28 OCTOBER 2016

Company Announcements Office Australian Stock Exchange Limited Level 4

20 Bridge Street

Sydney NSW 2000

Dear Sir,

Attached is a copy of the Chairman's Address to be delivered to shareholders of Ausdrill Limited at the Annual General Meeting of the Company to be held today.

Yours faithfully

DOMENIC SANTINI

Company Secretary

01 CHAIRMAN'S ADDRESS - 2016 AGM

Ladies and Gentlemen

I am pleased to report that the 12 months since the Company's last Annual General Meeting has been a period of significant turnaround for the business.

Ausdrill has returned to profitability, with all our major operational divisions improving their performance. The profit from operations of $20.2 million was augmented by the capital profit made on the sale of Drilling Tools Australia (DTA). The result is a great credit to our Managing Director, Ron Sayers, our two Chief Operating Officers, Andrew Broad in Australia and John Kavanagh in Africa, and our CFO, Theresa Mlikota.

We have focused our energies on getting back to what we do best - providing a range of specialised services and equipment to the mining industry.

The Company has successfully adapted to what is a very challenging environment. The board and management have taken some tough decisions and as a result, Ausdrill is now in the best shape it has been for some time.

Having said that, the environment in which we work remains very competitive and there continues to be pressure on margins both in Australia and Africa. Our board and executive team has set a clear direction for our business focusing on our core operations.

The Company has embarked upon a series of initiatives to rationalise our asset portfolio, reduce costs and to strengthen the balance sheet.

Over the past year, we have taken steps to rationalise our loss making businesses. DT HiLoad (our truck tray manufacturing business) and the Miners Rest Motel in Kalgoorlie have been sold and EDA (our oil and gas drilling business) has been mothballed. While these businesses performed well at times in the past, they have each been hit hard by the downturn.

We further rationalised our asset portfolio with the sale of the DTA drilling consumables manufacturing business which, in past years, had delivered good profits to Shareholders. The proceeds from this transaction delivered significant balance sheet enhancement and delivered excellent value for shareholders. Importantly, the sale triggered a more sensible valuation of our shares.

Looking to each of our business segments:

Our drilling services business in Australia led by Roy Coates, reported an increased profit in the face of subdued market conditions. Major cost-out initiatives and the rationalisation of workshop, warehouse and transportation services within this segment drove this improvement.

Whilst we have won new work in exploration and drill and blast, we expect margins to remain under pressure in the year ahead. Waterwell activities are expected to remain subdued in the near term, whilst expected increases in exploration activity are unlikely to provide margin relief due to excess capacity in the market. The Telfer project continues to operate at a loss, which we are working to resolve with our client and we hope to resolve this before the end of the calendar year.

Our Equipment, Services and Supplies segment is led by Donald James. As previously reported, the BTP Group has been seriously affected by the downturn. The BTP Group is one of Australia's largest non-OEM suppliers of heavy earthmoving solutions to the mining and construction industries. The BTP Group offers a full suite of services, parts, reconditioned and service exchange for major components, rebuilds through to heavy equipment rental. Having operated at a loss for some time, Donald and his team undertook a significant cost-out and restructure programme, which saw the revenues of this business stabilise and an overall return to profitability. Congratulations to Donald and his team on a job well done.

Looking forward, the BTP Group has diversified into Africa, an area where it sees significant growth opportunities. Over recent months it has sent a fleet of trucks and other equipment to AMS for use in Ghana and in Senegal. It also expects to experience growth driven by an expected uptick in rebuild maintenance and major component change-out activities by both mine owner-operators and contractors.

Our African mining services business, AMS, provides a full suite of contract mining services. In the year under review, AMS was working in Ghana, Mali, Burkina Faso and Guinea, with possible future works in Ethiopia.

