Orbit Garant Drilling (TSX: OGD), one of Canada’s largest drilling companies, took advantage of the last downturn to make a strategic move into Chile, and now hopes to repeat that success in West Africa.
In December 2015, the Val-d’Or-based company bought Captagua Ingenieria, a Chilean drilling company in Santiago. Since then Orbit Garant has grown its revenue base in Chile to more than $40 million.
As in Chile — where the company first set up an operating subsidiary in 2013 — Orbit Garant first established operating subsidiaries in Burkina Faso in fiscal 2017, and in Ghana in fiscal 2015.
In October Orbit Garant acquired the drilling business of Projet Production Internationale, based in Burkina Faso’s capital, Ouagadougou.
The US$6.4-million acquisition (US$5.15 million in cash and US$1.25-million worth of shares) adds 13 surface drill rigs, 100 employees, support equipment and customer contracts.
Orbit Garant expects the acquisition will add $12 million more revenue for the 2019 fiscal year ending on June 30, 2019, as well as generate positive cash flow and earnings.
President and CEO Eric Alexandre told The Northern Miner that Burkina Faso is one of Africa’s largest gold-producing countries and one of the most active exploration markets on the continent, so the acquisition makes a lot of sense.
Margins in West Africa are a big incentive, too, he added.
“The ground is a bit easier to drill,” he said in a telephone interview from Montreal, explaining that you can drill shallower and more productive holes in Burkina Faso. “In Canada shallow holes are like 1,000 metres, and there it’s 300–400 metres. The deepest holes in Burkina Faso don’t usually exceed 800 metres … and you don’t have winter conditions.”
In addition, “the cost of manpower is way cheaper than Canada, so that goes to your margin.”
Alexandre also noted that being French Canadian is an advantage in the French-speaking country, and that “you have to go where the mines are, and there are a lot of Canadian companies there.”
In the 2018 fiscal year ended June 30, Orbit Garant more than doubled its revenue from international projects to $52.2 million.
This latest acquisition should position the company to pursue new growth opportunities.
“We started in Quebec and Ontario, and now we are in Chile, and we have a strong base there and we can grow from that base, maybe in Peru and Argentina, or surrounding countries, and it’s the same in West Africa,” he said. “We’d like to be a dominant player in that region. We have interest in Ghana, Senegal and West Africa, and we will follow our clients, as well as be more recognized there by establishing a base in those countries.”
Alexandre said his plan is to continue to develop the company “through acquisitions and organic growth.”
“We’re very disciplined about the way we grow, and at this stage, we want to focus on integrating the new group into the Orbit Garant family and integrate the synergy we expect.”
Alexandre’s father, Bernard, and uncle, Pierre, founded the company in their hometown of Val-d’Or in 1986, and were later joined by another uncle, Richard.
In 2006, the company started a training school to teach skills to new drillers, and, in 2007, the family business merged with another family-owned drilling company called Garant & Brothers.
Alexandre took the new company, Orbit Garant, public in a $60-million initial public offering (IPO) in 2008 — the last IPO on the Toronto Stock Exchange before the global financial crisis.
As for the overall market, Alexandre says, while the gold price is going up, it’s still hard for junior mining companies to raise money.
“We had a great winter last year but the summer was pretty flat, and right now the juniors are quite silent … but we do believe we’re at the early beginning of an upcycle.”