A telemetry tool having position and direction sensors, a power supply, a signal receiver and a signal emitter is mounted in a drill string adjacent to a drill bit. A base unit at the surface generates, and transmits into the geological formation, a carrier signal, which may be a DC carrier signal. The geological formation provides a current path between the carrier current generator and the downhole end at which a portion of the carrier current is received by the telemetry tool. The drill string defines a relatively low resistance return signal conductor. The telemetry unit superimposes a time varying signal on the carrier current. The time varying signal includes a recognition sequence, followed by a data string which may include compass direction, azimuth dip, rotational speed, acceleration, and so on. The base unit strips the signal off the carrier current, and reads the code.