as to when does it makes sense to exit these investments, et cetera. And when does the market actually allow us to do it. So we're always kind of selling these when it makes sense.

The next question comes from George Melas at MKH Management.

Congratulations, gentlemen. You mentioned quite a bit the multiyear, multi-rig contracts in your prepared remarks. Is there -- can you give us some sense of what percentage of your revenue is made up of these -- I mean, I guess it's not binary and -- but it's not exact, but maybe how many of your revenue is from these kinds of contracts and also how that varies by geography?

Sure. So we break our -- when we're doing our budgets, we break our revenues and potential revenues into what we have and what we have to find. And in the have bucket through known contracts, it's currently about 60% and the other 40% will come by way of just general inquiries. So in terms of known revenues, we're in the sort of 60% quartile.

Does that mean that you start the year with 60% visibility into your...

No, because that 40 -- we actually start the year with 100% because the order book has contracts in that 40% quartile come off, other ones come on. So you've got to have a percentage of the fleet available on the fleet. If you can imagine, if it were a taxi rank, you'd have to have some rigs on the cab rank ready to go. Otherwise, you wouldn't be able to service that part of your business. So it helps us to know what our known revenues are going to be, but we also have to keep some availability so that -- for walk-ins, if you will.

Got it. And does that vary by region because some regions, you've been very established for 20 years. And of course, in South America, you're quite new.

I'm talking averagely here. Like if we look at South America at the moment, we have 0 -- like 100% utilization of the fleet. Every rig we have in the fleet, at least in one of the South American regions is 100% utilized. And in the other region where we're in South America, we're actually committed, just waiting to get through some community issues and those rigs will be out in the rigs spinning. So South America as a division is actually running at about 100%. Other parts of Ivory Coast at the moment, for instance, we don't have a spare rigs there. But I'd just like to talk in averages because the company is not just one region. It operates across 2 continents and 6 countries.

And what these multi-rig, multiyear contracts, what they allow us to do is because it's such a capital-intensive business, it allows us to plan. And so if we have a 2- or 3-year contract, and we know it's going to be significant amount of meters over that time period, we're able to better position and better plan in that region. So really, they're key to leveraging that region or that country and they're kind of the staple, the base which we can then continue to grow on.

So very important for the business. And whenever you -- it's a nice way of saying a really big contract. It's multi-rigs, which is numerous rigs, and it's usually over multiyear. So it's a significant management opportunity for us to actually take that contract, make sure we're executing on it, but to also build around it to kind of leverage that contract.

The thing about the known multi-rig, multiyear contracts is that it gives us recurring revenues that we can pretty much -- we can budget on and know unless there's some left field event that we're not aware of like a market capitulation or a commodity capitulation. But all things being equal, we can look at these and we can do our forecasting and we can plan.

Great. And maybe one more question. In West Africa, you've been there for a very long time. So I understand well how you -- how you have a great position. In South America, you're very new, yet you do extremely well. I mean, probably more than extremely well. How do you explain that? How do you explain your success in a new geography? And I imagine it's new customers, but I'm not sure. Maybe there's some overlap, but I doubt it.

The thing that caught my attention when I was in South America and what drove our thinking that we should expand into the South American continent is that when we arrived in -- well, if we follow our history, we operated, we saw a massive opportunity in West Africa when I started the business 26 years ago. And that was that the region was massively underserviced. I actually was at the same time thinking of expanding, I actually had, at that time, almost moved into South America instead of Africa, but I chose Africa, and I'm glad that I did.

The point is I visited South America more than 20 years later and nothing in South America had changed. The same opportunity was still there, and I saw that the same opportunity existed because I felt that the region was still very underserviced. And so when we expanded into South America, it was on the strength of relationships that we had forged out of West Africa, basically geologists and exploration companies that had operated in West Africa. had morphed into international companies operating across 2 continents, the other continent being South America. So it was a congenial thing that we could just jump from a customer that we had operated for in West Africa who we had history with that we're happy to try and use our services in South America.

