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Executives

Jerry Huang - Investor Relations Manager

Steven Gold - Chief Financial Officer

Analysts

Michael Mills - Beacon Securities

Cameron Burmaster - Clarus Securities

Ben Jekic - Industrial Alliance Securities

Peter de Auer - Cluster Asset Management

Shawn Orr - Sterling Capital Management

Neil Forster - Franklin Templeton

Jim Belin - Aldebaran Asset Management

Kam Mangat - Salman Partners

Bill Mason - Value Financial

Energold Drilling Corp. (OTCPK:EGDFF) Q2 2014 Results Earnings Conference Call August 28, 2014 4:30 PM ET

Operator

Good day, ladies and gentlemen. Welcome to the Energold Drilling second quarter 2014 results. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this call is being recorded. It is Thursday, August 28, 2014.

It is now my pleasure to introduce Jerry Huang, who will then pass the call to Steven Gold. Please go ahead, Mr. Huang.

Jerry Huang

Thank you, John, and thank you everyone for joining us today. My name is Jerry Huang, Investor Relations Manager for Energold Drilling Corp.

Before we review our quarter two 2014 financial results, we would like over our disclosure policy. Certain statement in the following conference call regarding Energold Drilling Corp.'s business operations may constitute forward-looking statements. Such statements are not historical facts, but are predictions about the future, which inherently involve risk and uncertainties. These risks and uncertainties could then cause our actual results to differ materially from those contained in the forward-looking statement.

I would like to now turn over to our Chief Financial Officer, Mr. Steven Gold, for a discussion of our financials this quarter.

Steven Gold

Thank you, Jerry. Good afternoon, everyone. During the quarter, the company's business units performed mostly in line with industry fundamentals. Company's revenue for the period was $20.8 million across all segments. This compares to $23.3 million in the same period of last year. Our gross profit margin as a percentage of revenue was 18.7% in the period compared to 13.5% in the same period in 2013. The company had a net loss in the period of $0.08 per share compared to a net loss of $0.03 per share in same period of 2013.

In the Mineral division, the second quarter is usually one of the busiest periods. In the quarter, the company drilled just over 61,000 meters, a 33% decline from the same period last year where we drilled 92,100 meters. The continued depression in the junior financing market is the primary reason for the decline on a year-over-year basis. Average revenue per meter for the second quarter was $159 compared to $176 in the second quarter of 2013.

Competitive pricing pressures continued to exist. Customers continued to seek to maximize exploration budgets and excess capacity continues to put pressure on pricing and as a result, profit margin remains depressed on an overall basis. Notwithstanding, gross margin remains positive as management seeks to maximize its variable cost structure employing rigs in contracts where the margin for error can be managed such that profits are mostly protected in the event of delays or malfunctions.

There are certain areas where we are seeing some improvements, specifically in Central America and the Caribbean region. In South America, we are seeing certain countries with some improvements while the Ebola crisis in West Africa is beginning to have an impact on our results.

On the energy drilling side, the seasonality of the energy business is apparent in the second quarter with reduced activity across the industry. That said, the division performed well in the second quarter, thanks to strong results in United States where the company is working through a multiyear geothermal work program. As well, some oil sands work during the period helped the company achieve significant increase in revenue on a year-over-year basis, inclusive of our new Latin American business while modest revenue in the second quarter 2014 was $8.4 million compared to $2.4 million in second quarter of 2013. While gross profit margin for the second quarter of 2014 was 9.5% compared to negative margin in the second quarter of last year.

Management remains focused on growing the energy business on two fronts. Number one, by creating what we call a second season. With activity levels peaking in Q1, the company is exploring other opportunities to generate revenue in the more typically slowest periods of summer and early fall. The second front is by using our manufacturing business to customize and design drilling equipment to meet the challenges plaguing the industry as clients seek to drill deeper holes in more remote regions.

Moving over to manufacturing sector. Revenues for manufacturing in the second quarter of 2014 was $2.2 million with gross profit margin of almost 32%. This compares to revenue of $4.4 million with a gross margin of 14.5% in the same period of last year. During the first half of 2014, Dando delivered five terriers and 10 D type rigs, one S3.5 and six WaterTec rigs. Revenue for the latter two rigs were accounted for in a percentage of completion basis in 2013. We continue to employ the same process in 2014.

Performance in the first half of the year is typical of seasonal trends across the manufacturing business. Little work is performed during the period as the beginning of the year is typically reserved for participating in the annual tendering process with NGOs and various layers of governments worldwide. Revenue recognition is usually loaded in the latter portion of the year, with the majority of the divisions tendered are in the water well division, while the mineral business remains weak.

