M ANAGEMENT ’ S DISCUSSION AND ANALYSIS (continued) 32 Orbit G arant 2012 annual rep O rt Dividend payments Orbit Garant does not expect to pay dividends as it intends to use cash for future growth or debt repayment. In additi on, the Credit Agreement places restrictions on the ability of Orbit Garant to declare or pay dividends. Credit risk The Company provides credit to its customers in the normal course of its operations. The Company has adopted a policy of only dealing with credit-worthy counterparties and obtaining suffcient collateral where appropriate, as a means of mitigating the ris k of fnancial loss from defaults. It carries out, on a continuing basis, credit checks on its customers and maintains provisions for contingent credit losses. Demand for the Company’s drilling services depends upon the level of mineral exploration and development activities conduc ted by mining companies, particularly with respect to gold, nickel and copper. In order to reduce the credit risk, the Company is using insurance coverage from Export Development Canada (“EDC”) on certai n accounts receivable from its customers. The insurance program provides under certain terms and conditions an insurance c overage amount of up to 90% of unpaid accounts. As at June 30, 2012, the amount of the insurance coverage from EDC represents approximately 24% of the accounts receivable (33% in 2011). As at June 30, 2012, 43% (43% as at June 30, 2011) of the trade accounts receivable are aged as current and 1% (2% as at June 30, 2011) of receivables are impaired. Two major customer represents 34% of the trade accounts receivable as at June 30, 2012 (June 30, 2011, one major customer represents 13% and one customer represented 10%). In fscal 2012, one major customer represents 15% of the contract revenue for the year June 30, 2012 ( year ended June 30, 2011 no major customer represented 10%). Credit risk also arises from cash and cash equivalents with banks and fnancial institutions. This risk is limited because the c ounterparties are mainly Canadian banks with high credit ratings. The Company does not enter into derivatives to manage credit risk. Interest rate risk The Company is subject to interest rates risk since a signifcant part of the long-term debt bears interest at variable rates. As at June 30, 2012, the Company has estimated that a one percentage point increase or decrease in interest rates would have c aused a corresponding annual increase or decrease of approximately $0.2 million before income taxes ($0.1 million impact in 2011). Fair value The fair value of cash, accounts receivable, bank overdraft, accounts payable and accrued liabilities, is approximately equal to their carrying values due to their short-term maturity. The fair value of long-term debt approximates its carrying value as it bears interest at variable rates and has fnancing condi tions similar to those currently available to the Company. The fair value on the contingent consideration has been evaluated as of a disc ounted rate value. OUTLOOK Management believes the long-term outlook for the mining industry remains positive. While short term economic conditions may i mpact market conditions from time-to-time, growing global demand for ferrous and nonferrous metals and depleting supplies, will ulti mately result in mineral resource companies being able to access capital to continue exploration drilling activities and replenish reserves . Increased demand for minerals from developing countries, such as Brazil, Russia, India and China, is providing the largest impetus for long-term growth. China now has a signifcant impact on global demand and pricing of ferrous and nonferrous metals. The lack of new mi neral discoveries, shortage of labour and other supply issues affecting traditional markets are all contributing to constraints in s upply. With gold prices currently more than US$1,700 per ounce, and base metals and iron ore prices well above the price lows experienced in late 2008 and early 2009, mining companies are able to exploit a greater number of mineral deposits. Senior and intermediate mining companies generally have healthy balance sheets and access to capital, which will allow the necessary investments to conti nue exploration and production programs. Approximately 74% of Orbit Garant’s revenues are currently derived from senior and intermediate mining companies. Continued global economic uncertainty has made it diffcult for junior exploration companies to access capital in 201 2, which may continue to have a negative impact to Orbit Garant’s utilization rates and gross margins in the near term. Orbit Garant c urrently has 70% of its drilling capacity booked for fscal 2013.