March 4, 2013 / 3:18 PM / 5 years ago

PDAC-Major Drilling posts loss as miners rush to cut costs

* Major Drilling sees volatility affecting revenue

* Miners delay exploration due to financing crunch

* Major Drilling is world’s No. 2 exploration driller

* Gold miner Iamgold outlines plans to cut costs

By Euan Rocha

TORONTO, March 4 (Reuters) - Major Drilling Group International Inc reported a quarterly net loss on Monday, as the financing crunch in the mining sector pushed metal and mineral exploration companies to cut back and delay drill programs.

Shares of the Moncton, New Brunswick-based company dropped after the results. It also warned that volatility in the mining sector would significantly affect revenue in the current quarter.

“In a number of jurisdictions uncertainty as to the policies of host governments or issues of land tenure are adding to the uncertainties,” said Major Drilling Chief Executive Francis McGuire. “These factors, combined with the fact that sources of funding for junior mining companies remain limited, has led to pricing pressures in certain regions.”

Major Drilling, the world’s second largest metal and mineral exploration drilling company behind Boart Longyear Ltd, said it was too early to assess its outlook beyond the fourth quarter.

The company reported a loss of C$4.3 million, or 5 Canadian cents a share, in the fiscal third quarter ended Jan. 31. That compared with a profit of C$9.6 million, or 12 Canadian cents a share, a year earlier.

Quarterly revenue fell 32 percent to C$123.2 million.

The results came close on the heels of a study by SNL Metals Economics Group, which warned that the three-year surge in exploration spending in the mining industry is likely to come to a grinding halt this year.

The study released Sunday at the opening of the Prospectors and Developers Association of Canada (PDAC) convention, the industry’s largest annual gathering, cautioned the sharp falloff in financing for miners with early-stage exploration projects would crimp spending to find and outline new mineral deposits. Spending rose to a record $21.5 billion in 2012.

Major Drilling’s stock was down 36 Canadian cents at C$8.40 in trading Monday morning on the Toronto Stock Exchange.

Metal and mineral explorers, which depend heavily on equity financing to raise capital to fund drilling programs, flock to PDAC’s Toronto event each year in search of willing investors to fund the programs.

Investors have panicked this year, leading many to shun the sector, due to stagnant metal prices coupled with many multibillion dollar asset writedowns by some of the world’s largest precious and base metal miners.

And it is not just the juniors, but also the intermediate- and large-cap miners that are looking to cut costs, as CEOs of many of the world’s top miners have faced the ax in recent months in the face of spiraling costs and the writedowns.

Gold miner Iamgold Corp said Monday it aimed to reinforce its financial position and improve its return on capital, by cutting annualized spending by $100 million.

The company said this will be achieved through reducing mine operating costs, exploration expenditures and mine site and administrative costs.

“Our recent share price performance is unacceptable. We are determined to intensify our return on capital and improve our operating performance,” Iamgold CEO Steve Letwin said in a statement. “Our assault on costs will continue until we have exhausted all possible opportunities to reduce spending.”

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