Energold ended the quarter with one of the strongest balance sheets in the industry with $18.5 million in cash and $70 million in working capital. The company continues to consider various prudent, yet accretive acquisitions across all business segments, while allocating capital on a case-by-case basis to improve productivity and grow internally as well.

With the financial review complete, I will speak to our outlook on our various divisions. The mineral side, we think will probably remain weak, at least through the middle of 2015. The junior market financing remains tight and there is little consensus that this will return any time soon. Seniors and well-funded intermediates continue to focus on reserve replacement through the drill bit, although their programs are somewhat muted and at times quite cautious. Finally capacity utilization remains weak across the industry. We are looking for an uptick in that to generate higher prices and this could take some time. Again, we are looking at a mid-2015 point for a material uptick in this sector.

On the energy side, higher sustained oil prices continued to generate activity. We expect another busy end of fall and winter period. There is some competition that's going to come into the industry, although the market for our specialty oil sands product remains quite tight, as well there is a growing demand for equipment in new markets such as South America.

On the manufacturing side, as I mentioned, the mineral rig market remains weak although the water rig markets remains robust. The challenge the company is finding at this time is in financing, how do we help our customers and potential customers finance their equipment. Meanwhile, we are maintaining stocked inventories so that we can deliver equipment fast and then engineering group to deliver unique solutions that our clients are willing to pay for.

Operator, that concludes the prepared portion of the call, and we will now take questions from participants.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question today will come from Michael Mills with Beacon Securities. Please go ahead, sir.

Steven Gold

Hi, Michael.

Michael Mills - Beacon Securities

Hi, good afternoon, guys. Just a couple of things here. I guess, first of all, on the mineral side, obviously, saw pretty good sequential improvement in the meters drilled in Q2. Just wondering what we should be looking for in Q3? Obviously you have mentioned some of the business challenges in South America and West Africa, obviously rainy season and now Ebola. Just wondering if we should look for some growth in Q3 or what we saw in Q2 is probably close to what we might see?

Steven Gold

Yes. Typically, Mike, Q3 has historically been a bit better than Q2. You get a few more months, or weeks rather, of drilling. Unfortunately it is getting wet in South America, is the seasonal trend, as I mentioned, and the Ebola virus is starting to create mostly delays in some programs or impacting productivity. I would say probably, we are targeting for flat Q3 over Q2 depending on the outcome of the crisis and the extent to which we can work in certain areas of South America while it's wet, would impact that. But somewhere around that flat mark, we think would be a good target.

Michael Mills - Beacon Securities

Okay, and what was utilization for the mineral rigs in Q2?

Steven Gold

We are tracking somewhere with the industry right now, call it 35% to 45% range for the Specialty Equipment.

Michael Mills - Beacon Securities

Okay, and then just on the energy side of things. You have talked about some of the international success, I guess the early success or positive results from the EESI joint venture. Just wondering what other, I guess irons are in the fire internationally on the energy side? Maybe I am just not aware where else are some of the energy rigs deployed internationally at this point.

Steven Gold

Well, right now, we started in Colombia and we are on one hand or on one front, we are expanding outside Colombia or at least attempting to. The ideology, as far as what we are trying to achieve and what the state oil and gas companies down in South America are trying to achieve are fairly ubiquitous across the platform. What I mean by that is that what we are doing in Colombia can easily be replicated in the neighboring countries. So that's front number one.

East Africa is another region where generally speaking, there is a deficiency and a general demand for Western equipment. We can penetrate that market, although it is extremely expensive to do so. The targets that they are looking for are much deeper. Infrastructure is challenged to the same extent as you are in some parts of South America. So it will be a growing market. I would say, we are focused on South America for the time being and Africa on a case-by-case basis.

Michael Mills - Beacon Securities

And then, I guess, in your MD&A, you talked about, I guess, a bit of a focus on Asian expansion. Is that both in energy and mineral drilling or is that primarily in the mineral drilling side?

Steven Gold

That's primarily in the mineral drilling side. The challenges facing the mineral industry are, they are not immune anywhere. As a matter of fact, South East Asia market, while probably performing better than the rest of the world, that's more of a deficiency of specialized rigs. Some of our competitors we know do quite well there and it's still a market we would love to participate in. The question again and we realize there has been some time that we have been talking about this, is how do we get in there. Do we grow organically? Do we move in with a client? Do we make an acquisitions? So it's really a question of, in our minds, how we get in, rather than when we get in.

