Moncton’s Major Drilling Well-Positioned For Electric Vehicle Boom, CEO Says
MONCTON – Copper could make up more than 25 percent of what Major Drilling Group International Inc. (TSE: MDI) usually drills for, as a move towards a greener economy means more electric vehicles that need almost four times more copper than gasoline-powered cars, says the CEO of the Moncton-headquartered provider of specialized drilling services for mining and mineral exploration companies.
“There is a lot of push for the green economy, and that’s going to need a lot of copper [for] all the electric cars, everything that has a battery, electric buses,” said Denis Larocque in a recent interview with Huddle. “We see ourselves very well-positioned to take advantage of that.”
A fully electric car has around 80 kg of copper in it, compared to 40 kg for a hybrid car and 20 kg for an average gasoline-powered car. That’s aside from the copper that would be needed in the charging stations.
Major Drilling also drills for lithium, cobalt and other metals that go into batteries needed for electric vehicles, though 50 percent of its work still comes from gold.
“By default, the copper, nickel, lithium – we’re going to have to do a lot more. We’re prepared for that,” Larocque said. “There’s no difference between the way we drill a gold deposit versus a copper deposit. So we’re prepared for growth.”
It remains to be seen how quickly electric vehicles will be adopted in the market. The International Energy Alliance predicted in 2020 that the global electric vehicle stock would grow from a few million today to between 140 million and 245 million by 2030, depending on which international environmental standard countries follow.
Many countries are also investing in infrastructure that includes electric transportation, Larocque noted.
“So we feel that probably later in this year, in 2021, copper is probably going to be adding to this equation. I mean, it remains to be seen, but certainly, the signs are pointing towards that,” he said.
Major Drilling is a public company listed on the Toronto Stock Exchange. Established in 1980, it has field operations in Canada, U.S., Mexico, South America, Asia, Africa and Europe. On Monday, the company’s market cap stood at more than $581-million with a share price of $7.21 at opening. It’s risen steadily since dipping under $2.50 at the beginning of the pandemic.
Overall, company revenues are on the way up. Major Drilling posted $114.2-million in revenue for its second quarter of fiscal year 2021, a 28 percent increase from the previous quarter, thanks to increasing gold drilling activity.
While the quarterly revenue growth is encouraging, the year-on-year result is still down by about six percent from $121.2-million in the same period last year. It posted net earnings of $7-million, slightly down from $7.3-million a year ago.
“If it wasn’t for Covid, we’d be much higher than that, because when we started the year, it was lining up to be a busy year. But then Covid hit, and then we saw a big drop in activity,” Larocque said. “So by our second quarter, we were still climbing out of that, but making our way back.”
Covid-19 also continues to impact operations in some regions, with staff travels to drilling sites restricted. Major Drilling has more than 3,000 employees globally, 800 of them in Canada. Forty-five are working out of the headquarters in Moncton.
But Larocque is optimistic things are going in the right direction as metal prices strengthen.
“Activity kept increasing as the months went by and Covid restrictions were starting to ease. That’s a big part of the increase versus our first quarter, for sure,” he said. “But at the same time, what happened is the gold price took a big jump in the late summer and fall, which basically brought on a lot of financings for junior mining companies.”
It usually takes about four to six months for that money to trickle down to companies in the field, Larocque said. But Q2 was the beginning of that, an encouraging sign of an upcycle, he added. Copper prices also went up by over 50 percent in the last eight months, as countries begin their infrastructure plans.
“What we’re seeing is the gold price has picked up recently, which is going to cause the senior gold companies to increase their budgets. So in 2021, we’ve already seen a lot of signs of them doing more work. And then the juniors were able to get their projects financed. We’re going to see that, for the most part, come through in 2021,” he said.
The drilling work is mostly elsewhere (only two of its 600 rigs are operating in the Maritimes), but Major Drilling remains headquartered in Moncton.
“The company grew from here historically, and we’ve developed a lot of expertise for different company positions to the point where we have a lot of people in our office that can tell you how to operate in Ecuador, and in Colombia, and in Mongolia,” he said.
Larocque added that it hasn’t been hard to recruit talent here either.
“If we were in Toronto, we’d be a very small fish in a big pond. Here we’re a big fish, and so we’re able to attract very good talent,” he said.
Now, Larocque and the team are gearing up for a much busier time ahead.
“We’re preparing rigs. We are training people, and taking steps to hire more people and train more people,” he said. “Retention is is key for us, so we’re working at that as well.”
Inda Intiar is a reporter for Huddle. Send her story suggestions: [email protected]