% Change
2009 2008
Revenue ($000’s) 3,851 8,625 -55 %
Gross margin ($000’s) 858 3,465 -75%
Gross margin percentage 22.3% 40.2% -18%
Net income ($000’s)
403 1,769 -77%
Earnings per share – basic ($) 0.01 0.06
Earnings per share – diluted ($) 0.01 0.05
Meters Drilled 20,490 56,862 -64%
Drill Rig Fleet 78 49 +59%
Cash and Cash Equivalents ($000’s) $22,867 $20,673 +11%
Working Capital ($000’s) $50,332 $36,166 +39%
As expected, the first quarter proved difficult as the current economic environment impacted drilling
worldwide, particularly on base metal projects. Many of Energold’s largest customers cut their
exploration programs significantly to conserve cash. While the challenges posed by the current
economic environment serve to limit visibility in the short-term, it is clear that as and when drilling
activities rebound, Energold will be poised for growth once again. Revenue in the second quarter has
already shown considerable improvement over that from the first quarter; however it will be below
revenue recorded in the second quarter of 2008. Lower levels of demand have increased competitive
pressures and thus pricing and margins will be lower than in 2008. Energold employs a variable cost
structure and thus when revenues decrease so do the majority of the costs. A strategic decision was
made not to reduce certain semi variable operating costs that would affect quality of service.
Despite the difficult environment, Energold expects to continue generating positive cash flow and
improve its working capital in 2009. Energold’s strategic goal is to continue to enhance cash reserves
to fuel further growth when market conditions improve. While it remains open to exploring suitable
acquisitions, Energold’s primary focus continues to be on organic growth through new rig development
and expansion into new markets.
With a modern fleet of drilling rigs and the continued opening up of new operating regions, the seeds
have been planted for future growth in five continents. The expansion of value-added services
continued during the quarter and included developing additional technical ability in underground
drilling. This was undertaken in response to customer demand for full service drilling solutions.
Energold took delivery of two new underground drill rigs in the first quarter bringing the total number
of rigs to 78. One additional underground rig has been ordered with expected delivery in the second
quarter. The two underground rigs are similar to the existing surface rigs employing approximately
90% of the same equipment and supplies as the surface rigs. This substantially reduces crew training
times and inventory requirements.
Energold will be discussing its 2009 First Quarter Earnings and hosting a question-and-answer period
via a conference call on June 3
