Geodrill Limited Q2 2026 Update – GEO.to

Disclosure: I own shares in GEO. I am not a professional. Please do your own due diligence.

Geodrill is a mineral exploration drilling company with leading positions in Ghana and Côte d’Ivoire and additional operations in Senegal, Egypt and Chile. The company operates a large fleet of multi-purpose rigs and provides exploration, delineation, underground and grade-control drilling services to senior mining companies, intermediate producers and junior explorers.

Price: $2.44 CAD / $1.71 USD

MC: ~86.6 million USD (diluted)

EV: ~88.4 million USD

1 year performance: -32.8%

Geodrill reported this morning before market open and held a call. Results were below my expectations, and the stock was down approximately 5-6% at the time of writing.

all numbers in USD unless stated otherwise

• Revenue: $55.1M vs $50.4M (+9.5% YoY)

• Gross Profit: $8.8M vs $11.9M (-26.4% YoY)

• Gross Margin: 16.0% vs 23.7% (-32.8% YoY; -777 bps)

• EBITDA was $7.9M vs $13.9M (-43.0% YoY)

• EBITDA margin was 14.4% vs 27.7% (-48.0% YoY; -1,329 bps)

• Revenue: $103.6M vs $99.1M (+4.5% YoY)

• Gross Profit: $16.0M vs $25.5M (-37.3% YoY)

• Gross Margin: 15.4% vs 25.7% (-40.0% YoY; -1,029 bps)

• EBITDA was $13.8M vs $27.5M (-49.8% YoY)

• EBITDA margin was 13.3% vs 27.8% (-51.9% YoY; -1,442 bps)

West Africa operations: Ghana, Côte d’Ivoire and Senegal

• West Africa margins were pressured by higher wages, inflation, the stronger Ghanaian cedi and a shift toward more core drilling.

• Egypt was profitable in Q2 2026

South America

• Chile / South America revenue: Significantly increased YoY

• Chile / South America gross profit: Significant gross loss in Q2 2026

• Chile / South America cost of sales: Exceeded revenue as drilling productivity was below required levels

• Chile operational factors: Onboarding delays and operational issues reduced acceptable drilling time

Other

• Entity in Saudi Arabia for tendering but was not operational this quarter

• Peru operations: All rigs and supportive equipment previously in Peru have been transferred to Chile

• Total Drill Rig Fleet: 104 rigs including two rented rigs

• Rigs Available for Operation: 98 rigs

• Rigs in Workshop: Two rigs

• Rigs in Transit: One rig

• Rigs Being Manufactured: One rig

• Total capex: $2.8M vs $4.0M (-30.4% YoY)

• YTD capex: $5.8M vs $7.7M (-24.4% YoY)

• Côte d’Ivoire Tax Repayment: Approximately $4.5M of the scheduled $8.4M repayment had been paid through June 30, 2026

• Côte d’Ivoire Monthly Payment: Monthly installments were reduced from approximately $0.9M to $0.45M

• Côte d’Ivoire Subsequent Payments: $0.45M payments were also made in July and August

• Geodrill is still pursuing recovery of the disputed Côte d’Ivoire tax payments.

• Chile

  • Geodrill is reviewing the business client by client and may finish unprofitable contracts without retendering them. This is not a full exit from Chile.

  • The main issue is productivity, not pricing. Geodrill is paid by the meter, so poor drilling productivity leaves the company carrying labour and support costs without enough revenue.

  • Some Chilean accounts are profitable and expected to continue into 2027. The review should take place over the next couple of quarters.

• Contract pricing

  • Some longer-term contracts were signed in a lower-cost environment.

  • As contracts renew, GEO should have a chance to reprice them for today’s higher costs.

• Ex-Chile profitability

  • Geodrill would not provide an ex-Chile gross margin.

  • West Africa and Egypt were profitable and generated all of the company’s positive gross profit in Q2.

• Q3 seasonality

  • The West African wet season typically reduces activity in Q3, with the period also used for maintenance and rig rebuilds.

• Demand

  • No numerical revenue guidance was provided, but gold prices, exploration spending and tendering activity remain strong.

  • Customers continue to commit to multi-rig, multi-year programs.

• Profitability

  • Better productivity in Chile and repricing older contracts are the main paths to improving margins. They said that there are profitable contracts in Chile that will continue to produce.

• Chile

  • Unprofitable work may be allowed to roll off over the next couple of quarters, while profitable accounts are expected to continue into 2027.

• West Africa and MENA

  • Geodrill continues to look for additional work with existing and new customers across West Africa and Egypt.

  • They are still bidding on work in Saudi Arabia but haven’t started operating there.

• Long-term contracts

  • The multi-year contracts give GEO some revenue visibility over the next three to five years.

• Q3

  • The West African wet season will remain a seasonal headwind, while Chile is also affected by winter conditions on some high-altitude programs.

GEO is trading at 4.1x EV/ttm EBITDA. I don’t really have a great handle on what the business could produce going forward, but I’m guessing that GEO could eventually get back above 30 million EBITDA. If that’s the case, GEO is trading under 3x EV/forward EBITDA,

I was not expecting this much weakness from Chile. I was expecting some frictional costs with ramp-up, but it sounds like they have mispriced contracts or incorrectly estimated the cash flow the rigs in Chile could produce. I also had a sliver of hope that we would get some news on the Côte d’Ivoire legal process.

If GEO can get Chile sorted without any other hiccups, then shares may be cheap here. I’m hoping that the lower/no-profit contracts run off and they can redeploy the rigs in a productive way. That might translate into a lower need to expand the rig fleet in the shorter term.

There are lots of things that are hard to get over with GEO. This is a set-up that I have misread from the start. Though I haven’t lost a bunch of money, I have tied up capital that could have been deployed elsewhere.

Currently, there is enough demand to turn the focus on margins. A couple of solid quarters would do wonders for the stock (and investors) in my opinion.

I continue to hold a position.

Thanks for reading my work.

Dean

long GEO.to