Two friends tell 2 friends who tell 2 friends. And before you know it, you've got business is going very well. So I think that Geodrill does a lot of things in a good way. And I think that the thing for us now is to try and mirror that same success that we've had in West Africa. And if we can do that and be as successful in South America, then effectively, what we're looking at is a doubling of the business.

[Operator Instructions] Next question is a follow-up from Mark Gomes at Gomes Pipeline.

I forgot to follow up. With regard to the environment for obtaining drills, for the typical kind of drill that you guys are buying, what is the market -- the going rate for new drills there?

There's just -- there's no one-off answer for that, Mark. It depends on the type of drill. There's rigs that cost $500,000. There's rigs that cost $2 million. It just depends on the application. But I'd say, look, on average, if you were to put an average against what does a rig cost, I'd say, average, you're looking at about $1 million. And then -- it doesn't only stop with the rig. You've got all the support equipment and everything that goes with it. So you can almost put -- add 50% to that again. I'm talking U.S. dollars. But that's -- again, that's just a very average number. We've got rigs in our fleet that cost more than $2 million, and we've got rigs that cost $500,000. But they're all different applications. It just depends on the demand and the demand drives our thinking in terms of what we buy.

Right, right. Yes, I was looking for a ballpark average. That's a good number. And that would be consistent with kind of looking at your fleet as being average, just kind of looking to further validate your book value.

Our book value is massively, massively understated, Mark. If I was to look at replacing these rigs with rig values today and have to go and buy, there's 98 rigs from a rig supplier. I'd reckon I'd be paying 50% above the -- above what we've got these rigs. These rigs have historical depreciation rates that accounting practices and depreciation rates that have applied per accounting standards. And if the market value of the rig changes, we can't just change that because it suits us to do so.

Yes. And in the meantime, you do invest in keeping them tip up.

Of course, we do that. But the interesting thing is because of the sudden demand that we've been faced with recently, we had to go to market and actually buy rigs from suppliers and have to buy some couple of second -- late model secondhand rigs that were in the market, and we're shocked how expensive they are shocked. So it really validates my point that when we look at the hard book value of this company, which today is -- what's our hard book value?

The total equity is...

The total equity. If we were just look on a share price basis and we're looking at Canadian shares, I think Canadian share price, I've got it here actually.

Yes, [ $3.80. ] And Mark...

The hard book value is CAD 3.80, and we trade at a discount to that even though after today's good stonking financial results, I using that word stonking because these results were nothing short of stonking. And even with that, we are still trading under our hard book replacement value. And that's not the market value. The market value of these rigs would be far greater, okay? And when you think of hard book values, you think of closing down sales, you think of a ghost town, you think of -- it's a western and there's a tumbleweed and there's a saloon door that's opening and closing and you can hear it creeping because it's a ghost town. And there's a rattlesnake that runs under one of the rigs and this thing is just all parked up because there's no drilling going on.

Well, nothing could be further from the truth. This is a real going concern. We don't have one spare rig in the fleet at the moment. And this is a 24/7, 365 day a year revenue-generating business that spits out very, very good returns for its shareholders. And yet, we trade at less than 1 year's revenue. If we look at our market valuation, we traded under 1 year's 1x revenue. We traded at about 2x EV to EBITDA, and we're trading at a discount to our book. I mean it just doesn't make any sense. There is deep, deep value in the story. I've said this for a long time, and I will continue to say this is a very, very overlooked story.

Mark, where you see -- no, no, go ahead.

No, I was just going to say we do disclose the carrying value of the rigs. So there's a table in the notes to the financials. It's about $43 million, call it, 98 to 100 rigs. So it just really emphasizes Dave's point that the book value because of the depreciation, the average rig book value is about $430,000. And it just shows you how much of a discount that is to reality to get a replacement rig.

Exactly the point I was getting at.

Deep value on the back of a very strong earnings story.

The next question comes from [ Jesus Sanchez ] at [indiscernible] Investment.

Congratulations for the great quarter.

A couple of questions from my side. You were mentioning and you are totally right about it that we are totally undervalued. Why do you think that our performance has not gone in line with the gold price because gold price have been raising for the last months, although our stock price did not. Is because we are not listed correctly or we are not considered part of the gold mining companies?

