GDLFF agree nobody likes West Africa
I do like what they are doing though. Their operating metrics relative to other players are off the charts good. The SA expansion diversifies both geography and commodity risk. At the same time their move into blast drilling smooths their cycle risk as blast drilling is going to be more business as usual mining rather than exploration focused. They also operate on a model of running new high quality drills versus the typical approach of sending your old used up junk to west africa. The industry bills based on what is actually drilled so they keep their rigs running constantly. They actually built a workshop to manufacture some of their own drilling consumables to reduce/eliminate downtime.
I had an hour long discussion with management a month or so ago. The CEO reminds me a bit of Gene Kostecki from AYSI in a way. He built this business from scratch with a single rig. He's basically a hands on guy who understands his business, but he isn't very corporate. I think he has an unnecessary aversion to debt which isn't great for growth. I'm not saying I would lever up, but a bit of debt to fund equipment makes sense to me for a guy who says he is pushing 100% capacity. They did say they were looking for new rigs, but funding that with cash flow limits them.
Also I think management compensation is a bit richer than I would like, and there are currently political risks in Peru, but I tend to think no matter what they will keep pulling minerals out of the ground as long as they don't go full blown Venezuela. They remain overwhelmingly tied to gold mining, but if you listen to major drilling gold exploration will remain robust with prices in the $1300/ounce range well below current levels. The
I see this quarter as likely in that .06/.07 range. You could squint enough to come up with scenarios of .10/share, but I doubt it. I would be surprised at anything less than .06.
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