Major Drilling’s Record Quarter: The Junior Turn Finally Arrives

Revenue hits $277M and juniors double their revenue share to 15% — a sign that the mining exploration cycle is broadening beyond seniors.

MDI.TO · Earnings Call · 2026-09-03

A Record Start with a Shifting Mix

Major Drilling Group International Inc. (MDI.TO) opened fiscal 2027 with a bang: revenue of $277.3 million, up 22% year over year, setting a new quarterly record. “We had a strong start to our new fiscal year with quarterly revenue of $277.3 million, representing a 22% increase over the prior year period and setting a new quarterly record for the company.” — Denis Larocque, President and CEO · 2026-09-03 But the more significant development is where the growth is coming from. While seniors still provide the bulk of activity, juniors are becoming increasingly impactful, growing to 15% of revenue from 8% a year ago. As CFO Ian Ross noted, “Following the acceleration of junior financing activity over the last year, this segment grew to represent 15% of revenue in the quarter compared to 13% in the prior quarter and 8% in the same period last year.” — Ian Ross, CFO · 2026-09-03 This is a long-awaited shift. For years, management has highlighted that junior exploration spending lags financing by several quarters. The surge in junior financing activity that began in late 2025 is finally showing up in drilling revenue. Denis Larocque, CEO, had flagged in the prior call that they were positioning for this: “This time around, we didn't run that chance. We held on to people during the Christmas break. And also, we also ramped up ahead of... even as we entered the third quarter in November, we ramped up our efforts on training because we were anticipating 2026 to be busier.” — Denis Larocque, President and Chief Executive Officer · 2026-02-26 That preparation is now paying off with new contract wins and addition of rigs across North America, South America, and Australia.

Operational Leverage and Margin Squeeze

The headline numbers are impressive—EBITDA rose 16% to $37.2 million and net earnings jumped 44% to $14.5 million, demonstrating strong operating leverage. Yet the gross margin (excluding depreciation) slipped to 24.0% from 25.2% a year ago. Management attributes this to ramp-up costs, higher labor and consumable costs, and investments in workforce training. The quarter’s gross margin actually improved sequentially from 22% in the prior quarter, reflecting “ongoing pricing improvements... partially offset by ramp-up costs associated with new contracts as well as higher labor and consumable costs and investments in workforce training and development.” — Denis Larocque, President and CEO · 2026-09-03 The margin trajectory is a deliberate trade-off. In the December 2025 call, Larocque explained why they avoid locking in long-term contracts: “We're trying to avoid is to lock ourselves up in long-term contracts because at this point, it's a labor cost is highly unpredictable...” — Denis Larocque · 2025-12-10 Instead, they prefer to price jobs dynamically as the cycle tightens. That strategy is now bearing fruit, as price increases are beginning to offset cost pressures. Management expects margins to continue improving, albeit at a slower pace than revenue growth. This is a classic cyclical pattern: revenue leads, margins follow.

Commodity Tailwinds and the Copper Story

The demand backdrop is exceptionally favorable. Gold remains strong at 46% of revenue, while copper—which hit an all-time high—accounts for another 28%. Iron ore adds diversification at 9%. In his outlook, Larocque was exuberant:

Gold is holding up, which keeps senior budgets and junior financing going. Copper just hit an all-time high, and everyone is talking about critical minerals.
Denis Larocque, President and CEO · 2026-09-03

This isn’t a new theme—he’s been bullish on copper for years—but the fact that copper has now reached record prices and is a topic of mainstream conversation validates the thesis. Activity levels at copper mines are expected to grow as the company moves through the year. Moreover, the global critical minerals narrative is expanding the addressable market beyond gold and copper. While these metals dominate, MDI is well-positioned to benefit from any increase in exploration for battery metals, uranium, and other strategic minerals. The company’s global footprint and specialized drilling capabilities make it a preferred partner for these increasingly complex projects.

Balance Sheet Strength and a Clear Path Forward

Even with record revenue, the company ended the quarter with $15.7 million in net cash, down from $20.6 million sequentially due to temporary working capital needs from higher rig utilization. Still, with ~$160 million in total available liquidity and strong projected cash flow, the balance sheet remains a competitive advantage. Management continues to invest in fleet modernization, spending $13.5 million in CapEx, adding 5 new rigs and retiring 10 older ones. The consolidation of fleet utilization reporting into surface and underground categories reflects how the business is viewed internally—a sign of maturity. As the cycle gains momentum, the primary constraint is labor availability. MDI has been proactively expanding its training pipeline and retaining crews through seasonal slowdowns. That investment in human capital is a key differentiator in an industry where experienced drillers are in short supply. With a record backlog of work, a rising junior contribution, and strong commodity prices, Major Drilling appears poised to translate this operating leverage into sustained earnings growth. The stock may have lagged in recent months, but the underlying fundamentals are clearly inflecting upward.