M ANAGEMENT ’ S DISCUSSION AND ANALYSIS (continued) 28 Orbit G arant 2012 annual rep O rt RISK FACTORS The following are certain factors relating to the Company’s business and the industry within which it operates. The following i nformation is a summary only of certain risk factors and is qualifed in its entirety by reference to, and must be read in conjunction with , the detailed information appearing elsewhere in this report and in the Company’s Annual Information Form dated September 19, 2012. These ris ks and uncertainties are not the only ones relevant to the Company. Additional risks and uncertainties not currently known to the Comp any, or that the Company currently deems immaterial, may also impair the operations of the Company. If any such risks actually occur, the bu siness, fnancial condition, liquidity and results of operations of the Company could be materially adversely affected. Risks related to the business and the industry Cyclical downturns Demand for drilling services and products depends signifcantly on the level of mineral exploration and development activities c onducted by mining companies, which in turn, are driven signifcantly by commodity prices. There is a continued risk that low commodity prices could substantially reduce future exploration and drilling expenditures by mining companies, which in turn, could result in a decli ne in the demand for the drilling services offered by the Company and would materially impact the Company’s revenue, fnancial condition, cas h fows and growth prospects. Sensitivity to general economic conditions The operating and fnancial performance of Orbit Garant is infuenced by a variety of international and country-specifc general economic and business conditions (including infation, interest rates and exchange rates), access to debt and capital markets, as well as , monetary and regulatory policies. Deterioration in domestic or international general economic conditions, including an increase in i nterest rates or a decrease in consumer and business demand, could have a material adverse effect on the fnancial performance and condition, cas h fows and growth prospects of the Company. Reliance on and retention of employees In addition to the availability of capital for equipment, a key limiting factor in the growth of drilling services companies is the supply of qualifed drillers, on whom the Company relies upon to operate its drills. As such, the ability to attract, train and retain hi gh quality drillers is a high priority for all drilling services providers. A failure by the Comp any to retain qualifed drillers or attract and train new qualifed drillers, could have a material adverse effect on the Company’s fnancial performance, fnancial condition, cash fows and growth prospects . In addition, rising rates paid to drillers and helpers will exert pressure on the Company’s proft margins if it is unable to pass on such higher costs to its customers through price increases. Increased cost of sourcing consumables When bidding on an underground drilling contract, the cost of sourcing consumables is a key consideration in decidi ng upon the pricing. Underground drilling contracts are typically for one to two years and expose the Company to an increase in the cost of cons umables and labor during that period of time. A material increase in the cost of labor or consumables during that period could result i n materially higher costs and could materially reduce the Company’s fnancial performance, fnancial condition, cash fows and growth prospects. Leverage and restrictive covenants Orbit Garant entered into the Credit Agreement (“Credit Agreement”) in order to provide it with credit facilities to fund, among other things, working capital and acquisitions. The degree to which Orbit Garant is leveraged could have important consequences incl uding: Orbit Garant’s ability to obtain additional fnancing for working capital, capital expenditures or acquisitions in the future may be limited; a signifcant portion of Orbit Garant’s cash fow from operations may be dedicated to the payment of the principal of and interes t on its indebtedness, thereby reducing funds available for future operations, and certain of Orbit Garant’s borrowings (includi ng borrowings under the Credit Agreement) will be at variable rates of interests, which exposes Orbit Garant to the risk of increased interes t rates which may have an adverse effect on Orbit Garant’s fnancial condition. The Credit Agreement contains numerous restrictive covenants that limit the discretion of Orbit Garant’s Management with respec t to certain business matters. These covenants are anticipated to place signifcant restrictions on, among other things, changes i n ownership and the ability of Orbit Garant to create liens or other encumbrances, to pay dividends or make certain other payments, inves tments, acquisitions, capital expenditures, loans and guarantees and to sell or otherwise dispose of assets and merge with another enti ty. In addition, the Credit Agreement contains fnancial covenants that require Orbit Garant to meet certain fnancial ratios and fnanci al condition tests. A failure to comply with the obligations in the Credit Agreement could result in a default which, if not cured or wai ved, could permit acceleration of the relevant indebtedness. If the indebtedness under the Credit Agreement were to be accelerated, there c an be no assurance that the assets of Orbit Garant would be suffcient to repay in full that indebtedness. In addition, the Credi t Agreement will mature no later than May 27, 2015. There can be no assurance that future borrowings or equity fnancing will be available to Orbit Garant,