Denis Larocque - President and CEO David Balser - Chief Financial Officer

Good morning, ladies and gentlemen. Welcome to the Major Drilling Group International Inc. Third Quarter 2016 Results Conference Call. I would now like to turn the meeting over to Mr. Denis Larocque, President and CEO. Please go ahead, Mr. Larocque.

Thank you. Good morning, everyone. And welcome to Major Drilling’s conference call for the third quarter of fiscal 2016. With me is David Balser, our Chief Financial Officer. You should have received a copy of our results last night, if not, please contact our office or visit our website at www.majordrilling.com. Before we get started, I would like to caution you as usual that during the course of this conference call, we will make forward-looking statements regarding future events, or the future financial performance of the Company. Such statements are forward-looking in nature and actual events or results may differ materially. Conditions in the mining industry continue to be extremely challenging. The third quarter is traditionally the weakest quarter of our fiscal year, as mining and exploration companies' shutdown, often for extended periods over the holiday season. As expected, January had a slow start and we were still waiting on customer plans for calendar 2016. As well, due to low commodity prices, particularly for base metals, some mining companies have reduced their exploration activity levels compared to last year. Revenue for the quarter was relatively flat compared to the same quarter last year at $71.9 million. Third quarter margins are typically impacted by a slowdown during the holiday season but they improved over last year at 18.1%. We continue to generate cash as our net cash is up $1.7 million from three months ago with net cash net of debt at about $35 million at the end of the quarter. Now David will take you through a more detailed review of our financial results.

Thanks, Denis. Total revenue for the quarter was $71.9 million, up 3% from revenue of $69.8 million recorded in the same quarter last year. The increase came from the Canadian US operations was offset by slowdown in the South and Central American operations. The favorable foreign exchange translation impact for the quarter is estimated at $6 million on revenue with an unfavorable impact on net earnings of less than $1 million when you compared to the effective rate for the same period last year. The overall gross margin percentage for the quarter was 18.1%, up 11.2% from the same period last year. As the Company continues to manage its cost across operations, general and administrative costs were down 3% in the same quarter last year, $11.3 million, despite an increase due to foreign exchange translation estimated at $800,000. The provision for income tax for the quarter was a recovery of $800,000 compared to a recovery of $1.7 million for the same quarter last year. Quarterly earnings were impacted by foreign exchange loss of $1.4 million relating to the devaluation of the Argentina peso following the relaxing of the currency control in that country. The Company recorded a restructuring charge of $1.5 million relating to the decision to close its operations in South Africa and Namibia. All of these combined for a net loss was $15.9 million or $0.20 per share for the quarter, compared to a net loss of $19 million or $0.24 per share for the prior year quarter. In terms of our financial position, we continue to have one of the most solid balance sheets in the industry. During the quarter, our net cash position increased $1.7 million for total net cash position net of debt of $34.8 million. During the quarter, the company spent $4.1 million on capital expenditures adding one drill rig while retiring or disposing a four drill rig. This brings our total rig count to 696. The new breakdown of our fleet utilization is as follows. And again these utilizations rates taken into account the holiday shutdown at several of our projects. There are 341 specialized rigs with 25% utilization, 187 conventional rigs with 10% utilization; 160 underground rigs with 43% utilization for a total rig count of 696 at 25% utilization for the quarter. As we've mentioned before specialized work in our definition is not necessarily conducted with specialized drills. Therefore, we'll also give you the breakdown of revenue by type of work for the quarter. Specialized projects represented 51%; conventional projects 7%; and underground projects 42%. Also for slowdown of the juniors, the senior and intermediate represented 86% of revenue in Q3 while juniors accounted for only 14% of our revenue. In terms of commodities, gold projects represented 45% of our revenue, while copper was at 27% this quarter. With that overview of our financial situation, I’ll now turn the presentation back to Denis to discuss the outlook.

Thanks, David. Our customers continue to work almost exclusively on mine sites, which means they have a much greater focus on production related drilling such as percussive and underground drilling. We’re continuing to adapt to the current conditions by investing in and growing our percussive and underground operations and our mine services. As we started the fourth quarter, there continued to be a number of projects where contracts have not been awarded yet. This has resulted in reduced activity in February, as compared to the same period last year, and is expected to carry through into March. At the same time, the industry is facing more pricing pressure as customers are working to further reduce their costs. We remain disciplined on pricing and focused on cost control, while being mindful that cost control must also be balanced with a continued focus on safety and the need to prepare for the next upturn. While we foresee market conditions continuing for the first half of calendar 2016 and perhaps beyond, we continue our efforts to prepare the Company for better times. As the Company’s financial strength allows it to invest in safety, to maintain its equipment in good condition, and to retain many of its skilled employees, we are strategically positioned to react quickly when the industry begins to recover. The Company’s Board of Directors has decided to suspend the dividend. The Company intends to use these funds to better prepare itself to adequately respond to a future upturn in the mining industry and to emerge as one of the strongest drilling companies. As we go through this challenging period, we continue to focus on cash preservation and cost control. The Company continues to have a variable cost structure whereby most of its direct cost including its field staff goes up or down with contract revenue. Having said all that and despite an economic slowdown, worldwide consumption continues. With the lack of exploration over the last four-five years, most commodities will face a supply gap in some five years, some even sooner. What really drives our business is what the supply demand picture looks like in 5-10 years from now, and you need to start exploring today if you want to address that supply gap in 5-10 years. In the near future, the need to develop resources whether it be gold, copper, zinc will come from areas that are increasingly difficult to access, at which time we expect to see resurgence in demand for specialized drilling. That concludes our formal remarks. And Mary we'll open the call to questions.

[Operator Instructions] : :

There are no questions registered at this time. I'll now like to turn the meeting back over to Mr. Larocque.

Well, thank you, operator. Next week is PDAC, our big mining conference. And we invite you for those that are in town to come and visit us at our booth 3, Suite 30. We'll have people there. If you got any questions about our company, we will be happy to answer. Thank you, everybody. And we'll talk later.

Thank you. The conference has now ended. Please disconnect your line at this time. Thank you for your participation.