Ausdrill : Company Magazine - Ausbits No 15

Issue 15 • 2016

getting to know our Africa

What's Happening

rio trip

Bringing More to Mining

AUSBitS

Ausbits is published by

Ausdrill Ltd

PO Box 1540

Canning Vale Western Australia 6155

Telephone (08) 9311 5666

Facsimile (08) 9311 5667

Email ausbits@ausdrill.com.au

AUSBITS

Issue 15 • 2016

Our Africa

What's Happening Getting to Know Us

I welcome all staff, clients, suppliers and shareholders to our 15th edition of Ausbits.

There is no need to apologise for this edition being late as it is on time as promised and is a credit to Taanya, our chief editor, and all the contributors

Cover photo: African Sunset

Exploration

In addition to term works performed for Gold Fields and BHP Billiton Iron Ore, the business was successful in

the award of a new two year contract at Kundana

and a two year contract extension at Kanowna

BRINGING MORE TO MINING

that provided material for this issue.

In the last edition I touched on the loss of Colin "Speedy" Hutcheson and Paul "Hearney" Hearn the previous year and went on to explain that I had bred a racehorse and named it Speedy Ladidi in honour of Speedy and arranged with Roz, Speedy's wife for it to run in Speedy's colours.

I am very happy to report that Speedy Ladidi a Filly is a winner of a metropolitan race and has won and placed twice from five starts. The photo shows her winning at Belmont in May. I understand she has had a short spell and is now back in work so if you are interested in punting

Belle to carry out exploration services for Northern Star in the Kalgoorlie region. Exploration drilling services were also provided to a range of clients in the Pilbara, Mid-West and Goldfields regions including Doray Minerals, Dacian Gold, Silverlake Resources and Breaker Resources.

Contract wins Africa

Ghana, AMS:

• Secured a two year contract extension for mining works at the Induapriem mine, owned and operated by AngloGold Ashanti; and

  ABOUT AUSDRILL

  Ausdrill is a diverse and integrated mining services group providing exploration, assaying, drill and blast, contract mining, equipment hire, procurement and logistics services to blue-chip mining and resource companies with operations in Australia, Africa

  and the UK.

  keep an eye out for her, as I am

  sure she has more wins in store.

  Speedy Ladidi

  • Secured a new 42 month contract to provide surface mining services to Perseus at its Edikan

    I am also happy to report that the Company has had a major turnaround in profitability in the past year based on a lot of hard work by all our staff and the sale of some assets in DTA and DT HiLoad as per the report on the following page.

    This is in no small way due to the collective efforts of every single Ausdrill employee who I want to personally thank for their contribution. I would also like to acknowledge the Executive team in John Kavanagh, Andrew Broad, Theresa Mlikota, Donald James and Roy Coates who have all played a big part in getting the Company back on the rails.

    Whilst we have had a turnaround in the profitability of the Company we are still way shy of where we were a few short years ago, and subsequently the Board has elected to not pay a dividend for the year just gone. However, we do look forward to being able to resume dividends and reinstating the service pay bonuses next year if the turnaround continues.

    Contract wins Australia

    Drill & Blast

    During the past year, the Company was successful in securing a three year production drilling contract extension at Ensham coal mine in Queensland.

    We also commenced works for Thiess at the BHP owned Rocky's Reward mine, and for Macmahon at the Newcrest owned Telfer gold-copper mine in the Pilbara, Western Australia.

    gold mine, Esuajah North deposit.

    Mali, AMS:

• Secured an extension to our exploration drilling contract with B2Gold at its Fekola gold project; and

• Secured an extension to our mining contract at the satellite pits at the Syama gold mine, owned and operated by Resolute Mining.

  Burkina Faso, AMS:

• Secured a six month extension until December 2016 to provide mining equipment to Nordgold for work on its Bissa Gold project; and

• Secured exploration drilling contracts with B2Gold, West African Resources and Vital Metals.

  Guinea, AMS:

• Successfully completed its second year of contract mining works at the Siguiri mine, owned and operated by AngloGold Ashanti.

  Senegal, AMS:

• Has secured a seven year contract with Toro Gold at its Mako project.

In closing again thank you to everyone who contributed to producing another excellent edition of our Ausbits magazine.

Have fun, enjoy your job, stay away from drugs, be safe and look out for your workmates and family.

Ron Sayers

AuSBITS PAGE 1

HigHLigHtS

• Significant business turnaround delivering profit from continuing operations of $20.2 million

• Financial position remains strong with exceptional cash flow delivering increased cash reserves of $181.9 million and lower gearing of 26.3%

• Successfully re-focused on core activities through the sale and closure of non-core businesses generating

  $35.7 million profit on sale, and in excess of $70 million in sale proceeds

• Reported profit of $58.2 million, basic earnings per share 18.6 cents per share

• Improved safety performance across the Group

Ausdrill has achieved a significant business turnaround over the past 12 months, increasing revenue and exiting non-core businesses to deliver a substantial increase in profit.