Michael Mills - Beacon Securities

Perfect. That's it for me. Thanks.

Steven Gold

Thank you, Mike.

Operator

Your next question will come from Cameron Burmaster with Clarus Securities. Please go ahead.

Cameron Burmaster - Clarus Securities

Hi, guys.

Steven Gold

Hi, Cameron.

Cameron Burmaster - Clarus Securities

So most of my questions were actually answered there, but for Dando, I was wondering if you could give us some numbers in terms of what your bid log looks like and what will be a reasonable figure for contracts awarded to you later in the year?

Steven Gold

Okay. I will deny answering the second question first, because we simply don't know. We should know in the next, as we speak, and over the course of the next, say, month, we would have a better indication of what we can do in the second half of the year.

As far as what we were bidding on, it's in the order $60 million to $70 million of business. The extent to which we win a substantial portion, in our minds the ability to offer creative financing ideas or alternatives for our clients. So the business is there and on a water specific rig side, the business is there and Dando's product is widely known to be not only top-tier but amongst the best historically. So it's really a question of how much of that bid log we win and that's a question of how creative we can be with our potential customers.

Cameron Burmaster - Clarus Securities

Okay. Now I assume there is lot of NGOs that you kind of bidding on work here. Would these be new clients or clients that you have had in the past?

Steven Gold

It's a mix of both NGOs and governments. The governments, it's a different sell, of course. They know the product. They presumably are coming back because they like what they have received so far. The NGOs are a little bit different, not in the sense that we charge a different price, but because again, the funding is an issue and then there is the operation. So as far as an NGO is concerned, what we like to do is not only offer the rig, but also offer the service. So certainly we would be willing to compromise a bit on price, if you will, if we can ensure there is going to be a follow-on business after that. Whereas on the government side, there are times that we can partake in that service after the sale but as far as they are concerned, they are just trying to acquire rigs and typically can have an army or another civil service or military service operating those rigs. So they are quite different clients.

Cameron Burmaster - Clarus Securities

Okay, great. Thanks, Steve.

Steven Gold

Thanks, Cameron.

Operator

Your next question will come from Ben Jekic with Industrial Alliance Securities. Please go ahead.

Steven Gold

Hi, Ben.

Ben Jekic - Industrial Alliance Securities

Hi. I just have one question. If I heard correctly, manufacturing had 32% gross margin?

Steven Gold

Right. Now that's a revenue completion basis. So you would probably get a better indication of that business on an annual basis. So it's historically been somewhere around the 10% to 15% on new product and a little bit higher on the tools. So being a small number in the quarter, I wouldn't read too much into that or have that set a trend.

Ben Jekic - Industrial Alliance Securities

Okay. Thank you.

Steven Gold

Thanks, Ben.

Operator

(Operator Instructions). Your next question will come from Peter de Auer with Cluster Asset Management. Please go ahead.

Steven Gold

Hi, Peter. Good afternoon.

Peter de Auer - Cluster Asset Management

Good afternoon. Quick question for you. As you as you go into new markets, particularly far away ones, how much in the way of minimum size do you actually need to provide profitable synergy in that kind of an environment?

Steven Gold

It depends. In some cases, we can achieve profitability with one rig. In some cases, we will need four or five. There's parts and there's areas in Africa where there is, whether it's bureaucracy or certain staffing levels that we have to meet that because of these higher fixed costs, we do have to have a larger program and there's other areas where you bring in one rig and you can keep a fairly limited staff and you can turn a profit as well. Sorry, it’s not the best answer, but it really depends on which country we are going in to.

Peter de Auer - Cluster Asset Management

[Inaudible] The next one is acquisitions versus actual drilling, as far as companies are concerned, presumably a lot of most logical acquisitions have either been consummated now or looked at carefully enough. Where does the tipping point come between finding good acquisitions in terms of accretive ones and running out of those and beginning to think about going back into drilling?

Steven Gold

Forgive me. I assume you are talking about the producer side, Peter?

Peter de Auer - Cluster Asset Management

Sorry?

Steven Gold

I assume you are talking on the producer side, right? Rather than as far as we are concerned.

Peter de Auer - Cluster Asset Management

That's correct.

