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All participants, please stand by, your conference is ready to begin. Good morning, ladies and gentlemen. Welcome to Q2 2019 results webcast and conference call. I would now like to turn the meeting over to Mr. Denis Larocque, President and CEO. Please go ahead, Mr. Larocque.
Good morning, everyone, and welcome to Major Drilling's conference call for the second quarter of fiscal 2019. With me is David Balser, our Chief Financial Officer. You should have all received a copy of our results, which were released yesterday evening. If you haven't, go to our website at majordrilling.com. Before we get started, I'd like to caution you as usual that during this conference call, we'll make forward-looking statements about future events and future financial performance of the company, and these statements are forward-looking in nature and actual events or results may differ materially. The -- for the quarter, demand for our services continued to grow in all of the regions this quarter. Despite the drop in commodity prices that we saw in June and July, most senior companies continued with their original plan as they scramble to replace their mineral reserves. The company's strong operational leverage showed this quarter as we saw revenue grow by 20%. And this, combined with improved margins and flat G&A expenses, this translated into a 71% increase in our EBITDA. The revenue increase was led by our international operations as we saw South and Central American revenue grow by 51%, and our Asian and African revenue was up 25% compared to last year. In Canada - U.S, our revenue grew modestly at 7% as we continued to focus on specialized drilling due to the high level of labor utilization experienced in these operations. Through this strategy though, we have been able to triple Canada - U.S. earnings this quarter as compared to the same period last year. Our net cash position, net of debt, improved by $12.8 million over the last 3 months to end the quarter in a strong position at $14.9 million despite having added 7 rigs that fit both our specialized and diversification strategies. Two of the additional rigs are suited for surface drill and blast and grade control work, while we added 3 others to our computerized underground fleet of rigs. David will take you through a summary of our quarterly results before I come back with the outlook.
Thanks, Denis. Total revenue for the quarter was $105.5 million, up 20% from revenue of $88 million recorded in the same quarter last year. Favorable foreign exchange translation impact for the quarter is estimated at $2 million on revenue while comparing with effective rate for the same period last year, with a negligible impact on net earnings. The overall gross margin percentage for the quarter was 27.4%, up from 24.1% for the same period last year. While pricing continues to improve in all regions, operational efficiencies also helped improve margins. General and administrative costs were flat at $11.2 million when compared to the same quarter last year. General and administrative expenses as a percentage of revenue have decreased to 10.7% of revenue for the current quarter compared to 12.9% for the same period last year. The provision for income tax for the quarter was an expense of $2 million compared to recovery of $100,000 in the same quarter last year. This combined for net earnings of $3.3 million or $0.04 per share for the quarter compared to a net loss of $2.7 million or $0.03 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, net of debt, increased by $12.8 million for a total net cash position of $14.9 million. The company also spent $7 million on capital expenditures, adding 7 new rigs and support equipment to our fleet, while disposing off 9 older, inefficient rigs. The total rig count is now 625. The company also sold a building and other assets for a total of $7 million. The new breakdown for our fleet and utilization is as follows: there's 297 specialized rigs at 38% utilization, 147 conventional rigs at 27% utilization and 180 underground rigs at 45% utilization for a total rig count of 625 rigs at 38% utilization this quarter. As mentioned before, specialized work in our definition is not necessarily conducted with specialized rigs. Therefore, I'll also give you the breakdown of our revenue by type of work for the quarter. Specialized work represented 63% of our revenue; conventional work, 11%; and underground, 26% of our revenue. Also, seniors and intermediates represented 82% of our revenue, while juniors have decreased to 18%. In terms of commodity, gold projects represented 53% of our revenue, while copper was at 22% this quarter. With that overview of our financial position, I'll now turn the presentation back to Denis to discuss the outlook.
Thanks, David. We continue to have discussions with seniors about more drilling as they face reducing reserves. With copper reserves depleting at an accelerated rate and grades declining, many industry experts expect the copper market will face a significant deficit position in the next few years due to the continued production and high grading of mines, combined with the lack of exploration work conducted to replace those reserves. The same dynamic can be seen in most mining commodities, including gold, which -- and we believe that most commodities will face an imbalance between supply and demand as mineral reserves continue to decrease due to the lack of exploration. Therefore, it's expected that at some point in the near future the need to develop resources in areas that are increasingly difficult to access will significantly increase, at which time we expect to see a resurgence in demand for specialized drilling, which continues to be our main focus. As part of our ongoing efforts to prepare for future increases in activity, we are continuing to make investments in innovation directed towards increased productivity, safety and meeting customers' demand. We keep growing our fleet of computerized rigs as well as retrofitting some of our new rigs with computerized consoles. As we need to cater to a new labor force, this falls in line with the enhancement of our recruiting and training systems as we bring in a new generation of employees while strengthening our customer service. The company made the difficult decision to close its operation in Burkina Faso. The Burkina Faso operation contributed only approximately 1% of the company's global revenue this quarter, and we were at a crossroad where we needed to invest significant capital if we were to grow this area. This is at a time when competition in -- is growing in that country, while we see growth opportunities in other region around the world. Preliminary estimates indicate closedown -- cash closedown cost of approximately $1.5 million, with additional noncash expensive of -- expenses of approximately $6.5 million to $7.5 million related to deferred tax assets impairment, VAT receivable write-off and impairment charges relating to property, plant and equipment and inventory. It's important to note that we are now in our third quarter, traditionally the weakest quarter of our fiscal year as mining and exploration companies shut down for extended periods over the holiday season. At this time, most senior and intermediates companies are still working through their budget process and have yet to decide on post-holiday start-up dates. As usual, due to the time it takes to mobilize once new contracts are awarded, a slow pace of start-ups is expected in January and February. Additionally, the company schedules substantial overhaul and maintenance work on its equipment during the slower period. These factors result in reduced revenue, increased cost and reduced margins in the third quarter, as we have experienced in -- and as we have experienced in previous years, we expect to generate a seasonal loss in the upcoming third quarter. This concludes the formal remarks, and we'll now open the call to questions.