The Company reported sales revenue of

$743.9 million and a profit after tax of $20.2 million from continuing operations for the year ending 30 June 2016. All major operating divisions achieved improved performance during the year.

The Company's long-standing exposure to the gold sector has continued to underpin revenue, with approximately 84% of Ausdrill's mining services revenues generated from the provision of services to gold companies.

In what has remained a challenging environment, Ausdrill has successfully re- focused the business on its core activities, reduced costs and won significant contracts with existing and new clients.

The significant profit improvement was driven by cost-out initiatives and business

rationalisation, which contributed to a 53% improvement in EBIT.

The Company's overall profit was boosted by the Group's sale of the DT HiLoad truck tray manufacturing business and the DTA drill bit manufacturing business, which together generated $35.7 million profit after tax, and which will deliver in excess of $70 million in cash proceeds.

These contributed to the Group's reported profit after tax of $58.2 million.

The balance sheet of the Group remains strong, with a continued focus on debt reduction and cash generation, gearing levels decreased from 39.1% to 26.3%, with cash reserves of $181.9 million at 30 June 2016. The net assets of the Group increased by $53.3 million to $606.6 million during the year, resulting in the net tangible asset position increasing from

$1.77 per share to $1.94 per share.

Having given due consideration to current operating conditions, the Board did not declare a final dividend for the financial year ending 30 June 2016. Ausdrill has historically paid dividends to its shareholders twice a year and expects to resume paying dividends in the next financial year, subject to continued improvements in financial performance.

oUtLook

The Company has successfully refocussed its strategy on the delivery of core mining services in markets where it has a competitive advantage. Its strategy is client-focused and harnesses innovation and technology to deliver relevant and low cost mining solutions to its clients.

The mining industry continues to experience a period of uncertainty in relation to future levels of demand and prices received for commodities. Furthermore, surplus capacity in certain markets in which we operate and the lack of new projects coming on stream mean competition for work remains extremely high in mining services.

In response to these market conditions, Ausdrill will:

• maintain its strong focus on safety

• work to maintain and rollover contracts as they mature

• continue to deliver efficiency gains to counter market-driven margin compression

• rationalise its businesses further to focus on profitable revenue streams

• maintain a stable financial foundation from which to grow the Company in the future

• review working capital, particularly inventory levels, to ensure that it is commensurate with current levels of activity

• demonstrate continued restraint in capital expenditure

Competitive market conditions and margin pressures are expected to persist. The gold price in Australian dollars currently favours the Australian production-related mining industry and provides a platform for a stable level of activity in the near term. However, near-term growth opportunities are anticipated to come from Africa in particular, where there is a higher rate of tendering activity.

The outlook for the resources industry is expected to improve over the medium term in both Australia and Africa where Ausdrill has a long established presence and local know- how. As a consequence, Ausdrill remains very well placed to take advantage of future opportunities.

Based on the level of work currently in hand and the expected continued growth in the sector, Ausdrill is targeting revenue around

$800 million with an anticipated profit uplift from continuing operations of around 50% in FY17, subject to potential uncertainties associated with the volatility in world financial markets, exchange rates, tightness in labour markets and execution of the contracted work to plan.

Theresa Mlikota

Chief Financial Officer

AuSBITS PAGE 2

Alec Barfield, General Manager HSEQT

By all "traditional" measures of safety performance (Frequency rates for Total Recordable Injury, Lost Time Injury etc) our statistics are all reducing consistently, which is fantastic. Our Total Recordable Frequency Rate (TRIFR) is now over 45% less than it was 12 months ago.

This type of reduction doesn't just happen, it needs our management teams, supervisors and work crews to work together. Hazards must be identified, correct controls put in place and everyone has to work to the agreed plan, if we are to be successful in completing our work without harming anyone.

Congratulations and thankyou to all of you for helping to make Ausdrill a safer place to work.

Along with this hard work, there are lots of people and work crews thinking of ways in which we can change things to make our work easier and safer.

It is not possible to show and discuss here all of the improvements we have introduced thanks to our work crews. If we did we would need all of the pages of this edition of Ausbits and then some.

What I have done is put together some examples of "What Good Looks Like". Everyone involved in these examples and the others which are not shown, should be justifiably proud of their efforts and teamwork in helping to improve the way we do our business.

With the continued active engagement of all of the people who work for Ausdrill, we will continue to improve.

Please remember that One Safe All Safe is our vehicle for change and "If you see something, say something, do something, make it safe".

AuSBITS PAGE 3