Steven Gold

Okay. Well Fred usually highlights the natural trend of the corporate mining world where shareholders demand growth in much better times and the Boards and management teams would go ahead and make acquisitions and pay lofty multiples but paid that’s what the shareholders wanted and then the market turns for worse and everybody gets criticized for doing that. So they go ahead and start exploring through the drill bit again to add reserves because maybe they overpaid for reserves in the past or haven't explored certain targets. I think we are certainly or evidences dictates that we are definitely in an era where reserve replacements will come mostly through the drill bit. But again that's cautious as well because of funding limits or funding limitations, mostly of course for the juniors but the seniors have to make sure that every dollar in the ground gets maximized. So it's our opinion that we are in an exploration driven world for reserve replacement and right now I think, there is also a focus really at the corporate levels of, yes, reserve replacement is important, however they do it. But they also have to focus on, once they have these reserves and want to build the mine, to bring cost and they have done a good job over the last two and half years and maybe they have more to go, but what we are being told is that these programs are not going to stop. They will be more selective and they will take a little bit more time, but the explorations, as far as the seniors and these well-funded intermediates are not going away.

Peter de Auer - Cluster Asset Management

Thanks.

Steven Gold

Thank you, Peter.

Operator

Your next question will come from Shawn Orr with Sterling Capital Management. Please go ahead.

Steven Gold

Hi, Sean.

Shawn Orr - Sterling Capital Management

Hi, guys. Just two quick questions. One of my questions has to do with the shift from the junior guys and into the exploration being done by the intermediates and the larger players. Can you give sort of some color on what kind of gross margins you are seeing on exploration work that would be typically by the juniors, but maybe now being done by the senior guys? I am just wondering if there is maybe some structural gross margin compression perhaps. I am trying to understand that one.

Steven Gold

Yes, that's probably already happened, if you look at the industry in general. And if you take ourselves and probably our six or seven biggest competitors and we are the lion share of the industry altogether, the juniors or let me give you this way, margins in general have been cut by 50% to 75%. So that gives you a better indication. So we have always felt that we love working for the seniors because certainly it's good business and it's obviously more stable business because of their size and obviously their balance sheet and their ability to fund programs. Whereas juniors take a different view and they raise money and they are willing to spend it faster and willing to pay up a little bit more for rigs. So would I say there is margin compression? I would say, it's already happened. In certain contracts, you could do a little better than others and outperform the norm, but the juniors are always more profitable than the seniors.

Shawn Orr - Sterling Capital Management

Okay. Even when they are both, say, doing the same projects, the juniors will obviously have a better gross margin is what you are saying?

Steven Gold

Yes. Now the juniors are much more grassroots as well and it's a very specialized kind of rig. So we can charge for that. The type of rigs that we have, these star rigs that are ideal for drilling on the side of the mountain. Can we drill in the middle of the desert in Nevada? Certainly. But we specialize in drilling in these remote areas where we can charge for that access to these rigs.

Shawn Orr - Sterling Capital Management

Okay, great. And then just --

Jerry Huang

Let me add just a little bit here. It's Jerry here. On the junior side, we have compared some of the best cores we have had in 2009 to 2011 period when obviously the junior markets were a lot healthier. The capital markets were obviously a lot more lenient to the venture capital size of the mining business. We are seeing gross margins anywhere from 35% to 40%, even on consolidated basis. And again, keep in mind, in 2011 we added Dando and Bertram as well in the energy and manufacturing divisions. So gross margins, even after consolidated across-the-board, we are over 36% on a month-to-month or even an annual basis. And compare that to 2014 year-to-date, we are looking at just under 24%. Again that's across-the-board and for the quarter, for the most part we are looking at a fraction of that. So that pretty much gives you an idea there. And on another metric, we are close to over $205 a meter, revenue per meter, compared to what we are seeing right now. So certainly there is margin compression on the upside as a result too.

Shawn Orr - Sterling Capital Management

Okay. Thanks. That's very helpful. Then my one last question is, I am trying to understand what else you guys can do to drive more revenue in South America on the energy side? And well, I was hoping for a little more traction there. I am sure you guys are doing the best you can (inaudible). Can you help me understand the trajectory you are expecting there? And what you guys can do to accelerate that?

Steven Gold

Yes, that's mostly seismic programs rather than conventional drilling. It's an immature market in that sense. We are in a joint venture on purpose because we don't profess to have certain expertise that we would need down there, relationships and it's the kind of business where, yes, it's a couple of million bucks here and there but the opportunities are there but then you run into a funding gap as well. So this isn't to say that hydrocarbon prices don't make exploration or seismic activity economic, but it will take some time to grow it as profitable and as far as we are concerned we are happy to allocate capital to it. Can I give you a number of what this business looks like in two years? No, I can't. But I can tell you that it's probably our most hopeful read or hopeful area to develop that second season that I was talking about.

