Think of mining moguls, and the mind conjures up images of rugged geologists or financial hotshots from Toronto and Vancouver. You don’t think of Francis McGuire, the gregarious onetime theatre student and ex-provincial deputy minister who runs a global mine-drilling operation out of Moncton. His company, Major Drilling Group International Inc. , is on a growth kick. With annual revenue of about $700-million, publicly traded Major seeks to dominate the international market for tough drilling jobs – on mountaintops, in frigid weather, and wherever things get dicey.
You say your drilling business is not understood, even by mining company clients. How?
People don’t realize how the cyclicality of this industry affects things such as the labour force. In 2008, we had our best year ever – we had 4,400 employees in November, but in three months we had lost 65 per cent of our business and were down to 2,000 people. We have a very itinerant work force and people who might have got eight months of work in a year were looking at just four months.
This is a really skills-intensive business, and it takes three to five years to train somebody. And yet people don’t value the driller as a very skilled blue-collar person. And now [finding experienced people]is a challenge as we’ve been ramping up again - we’re up to 5,400 people including a recent acquisition in the Ontario-Quebec market.
So is this business that much different than, say, oil drilling?
There is virtually no transfer of people between our industry and the oil patch. Part of it is the different technology, but it is also the culture. Guys out of the army are perfect for the oil patch – you get on a drilling crew, which is eight to 12 guys with a sergeant-major-type who tells you what to do, and you don’t ask.
But our guys are farmers and do you ever try to tell a farmer what to do? That’s why mining companies don’t own drilling companies. They can’t deal with the labour force, which is very independent – rough, tough blue-collar guys but highly skilled.
The clients all want experienced drillers but I ask ‘How do you get experienced drillers if you guys suddenly make a decision [to cut back]and, in 90 days, 65 per cent of our people have to be sent home?’ We keep hearing that in the next downturn things will be different, but they will still send us home with just one day’s notice. That’s the industry standard. It’s a pretty rough world.
How did Major Drilling end up in Moncton?
It started in Bathurst, N.B., in the days when Noranda had one of the biggest zinc mines there. The ownership [of the drilling company]changed, and the head office moved to Moncton.
It is an excellent example of how you can be a global player anywhere. I get frustrated when I hear Maritimers say, ‘Our market’s small.’ What do you mean your market’s small? You’ve got the whole world. Or they complain about capital and I ask, ‘Why do you think capital will come to you? Why don’t you just go to Toronto where the money is?’ It’s taking people out of their comfort zone.
What was it like moving from government to the boardroom?
The political experience [as a New Brunswick deputy minister]helped. I came to Major Drilling in 2000 when the company was going bankrupt. One of the reasons I came in was there was a lot of turmoil on the board. The chairman was [my former boss]Frank McKenna, who said, ‘Francis, you dealt with a cabinet for 20 years – you can deal with our board. We need you to shape this.’ And as deputy minister, bailouts might come 10 a week, so maybe it took someone with my background.
Didn’t you study theatre and poetry once?
It drives the guys at the stock exchange nuts when I say, ‘The stock exchange is all theatre and poetry.’ It’s communication. In going public, the first thing you need is a story and if you don’t have a story, don’t go.
When I joined in 2000, we were a very conventional driller, and 80 per cent of our drills weren’t at work because of the downturn. But I kept getting these capital-spending requests from our managers in different places, saying ‘If I could get this machine which nobody else has, I could get this drilling job.”
So we asked why this was happening. The fact was that most near-surface mines were developed in the 1980s when they introduced aerial-survey technology. But as those mines get old, people have to look at harder-to-access areas.
That solved our differentiation problem. We coined this term ‘specialized drilling.’ It’s a bunch of things, such as high altitude drilling in the Andes, Arctic drilling in Canada, deep-hole drilling anywhere. We pick these areas with barriers to entry so we don’t have to compete against the moms and pops. That became our story.
How do you approach that market globally?
You dominate or you die. I don’t want anybody to get bigger than us in our market. Specialized drilling is probably only 10 per cent of the drilling, but we’ve got 80 per cent of that. So when it becomes 15 to 20 per cent of activity, I still want 80 per cent of it. Capital spending and acquisitions are driven by two things – we look to acquire any specialized driller anywhere, or sometimes we buy a conventional company to get a foothold in a market. We just bought a company in Mozambique for that reason.
And we recently acquired the Bradley Group in Rouyn-Noranda, Que., which does 40 to 45 per cent of its work in specialized drilling, but they are second-biggest in Canada after us.
How do you find takeover targets?
I call myself the grim reaper. I look for divorce, sickness, retirements, family feuds. Every single firm we want to buy out there – we have a list, we know them all – is family-owned, so there has to be a transition of some kind in the family. All those guys know if you phone up Major, we’ll be there.
With this economic uncertainty, are you worried?
Petrified – and yet business has never been so good. A couple of my directors are mining executives and they say it is all about reserves dropping. And nobody cares about the price next year, but everybody is thinking about prices in 2018-2020. All their projects are two years behind and they all have to catch up.
What they really care about is Asia, which is the only thing that counts in commodity markets. They really don’t care if China is growing at 10 per cent or 3 per cent, as long as it’s not minus 5 per cent. After all, China is now operating on an economic base that was 70 per cent smaller five years ago.
Knowing the demographics in Asia, mining companies are looking out five or six years. It will take all that time to get that ore out of the ground. So I totally understand in my head why my customers are doing what they are doing. But, in my gut, I’m scared to death, as I read every day about what the Americans or Europeans are doing or not doing.
FRANCIS McGUIRE, 60
President and CEO, Major Drilling Group, Moncton
Born in Halifax
Education: Masters in international studies, trade and economics, Johns Hopkins University; diploma in European politics, Institut d'études politiques, Paris; BA, Dalhousie.
- In mid-1980s, joined Frank McKenna, then leader of the opposition in N.B., later premier from 1987-1997. Held senior N.B. jobs, including deputy minister of intergovernmental relations and economic development.
- 1998-2000: Vice-president of MITI Information Technology Inc.
- 2000: hired to run Major Drilling.