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Despite a murky outlook for the mining industry, Boart Longyear CEO Craig Kipp says demand is still huge for drills and bits.Deborah Baic/The Globe and Mail

Craig Kipp's business is booming. As he walks the floor of Boart Longyear Ltd.'s plant in Mississauga, Ont. , he looks upon row after row of steel drill rods that have no time to gether dust before being shipped to customers from Sydney to Santiago.

This year, the Boart factory could hardly be busier. It's the outlook for 2013 that makes Mr. Kipp a bit uneasy, because the mining world is swooning.

"Is the world more nervous than it was a couple of months ago? Yes," said Mr. Kipp, the chief executive officer of the South Jordan, Utah-based company. "I'm more nervous.You wouldn't be breathing in this environment without being a little concerned about what's going on in Europe, in China and so on."

But despite a murky outlook for his industry, Mr. Kipp is far from gloomy, energized by customers that include most of the world's largest miners, which have not let up on drilling.

Every drill and drill bit pushed through the Boart Longyear plant in Southern Ontario has been spoken for, as have those it makes in seven factories around the world to supply companies from Ghana to Guatemala, Tucson to Tierra del Fuego.

That defies a commodity market slowdown that seems to deepen with each new signal that China's growth charge has slowed or that the U.S. economy can't seem to stop spinning its wheels, or that Europe is flirting again with economic mayhem.

"We haven't seen it impact our demand," said Mr. Kipp, who has run the company since 2008 and helped reshape and streamline the production line so it can react to changes in the commodities cycle. "So we are still fairly bullish on the world."

Boart Longyear sells 80 per cent of its drills and services to the world's top 20 mining firms while the remainder goes to junior miners.

Other large drilling companies are equally, albeit cautiously, optimistic, even though risk-averse investors have punished their stocks, just as they have with the pure-play mining companies.

Shares in Boart Longyear are off about 30 per cent from this year's peaks, with most of the losses occurring since early March, when the prices of gold, copper and other metals began a slow retreat from near-record levels.

Shares in Major Drilling Group International Inc., a Canadian company and Boart's next biggest rival, are off by about the same amount and Geodrill Ltd., a smaller driller that focuses on West Africa, has seen its stock cut by 40 per cent in the same period.

Those numbers are telling because drilling company stock is a bellwether of the mining industry in general, tied nearly as closely to the prices of metals as the miners themselves. The prices of gold and copper – which have oscillated with tumultuous financial markets – are especially closely monitored because they account for more than 50 per cent of exploration spending.

Copper prices were trading near seven-week highs on Wednesday, rebounding from a slump that saw them fall 17 per cent from early April. Gold prices have also recovered somewhat after witnessing some of their biggest routs since December in June. Other metals prices tell similar stories.

Drillers don't deny that parts of the industry are under duress, pointing especially at juniors that have cut back on exploration over the past year as investors abandoned the smaller companies that seem to burn cash as they search for new, or greenfield, discoveries.

"Juniors live and die by the financing sword, that's just how it works," said Michael Mills, an analyst with Beacon Securities in Toronto.

But as juniors cut back, Mr. Mills and others contend, big miners have picked up the slack, accelerating exploration to extend the life of existing mines instead of developing new ones or acquiring other companies at considerably greater costs.

By contrast, in the 2008-09 global economic crisis, exploration spending was slashed across the board amid gold prices that were about half as high as they are today.

"That is a key differentiator between now and then, and I think it certainly explains why we are continuing to see budgets maintained by the intermediate and senior producers," Mr. Mills said.

Leading the pack is Barrick Gold Corp., the world's largest gold miner, which tripled annual exploration spending since 2009, to nearly $500-million from $150-million, as it searched for more gold around existing mines.

Big miners have more wiggle room than juniors because they are well-financed, having built up capital reserves after the last economic crisis.

"We're still busy, but mindful," says Dave Harper, the president and chief executive officer of Geodrill, the West Africa-focused driller that is listed in Toronto and started operations in 1998 with one drill and one contract and aims to have 40 rigs by the end of this year.

Like larger competitor Boart Longyear, Geodrill is counting on West Africa, particularly Ghana, to continue to drive exploration growth, particularly as it applies to gold. Mr. Harper projects rig growth of 30 per cent a year will continue and has even hired a new corporate development officer to help manage new business.

"We're sleeping with one eye open, but we've still got a $1,600-an-ounce gold price," he said in a recent interview in Toronto.

More clarity will likely come for drillers in the fall, when miners set exploration budgets for next year.

"They determine their exploration budget for next year and then they come and talk to us and say, 'Here's what we'd like to do; are you available? Let's talk about availability of rigs, pricing,' " said 56-year-old Mr. Kipp, a jogger who spends about half his life on the road and the other half in Park City, Utah, with his wife and son.

He plans to continue adding to Boart Longyear's 1,200-rig count through organic growth rather than through takeovers, with a focus on West Africa, and on South America, where Chile and Peru lead booming exploration for copper.

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