Shawn Orr - Sterling Capital Management

Okay. That's it for me. Thank you, guys.

Steven Gold

Thanks, Sean.

Operator

Your next question will come from Neil Forster with Franklin Templeton. Please go ahead.

Steven Gold

Hi, Neil.

Neil Forster - Franklin Templeton

Good afternoon, guys. I am just wondering if you could help me understand the net loss in the Bertram division. Gross margins were up 600 basis points year-over-year, but net loss widened by 50% and if we consider rest of the Bertram payments flowing in 2013, then the delta was perhaps even larger there. So if you could help me just explain what's going on there, that would be great.

Steven Gold

Sure. There is two things, Neil. There is an inflated amortization in that division because we had to markup the assets and basically we bought the business on an earnout basis. So it didn't matter even if we would have paid $1 at the beginning, and earned out the rest. We had to write up the assets which paid a higher amortization because the orders stop but it doesn't matter what you are paying now, what are the assets worth. And because we paid for an earnout, we couldn't use an amortization level that was in line with an initial payment, which at the time was just $15 million. So I could talk to you more offline about that but its related to an amortization increase due to a bump up in the value of assets that we did about two years ago.

The second reason is, there is some tax advantages in the way that we fund a subsidiary and without going in to too much detail, there is a higher finance cost in that division but it offsets within the parent. So the best way to measure the performance of that, unfortunately, is not on a net basis, because there is too many items in there that gets offset at the corporate level.

Neil Forster - Franklin Templeton

I see. Okay, and so that will likely continue moving forwards?

Steven Gold

Yes, it will continue definitely.

Neil Forster - Franklin Templeton

Okay. Thanks. It's helpful.

Steven Gold

Thank you, Neil.

Operator

Your next question will come from Jim Belin with Aldebaran Asset Management. Please go ahead.

Steven Gold

Hi, Jim. Good afternoon.

Jim Belin - Aldebaran Asset Management

Just a question. My question involves insider buying of the common stock. I haven't seen any. And I wonder, the valuation of Energold is cheap and I am wondering why officers and directors aren't stepping up to the plate and buying common shares through the open market.

Steven Gold

There was a subscript into the quarter where we raised $13.5 million by way of convertible debenture and the insiders and management and directors took down almost 25% of that. So it's being done but in a different from.

Jim Belin - Aldebaran Asset Management

Well, that is a different form. I mean they are being paid high interest rate on that and I am just kind of surprised why they aren't also interested in the common as well?

Steven Gold

Well, I can't speak for my colleagues or the directors. They have own stock. I suppose they will continue to own stock and I don't any of them would be here if they weren't confident in the in the future of the company. You are welcome to ask them.

Jim Belin - Aldebaran Asset Management

Okay.

Steven Gold

Sorry for that. I don't have any, I guess I can't speak for them.

Jim Belin - Aldebaran Asset Management

Okay. I appreciate the answer but I mean there is a big difference between owning a debenture where you are being paid interest, large amount of interest, while waiting for it to turnaround versus owning the common. There is just the dividend paid.

Steven Gold

I will also say that, and this is again, I am not speaking for my colleagues, but as far as blackout was concerned, management until 48 hours from now, because we are still in blackout, we couldn't purchase shares since the end of Q1 because we are doing the convert anyway. So we have been blocked out since the March quarter.

Jim Belin - Aldebaran Asset Management

Okay, thank you.

Steven Gold

Again I can't speak for my colleagues. I can just simply say that even if anybody wanted to, they couldn't because they are working on this convert.

Jim Belin - Aldebaran Asset Management

That's fine. Thank you very much.

Jerry Huang

And, Jim, we will be happy to speak further in regards to the insider positions. As you know, already the insiders and Fred himself has a fairly large position as well, nearly 5% of the outstanding shares not including the recent convertible debenture.

Jim Belin - Aldebaran Asset Management

All right. Well, thank you very much.

Steven Gold

Okay. You are welcome.

Operator

Your next question will come from Kam Mangat with Salman Partners. Please go ahead.

Steven Gold

Hi, Kam.

Kam Mangat - Salman Partners

Hi. I just wanted to circle back to the energy revenue. There was a nice increase year-over-year this quarter and I know seismic activity in U.S., I guess benefited you and then you have the Latin America. For Q3, I know, it's a seasonally weak quarter for your all sense type of drilling, but just on what's going on in the U.S. and Latin America, should we still expect a nice uptick in revenues?

