Last Updated On: January 1, 2019
Share Price On This Date: $1.42
Offers drilling exploration services to miners in Africa through its fleet of multi-purpose drilling rigs.
Geodrill offers contract drilling services to miners in western Africa. They have been actively trying to diversify their customer base into base metals and potash but most of their business is still with the gold mining industry. They were recovering well from the industry slump of the last few years and appeared to be back in growth mode earlier this year. Then the rug was pulled out from underneath them as Burkina Faso, where they do a large percentage of their business, decided to double its withholding tax rate. These withholding taxes are based on a percentage of revenue and not profit which means that any weakness in operations have an outsized impact on after-tax profitability. This is exactly what transpired in the most recent quarter and it sent the stock price tumbling. I have been attempting to exit this position but am unwilling to simply give the stock away. At the current share price, the company is trading at around 1 times its tangible book value. Management has been guiding to improved results in coming quarters and if they can divert more of their business into lower tax jurisdictions, profitability could improve.