Landdrill International Inc. (LDI-TSX)

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July 17, 2009 Issue

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Good Service And Excellent Performance Keeps Customers And Gives Landdrill International An Edge On The Competition

Company Profile:

Landdrill is a growth oriented international drilling company with a focus on the metals and minerals industry. The Company continues to explore opportunities for growth in key markets, either through establishment of new branch offices or through acquisitions as opportunities arise. The Company now has 31 drills with operations in Canada, Mexico, Russia and Mongolia.

Ronald J. Goguen, Sr. – President & CEO

Mr. Goguen is the founding shareholder of Landdrill International Inc’s predecessor company, and he has been President & CEO of Landdrill since taking them public in March 2006.


Ron purchased his first exploration drilling company, Ideal Drilling, in 1980. In 1981, he added a second exploration drilling company and increased sales and net income significantly. Those companies were combined to become Major Drilling Group International Inc., a publicly traded company that has traded on the TSX since March 1995 (TSX:MDI). Ron served as President and Chief Executive Officer until 2000 and during this time was a key driving force in building Major Drilling into one of the largest mineral drilling service companies in the world (33 operations in 15 countries).


Since leaving Major Drilling in 2000, Ron has served as the President of Royal Oaks Real Estates Inc. and Royal Oaks Golf & Country Club. During 2006 Ron was appointed Chairman of the Board for Beaver Brook Antimony Mine Inc., and he remained so until bringing this operation into production during early 2008. Beaver Brook is the largest antimony mine outside of China. Now that this company is operating, management has been put in place to carry on it’s operation and Ron remains one of its Directors.


Ron is currently a member of the board of directors of Northeast Bancorp (NBN:AMEX) and Saratoga Capital Management. During 1995 Ron was named Atlantic Canada's Entrepreneur of the year as presented by Governor General of Canada.

Metals and Minerals

Landdrill International Inc.
160 MacNaughton Avenue
Moncton NB Canada E1H 3L9
Phone: 506-388-8100

Interview conducted by: Lynn Fosse, Senior Editor,, Published - July 17, 2009

Mr. Goguen:, what was the vision when you founded the company, and where are you today?

Mr. Goguen: “We started in 2004 by purchasing a company in Mongolia. At the same time, we purchased some assets from a company in Canada. We had planned on starting an operation in Canada at the same time as Mongolia. The Mongolia market was much stronger and the Canadian market was a bit softer in pricing. So we decided to send most of the equipment to Mongolia and enlarged that branch and we took that branch and increased sales by quite a bit at that time. Our vision was to get to $100 million in sales by being in strategic centers where there is a lot of mining and drilling activity.”


CEOCFO: Where are you today geographically?

Mr. Goguen: “Today we are in Mongolia, Russia, Mexico and Canada.”


CEOCFO: What are the particular challenges of being in Russia and Mongolia?

Mr. Goguen: “Different countries have different problems. I would say getting set up properly is the difficulty, and doing the market surveys properly. The way that we like to operate is we get set up and offer the same services in those countries that we would in North America. We have drill inventory, drills, and everything is administrated locally.”


CEOCFO: Do you use local people?

Mr. Goguen: “Yes we do. We train drillers. We start off with North American or Australian drillers, but we train the local people. All of the helpers are local and local vehicle operators, the administrative people are local. In most branches we end up at the end of the day that we only have one expatriate.”


CEOCFO: Why choose Landrill?

Mr. Goguen: “We feel that we can offer a superior service, and we have great back-up. We are not always the lowest price going in, but are the lowest price at the end. We finish on time, and on budget, your cost per meter is less with us, because we care and we know that we can do the job properly and on time your cost will be reduced. This is because the clients have a cost that has nothing to do with the drilling cost. Their own employees are there, the renting of trucks, the geologists in the field and core splitters. The drilling is only 60% to 65% of their cost; the other 35% is overhead on their side. So if we can get a job done in three months rather than six months their cost would be reduced by quite a bit. The other reason that they should use Landdrill International is that we can get to the bottom of the hole because of our experience with drillers and our modern equipment. Many clients have complained that other contractors have not been able to get desire depth or target.”


CEOCFO: Do most of your customers realize the difference in quality or is it  a challenge to get them to understand that concept?

Mr. Goguen: “It is a huge challenge to get them to understand. If you are 10% or 8% cheaper, people have a tendency to look at price first. However, once we have a client we have a tendency to be able to maintain them.”


