November 18, 2011 / 10:44 PM / 7 years ago

West African gold rush driving growth for Geodrill

* Increased gold exploration driving demand for drillers

* Co boosting size of drill fleet in bid to meet demand (In U.S. dollars unless noted)

TORONTO, Nov 18 (Reuters) - The current gold rush in West Africa is spurring growing demand for drilling services in the region, said Geodrill Ltd’s (GEO.TO) Chief Executive David Harper on Friday.

The small drilling services company, which listed in Canada barely a year ago, is in the process of dramatically expanding the size of its drill fleet to keep pace with the demand in the region, Harper told Reuters in an interview.

“We currently have 25 rigs and we are expanding to 40 rigs, by the end of next year,” said Harper, who himself was a driller before starting Geodrill with a single rig back in the late 1990s.

Since then, the company has grown to become one of the largest players in West Africa, one of the fastest growing gold producing regions in the world.

Gold mining heavyweights like Newmont (NEM.N), Kinross (K.TO) and Iamgold (IMG.TO) all own major mines in the region and have invested billions of dollars to boost production in countries like Ghana, Mali and Mauritania.

“We are operating predominantly in Ghana and Burkina Faso,” said Harper, adding that the company is looking at re-entering Ivory Coast, after pulling out due to the political instability there.

Harper, who is based in Ghana, said Geodrill’s plans to get back into Ivory Coast were constrained by the fact that it does not have any spare drill rigs to redeploy at this time.

However, despite boasting of profit margins that are well above the industry average, shares of the small driller have been beaten down along with those of its peers, amid the sharp pullback in equity markets.

Shares of the company, which peaked at C$3.80 in February, are down more than 40 percent since then, closing at C$2.09 on Friday. Harper, who himself owns over 40 percent of the company’s stock, is not too worried and intends to stay the course.

Geodrill, which owns a fleet of primarily multipurpose rigs, generates revenues of roughly $3 million annually from each rig, while the industry average is roughly $1 million, said Harper.

The company is able to generate more revenue per rig, largely due to the fact that it owns a maintenance facility that is within a 12-hour drive of most of its drill sites, thus reducing the amount of downtime.

This has helped the company consistently increase revenues over the past three years, despite the 2008-09 downturn.

“I only ever wanted to build a drilling company that was built on a best-in-class model and that’s what we’ve done,” said Harper. “The ultimate litmus test for a company is not how well it does in the good times, but how well it does in a downturn.”

$1=$1.03 Canadian Reporting by Euan Rocha; editing by Rob Wilson

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