|August 28, 2009|
Energold Announces Second Quarter Results
|Energold Drilling Corp. ("Energold") is pleased to announce its results for the quarter ended June 30, 2009. Drilling revenues for the second quarter were $6,262,099, up 63% from the prior quarter. Energold drilled 37,200 meters in the second quarter, up 82% from 20,490 meters in the first quarter of 2009. The Company incurred a small net loss for the second quarter of $214,840 due to a significant foreign exchange loss of $1.5 million. Energold ended the quarter with an industry leading balance sheet including a working capital position of $50.8 million, cash and cash equivalents of $19.9 million and no debt.|
As expected, the second quarter proved to be a substantial improvement from the first quarter 2009. Due to intermediate base metal and gold mining companies being successful in raising capital, drilling activity has been increasing each month from the beginning of 2009 to present. Exploration for precious metals currently represents the largest portion; however, certain specialty commodities and base metals are also increasing the demand for drilling services.
Lower levels of demand have increased competitive pressures and thus pricing and margins will be lower than in 2008. Energold employs a variable cost structure and thus when revenues decrease so do the majority of the costs. A strategic decision was made not to reduce certain semi variable operating costs that would affect quality of service. However, the combination of improved operating costs and higher meters drilled resulted in an increase in the gross margin to $2.3 million, up 168% from the first quarter. The gross margin percentage also increased to 36.7% in the second quarter compared to 22.3% in the first quarter.
With a modern fleet of drilling rigs and the continued opening up of new operating regions, the seeds have been planted for future growth in five continents. The expansion of value-added services to provide clients full service drilling solutions continued during the quarter, and included developing additional technical ability in underground drilling. Energold took delivery of one new surface rig and two new underground drilling rigs in the first six months of 2009, bringing the total number of rigs to 78. One more underground rig was delivered early in the third quarter. The three underground rigs are similar to the existing surface rigs employing approximately 90% of the same equipment and supplies as the surface rigs. This substantially reduces crew training times and inventory requirements.
Despite the difficult environment, Energold expects to continue generating positive cash flow and improve its working capital in 2009. Energold's strategic goal is to continue to enhance cash reserves to fuel further growth when market conditions improve. While it remains open to exploring suitable acquisitions, Energold's primary focus continues to be on organic growth through new rig development and expansion into new markets.
Energold will be discussing its 2009 Second Quarter Earnings and hosting a question-and-answer period via a conference call on September 1st, at 1:00pm (PT), 4:00pm (ET). The dial-in numbers are 416 340 8018 and 866 223 7781. The webcast (audio only) can be accessed at: http://events.digitalmedia.telus.com/energold/090109/index.php.
Energold Drilling Corp. is an environmentally and socially sensitive diamond drilling company that services the mining industry.
On behalf of the Directors of Energold Drilling Corp.,
"Frederick W. Davidson"
President and Chief Executive Officer
For further information, please contact:
Darrell Rader, Corporate Development
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