This part of our business continues to grow and we have enjoyed a good strike rate in winning work, including incremental works for our client Perseus with the Esuajah North contract and more recently, the award of the Toro Gold contract in Senegal. The outlook for Africa continues to be very positive with a number of tenders and budget price submissions still in the pipeline. We expect to win significantly more work in Africa.

AUMS, our 50% joint venture with Barminco, works in Ghana, Mali, Burkina Faso and Tanzania. Although revenue dropped because of completion of our work at the Gara project, the profit before tax increased because of a focus on costs and an increase in the value of its shares in Roxgold, which the joint venture acquired to assist our client in its start up. We expect an ongoing solid contribution from this business in the year ahead.

MinAnalytical, which has for some time operated at a loss, started to experience revenue growth and has more recently delivered a small profit in the period under review. Not surprisingly, there is growth in the gold sector, which we expect will materialise as additional revenue for Minanalytical in the coming year. To bring our business closer to our customer base, MinAnalytical relocated assets from Africa and opened a sample preparation facility in Kalgoorlie in October. We are confident this will accelerate revenue growth to ensure this business can deliver a level of return commensurate with the investment we have made in it.

Although it seems counter intuitive, given the downturn, Ausdrill is in the best shape it has been for some time. The rationalisation of our asset portfolio, our cost reduction programme and our focus on improving the condition of our balance sheet have contributed to our return to profitability and an uplift in our share price.

The Company's balance sheet is strong following our asset portfolio rationalisation, led by our CFO Theresa Mlikota. At balance date we held $181.9 million in cash with a further injection of $19.9 million due in December 2016 from the sale of DTA. In the last three years we have repaid a net $220 million in debt, bringing our gearing down to 26.3% at 30 June with further reduction by year end.

We have a revolving bank facility of $125 million with $123.9 million undrawn. Our unsecured notes are not due until 2019. All of this positions the company well to pursue growth opportunities and to further pay down debt together with an expected return to dividend payments.

Turning our mind to Safety and People:

Ausdrill has a strong commitment to the health and safety of its employees. I am therefore very pleased to report, following a reorganisation of our health and safety division and the rollout of the One Safe All Safe program, there has been a 25% reduction on incidents over the previous year and around 45% reduction in the Total Recordable Injury Frequency Rate (TRIFR).

Whilst the improvement in safety is pleasing, more needs to be done and a strong focus on improving safety will continue. The creation of a safe environment is the responsibility of everyone. We are all safety officers. While our people deserve credit for the improvement, we all share the responsibility to work to reduce the number of incidents to nil. Good safety is good business.

Ausdrill has always been fortunate to have a loyal, hardworking and experienced workforce. Sadly, when earnings deteriorated, we were forced to let people go. As a demonstration of their support and commitment to the Company during these times, the workforce voted to temporarily stop the service bonus which has historically been paid to our people in the form of a fixed amount for each year of qualified service. For long serving employees, that was a significant sacrifice. At the same time, your directors have also taken a 10% reduction in their fees. However, we remain hopeful that we should be in a position to pay at least part of the service bonus in the not too distant future, as conditions continue to improve.

Fortunately, we still have our core of long serving and highly experienced employees which permits the Company to deliver the level of service and performance we seek, and which our customers have come to expect from us.

Outlook

The outlook for the mining industry continues to be uncertain, reflecting the current state of the global economy. Europe seems to be still in recession and the signals from China are confusing. America may be the one bright light, although the current presidenti al campaign and the possibility of isolationist policies being implemented by the United States remains a concern.

All this makes predicting what is going to happen in our industry difficult.

The good news is that recently we have seen increased activity in both mining and exploration. However, competition for work remains fierce with excess capacity in the market and margins compression remains a risk.

In response to these pressures, we must become more efficient in what we do and our company wide business improvement initiatives will be intensified. We will also continue to focus on safety, as nothing is more important than our people getting home safely to their families.

Ausdrill Limited published this content on 28 October 2016 and is solely responsible for the information contained herein.
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