Steven Gold

I would think, in the U.S., you will see flat because this geothermal work that we are doing is fairly constant. Latin America is, again, it's going to get wet. It's already started to rain there. It would impact Q3 to the extent that we can generate a meaningful revenue in South America. And when you look up north, in Northern Alberta, it's Q3. It will be well activity and it will probably in the quarter, we will start spending money to get ready for the winter. So I wouldn't expect a meaningful quarter revenue wise in Q3. It's our hope that, again, we can create that second season but right now, we are not going to see it in this Q3.

Kam Mangat - Salman Partners

Okay. So that's just more of a mid to long term goal?

Steven Gold

Correct.

Kam Mangat - Salman Partners

To change the seasonality between the quarters.

Steven Gold

We re just -- yes, certainly and add to it. We are sitting with over 100 rigs that -- and again no difference from a utilization percentage across the industry, but we are assuming with over 100 rigs, waiting for the cold and it would be ideal to move them around or have them work someone else doing anything while sitting around and wait for the end of December.

Kam Mangat - Salman Partners

Okay. Great. That's the only question I had. Thanks.

Steven Gold

Thanks, Kam.

Operator

Your next question will come from Bill Mason with Value Financial. Please go ahead.

Steven Gold

Hi, Bill.

Bill Mason - Value Financial

Steve, I was wondering if you could give me an idea of what these lower revenues than the last couple of years, I am trying to get an idea of how much slack there is, let's say, how much money are you having to spend to either keep crews idle or keep rigs ready to go, that kind of thing. In other words, what would it -- if you had -- if we were in an emergency situation at this kind of revenues, could you get to this stage, if you went, okay, we are going to get rid of all these crews, et cetera that we have got idle. Could you get to the stage at these revenues where you could breakeven or make some kind of profit?

Steven Gold

Yes, we can. I would say, the vast majority of our non-fixed costs is labor. So we don't pay to keep crews on when there is no work. And just as an example, at the end, and I am just speaking for the energy division, the program we did was one of our few largest clients ended in the middle of March this year and that's just when we finished the work and rather than keep these folks on end of months or for any reason, they were given notice that the program ends on this day and your termination is effective the next day and we will see you again next winter. So that's on the energy side.

In the mineral side, it's the exact same thing. We are hiring on a case-by-case basis, or a go-by-go basis. We get a contract in a particular area. We go to local community. 90% of people who are on that program are from the local community. We pay them a day rate for work done.

Can we get to a breakeven level? Yes, we can. And again, we are profitable on an operating basis in any event. But it's a question of obviously covering our fixed costs. And at the same time, just by way of example, we have of our 16 oil sands coring rigs, there is two that's undergoing modification as we speak for a program coming up this winter. We do have to pay mechanics for that. We do have to pay welders for that. We do have to pay staff for that.

So while in theory, they are variable, because even if we don't need, we get rid of them, but there are costs that are recurring throughout the year. But on a pure operating basis, we should have a consistent gross profit margin at that level.

Bill Mason - Value Financial

Okay, and then also, you brought up the oil coring and I was wondering, in that area, are you going to be adding any new rigs to the oil coring area?

Steven Gold

No, not right now. We bought two last summer and they are capable and quite deep. There is one rig that's in prototype and if it works for a specific client in a specific thing they want to do, then we would but the program would pay for itself.

Bill Mason - Value Financial

Okay, and then the final question I have got is, as far as, I know there is a couple of rigs that were moved to Asia for the purpose of mineral exploration or I believe that's correct. Has anything occurred yet in regard to those rigs?

Steven Gold

Unfortunately not. We moved in there with the intent to be ready to do something if something came along. It just goes back to what I discussed earlier. We are trying to decide how we get into that region and if one of these options continue to be, then we just grow our way win, then we will have rigs there. But in the meantime, they haven't done anything impactful.

Bill Mason - Value Financial

Okay. Those were my questions. Steve, thank you.

Steven Gold

Thank you, Bill.

Operator

And we have no further questions at this time. I will turn the call back over to management for any closing comments.

Steven Gold

Thank you.

Jerry Huang

Thank you, John. Thank you for your comments, Steve. And thank you everyone for your Q&A period questions. This would concluded the call for Q2 2014 Energold Drilling and for further information, feel free to e-mail us or call us at the office and our website is www.energold.com and we wish everyone a pleasant afternoon, and we look forward to speaking with you next quarter.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for participation. You may now disconnect your lines and have a great day.

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