CEOCFO: How do you get new business and convince people that quality counts?

Mr. Goguen: “It is a selling and a marketing job and you have to spend a lot of time doing it. Some companies divide their drilling by using 2 or 3 different contractors, this really give us a chance to compare our quality of work compare to competitors. Many times, we have been able to outperform the other contractors with service, quality and quantity of work ending being the only contractor on the job site.”


CEOCFO: Landdrill describes itself as a forward-looking company, what does that mean to you?

Mr. Goguen: “It means that we are up-to-date with modern equipment, we are open to ideas and new methods of drilling and willing to go anywhere that these companies want to go in tough locations. We can help them design the job and get it done.”


CEOCFO: What is new in the drilling industry?

Mr. Goguen: “There are always new hydraulic machines and new bits, new types of core barrels. There are always new methods coming out. We are focused on really being on top of the mud system, because you can really condition a hole when you use different kinds of muds, which we are experience in using the proper mud.”


CEOCFO: How are you faring in the current economy?
Mr. Goguen: “In our 1st Quarter we were just about even to last year, so we were pleased and our margins were excellent. However, the 2nd Quarter was not quite what we expected. We had many jobs lined up that had been postponed. I would think we are going to have a weak 2nd Quarter, very good 3rd Quarter and an excellent 4th Quarter, because we have been working hard at marketing and are developing new clients that we did not have before. In addition, we are going to be invited to bid on tenders and hoping that we can convince them that even if we are not the lowest going in but we will be lowest coming out. We can give them the service they need. We have been working very hard at marketing and spending the money and the time required all of this year.”


CEOCFO: What is the competitive landscape like?
Mr. Goguen: “Depending on the area and the country it can be very competitive. Certainly, in Canada we have many contractors. The first thing they want to do is cut prices and services and we do not want to lose our reputation, we do not want to cut service. We have to decrease our prices and we have to find ways to do that and ways of maintaining the same service and quality.”


CEOCFO: Give me an example of how you have adapted to the current economics.
Mr. Goguen: “We have done that by changing our methods of paying our drillers, so that they can still make the same money, but we can remove a lot of the risk from it. We are also fighting hard with the suppliers to bring down the prices. We are able to bring down our pricing also, but try to maintain our margin, maybe not quite, but close. We need to reduce the cost of supplies and the cost of labor by being creative.”


CEOCFO: Are there countries or areas where you would like to be active?

Mr. Goguen: “Our intentions for the long-term is to be in Australia; it is a mining country and we want to be in the countries that have a lot of long-term mining.”


CEOCFO: Why should potential investors be interested?
Mr. Goguen: “This stock is underpriced. The price of our stock is below our book, which is not uncommon in this environment. In the long-term, we are going to have a good steady list of clients. Our management and teams out there are improving all the time and we are giving our client better service. I see it by the letters of recommendation that we get and letters not solicited by companies that write to us or email us and say how pleased they are with the service. We had one unsolicited letter from a person 31 years in the business; he said he has never seen service like the one he got from Landdrill. That makes me very happy. When jobs go extremely well that is when your margins are even better. To see a client that is that happy is what we are working for.”

CEOCFO: What might people miss when they are looking at the investment opportunity that they should understand?

Mr. Goguen: “That it takes time for a company to get mature. We only started in 2004 and we will have ups and downs. In this business, there are many ups and downs. I think that if they can see the resource industry, where everybody thinks that gold is going up or will maintain its course and will be very profitable for companies. Metals are all sustained very well in pricing, there are a few undervalued like lead and zinc. The price of copper is coming back and at these prices, I think the mining sector will make money going forward.”


CEOCFO: Final thoughts, what should people remember most about Landdrill?

Mr. Goguen: “Landdrill has a lot of potential going forward and we want long-term growth not short-term growth. If we were going to pick one thing that Landdrill is very strong on besides service, it is that we do have excellent margins and the better service you give, and the more proficient you are at your work, there is less cost to the client and more margins for us.”


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“Landdrill has a lot of potential going forward and we want long-term growth not short-term growth. If we were going to pick one thing that Landdrill is very strong on besides service, it is that we do have excellent margins and the better service you give, and the more proficient you are at your work, there is less cost to the client and more margins for us.” - Ronald Goguen does not purchase or make
recommendation on stocks based on the interviews published.