So if you look at our financial performance and our rig utilization, there's a nice correlation actually to our -- to the gold price. So as gold goes up, as gold goes up, utilization goes up with it, revenues go up in lockstep. And actually, I would argue with you, as we've said, our share price performance over the last year has actually been quite solid. If you look and you mapped up Geodrill, [indiscernible] and looked at how it performed against the S&P last year, it outperformed the S&P. It outperformed gold. It outperformed gold ETFs.

So it actually did quite well. However, the same -- in my same -- in my same breath, I would say that we are fundamentally still very undervalued. There are very few stories out there where you can buy cash-generating businesses that provide good returns in stable, solid markets. We do operate in West Africa. Yes, I get that. But Africa is made up of 54 countries, and we operate in the best 4 countries in Africa. And in those countries, they produce gold. And that's why we operate in Africa. We don't actually necessarily operate there by choice. We operate there because that's where the gold is. And if the gold was in Ukraine or whether it was in Brazil or whether it was in Mexico, that's where we would probably be drilling. We just happen to be in West Africa.

And -- so I would argue with you that I think our share price has performed reasonably well relative to market and relative to our sector, if you compare us against all the other drillers, we've actually done pretty well this year. However, we could definitely do better. And I was just highlighting the point there before, where can you buy a cash-generating profitable company with good fundamentals that trades at less than 1x revenue. You're just not going to find them. And this is a real -- this is a derivative of gold. If you want to play gold, which is a pretty smart thing to be playing at the moment, with all the turmoil in the world at the moment with concerns about currencies and trade wars and tariffs turmoils. One safe haven that seems to be doing very well is gold. But how do you play gold? How do you invest in gold?

Do you go and buy a big bar of gold and take it out and put it in your safe? I need to find that your house [indiscernible], get the combination and run away with it. You can buy gold ETFs, you can buy gold shares or play derivatives. And Geodrill and companies like Geodrill are picks and shovels. That's what we refer to them as. And of the picks and shovels, we are probably the best of the picks and shovels because we speak for the largest of the exploration budgets, okay? Approximately 50% of all exploration budgets go to drillers, okay? So from our point of view, the objective is to be the best driller out there.

I hope that answers your question.

Yes. No, I totally agree with you that last year performance was exceptional. Totally agree with you that it is unjustified the fundamentals. Totally agree with you that we are a derivative play and a very cheap actually way of having to go. So thank you for your perspective. That's why we are invested in Geodrill actually. My second question is about what are you sensing in the market? You mentioned increased client demand. I guess with this gold prices, majors or other mining are increasing their CapEx is what you are listening in the industry?

Yes. That's the short answer, yes, very much so.

And what about that? Are we going to increase our CapEx? We added some rigs this quarter. What are our plans for future CapEx?

We just had a really busy quarter with CapEx. We had a very busy -- we had a record quarter last year with CapEx and quarter 2 will more than likely be another record CapEx quarter. So we're increasing our exploration CapEx expenditure in lockstep with demand. The demand is there. And so it makes perfectly good sense for us to continue to expand into an ever-increasing insatiable appetite for our services. Once that service or that demand starts to fall away, we'd like to be in a really strong position of having cash on the balance sheet and being able to, at that point, start thinking about making some returns to our loyal shareholders.

And just to add on, we're unique. We're fortunate to be able to continue to add to our CapEx. And that's because of the cash flow we generate from operations, plus we have facilities in place, term loans and credit lines, et cetera, where we're able to utilize those to actually add to CapEx if we need to. And not all of our competitors have that luxury. But Geodrill, because we're disciplined and we do this, we've been doing this for a long time. We're able to continue to add CapEx either through cash flow or if we need, we can utilize the lines.

And that's something I love about Geodrill with the return on capital employed that you have, reinvest everything in rigs. I just want to get the sense that we are going to continue in this space of 3 rigs per quarter increase, [indiscernible] even the demand, I'm happy with that.

We have no further questions. I will turn the call back over to management for closing comments.

Thank you very much, everyone, for participating in today's call. Thanks for your great questions. Thank you very much.

Thank you.

Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please disconnect your lines.