[Operator Instructions] Our first question is from Jacques Wortman from Eight Capital.
Two quick questions, Denis. Can you speak even in broad terms to where you see the growth opportunities in the other regions as part of the decision-making process to leave Burkina Faso? I assume it's in the South and Central America, but maybe you can just enlighten us where you see that growth? And the second question is, there's an article on Kitco today that speaks to a 5-year high in mineral exploration in Australia. Could you just remind us of your activity levels in Australia and maybe revenue contribution from that country? I don't know if you're still active there at all.
Yes. Yes, well, in terms of redeployment of equipment coming out of Burkina Faso, you are right. The main part is going to head towards Latin America. And we're seeing growth there. We started from a low base in most countries, and we've been growing and we see additional work coming from those regions. And at the same time, we're not facing the same labor shortage in those countries as we are in North America. So for us, it makes sense to pursue opportunity that we're seeing in those regions. In terms of Australia, we're -- we moved out of Australia, I think, in 2013. So we are completely out of Australia at this point. So -- but we're in Indonesia, Mongolia and Philippines in the Asian region.
And how many rigs do you think there are that will come out of Burkina Faso? What -- of your 625, how many are in Burkina Faso that will be redeployed to Latin America?
We don't -- this is very early, so I don't have numbers at this point. We are -- there might be a few that could be sold locally that we don't feel that necessarily it's worth shipping across because of standardization. We've worked over the last few years. We've come a long way in standardizing at different branches different types of rigs, and we want to try to keep that so there might be some that we're better off selling. So we'll see.
Our following question is from Daryl Young from TD Securities.
So just the first question, margins were fairly strong this quarter and showed some improvement. And I was just wondering if you could break down the split between pricing improvements and operating leverage?
Yes, basically, pricing has improved, and it has improved in North America. Basically, it's just that because of the labor crunch we're facing, we've been kind of selective on contracts in a sense that we've put the bar at a certain point. And if it works, it works. If it doesn't, in terms of pricing if we don't get it, that's okay. But we've kind of raised the bar in terms of return that we were looking for, and we've been able to get our fair share of work. And -- but having said that, we did have -- operationally, we did have a very good quarter. So what you see there, a lot of things went right for us this quarter, both from a weather perspective and also operationally. So it was a strong quarter operationally. The one thing I'll mention and -- in terms of the contracts, we saw a drop in our junior work. And at the same time, the junior financing is drying up, and we're quite happy that we've been able to increase our work with seniors and intermediates, with solid companies that have plans for the future. And at the same time, the juniors that we are still working for are well-financed juniors that also have plans for the future. So we feel we are in a good position going forward.
Okay, perfect. And then will there be any margin improvement going forward from shutting down of the Burkina Faso operations as there are a few million dollars a year in costs there that are going to go away?
Not a whole lot. When you consider it only makes up 1% of the company's revenue this quarter, it's not going to move the needles really when you take that out.
Got you. And then in terms of the pipeline for 2019 and conversations that are happening now, is that something you can provide any sort of color around?
Yes, we're having lots of discussions for 2019, and those are all positive and all points to more work next year. But that is -- hinges on -- the people in the field have plans, but I mean, they need their board to approve budgets. And that's always -- so lots of discussions, lots of plans, but it's always -- 2 years ago, we were in that same position. And all of a sudden, you had the Trump election and then copper and gold took a big drop right in end of November. And then went -- companies went into their budget season and basically put a hole. They didn't cut budgets, but they basically -- they just went flat. So at this point, commodity prices are not bad, and there's nothing -- in fact, there's been a little bit of a pickup over the last couple of days. So we'll see where those budgets goes. But it's really unknown at this point. But again, the sentiment is positive in the field.
Okay, excellent. And then just one final one. In terms of the building sale and the $7 million of proceeds from that, where was that facility? And maybe just reasoning for the sale?
Yes, and by the way, the sale of the building, we sold other assets as well. We sold some rigs. We sold -- so it's not -- we didn't sell the building for $7 million, it was more like between $4 million to $5 million. I don't have the number in front of me. And there wasn't much of a gain on the building. And that building was in [indiscernible]. But we've basically signed -- it was a sale/leaseback. So it was just turning the building into cash for us. And it was a great opportunity, so we felt that it was better spent -- that the cash was better spent on rigs than a building. And like I said, we signed the lease for multiyear.
[Operator Instructions] So we have no further questions registered at this time. I am sorry. We do have a question from Ahmad Shaath from Beacon Securities.
Just maybe a housecleaning item. The outlook you provided for Q3 in terms of your reference of a quarterly loss. Is that on the bottom line or EBITDA perspective?
That's bottom line. Yes.
Thank you. We have no further questions registered at this time. Back to you, Mr. Larocque.
Well, thank you. I'd like to wish Happy Holidays to everybody, our shareholders and our employees out there. Rest up for hopefully what could be a busy 2019. Thank you.
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.