AUSBITS

Issue 14 • 2016

Rocky's Reward Getting to Know Us Our Hockeyroos

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 [email protected]

AUSBITS

Issue 14 • 2016

Rocky's Reward

Getting to Know Us Our Hockeyroos

From the MD

Cover photo: Ausdrill Hockeyroos

BRINGING MORE TO MINING

I welcome all staff, clients, suppliers and shareholders to our 14th edition of Ausbits.

Again, I must apologise for the delay in producing this edition. We have in the past produced two newsletters each year, but due to the workload of our chief editor, Taanya, and the delay in getting stories in, we only produced one this past year. However, I can assure you that this year we will be delivering another edition of Ausbits in late August/early September.

Being a year since our last edition, it brings back memories of the loss last year of two of our long term and most valued employees in Colin "Speedy" Hutcheson and Paul "Hearny" Hearn who received numerous tributes from fellow workers.

As Speedy was a horse fan I have arranged with Roz, Speedy's wife, to race a horse in Speedy's name and have called it Speedy Ladidi (a combination of Speedy and its mother's name Ladidi) and it is showing good form. Having won four trials and running third at Ascot recently, keep an eye out for it, as it looks to have ability.

Before talking to the financial results on the following page I take great delight in welcoming Theresa Mlikota, our new Chief Financial Officer, to the Ausdrill group. I have known Theresa for many years and she is admired throughout the mining and construction industries in Australia. Theresa has settled in well and is already starting to put her stamp on the business. We wish her well going forward.

In welcoming Theresa to Ausdrill, I also need to welcome Andrew Broad back into the fold after a five year hiatus. Andrew has re-joined the company as Chief Operating Officer Australia replacing Alex McCulloch. Andrew was with Ausdrill for 18 years before his hiatus.

During the process of looking for a replacement for Alex we identified two very capable gentlemen in Donald James and Roy Coates and subsequently created two new roles with Donald looking after Equipment, Services and Supplies and Roy looking after Mining Services Australia. We welcome Donald and Roy to Ausdrill and look forward to a mutually rewarding future.

From a financial perspective, the half-yearly result represents a turning point for Ausdrill. The gold price has improved to the nearly record price levels of a few years ago and, as approximately 70% of our revenue comes from gold, we are well placed to go forward.

Some contract wins we have had in the past 12 months are as follows:

• BTP Equipment won a four year contract with Peabody Energy Australia Ltd for the supply of 68 pieces of mining equipment based on a combination of dry hire and fully maintained hire.

• AMS has been appointed preferred contractor by KEFI Minerals for the Tulu Kapi Gold Project in Ethiopia. The estimated contract value is US$300 million over

  the Life of Mine of approximately 10 years.

• AUMS, our 50:50 Joint Venture with Barminco, has been awarded an underground mining contract by AngloGold Ashanti at the Geita Gold Mine in Tanzania. The estimated contract value is US$70 million over

  three years.

• Ausdrill Drill and Blast has won a six year contract with Macmahon at the Newcrest owned Telfer gold-copper mine, and a two year contract at the BHP owned Rocky's Reward project with Thiess.

  
  

  These new contracts do auger well for the future, however, we do need to keep our heads down and tails up to ensure we can get the company back to the position it held before the mining slowdown.

  
  

  It has come to my attention that some staff who have reached milestones in their service with Ausdrill have not received official recognition. Whilst they ultimately did receive their award it was not done in a formal manner. I will be discussing this with senior management to ensure everyone receives the recognition they deserve.

  
  

  I would also like to comment on a recent newspaper article that made reference to Ausdrill exiting certain business units. This is an incorrect interpretation of Ausdrill's intentions in relation to these businesses, as apart from the closure of DT HiLoad and putting the business of EDA into care and maintenance which Ausdrill had to do given the losses being incurred by those businesses, no specific decision to close or sell any of the other businesses has been made.

  
  

  As my late Father used to say "the only thing you can believe about a newspaper is the price and the date on the front of it".

  
  

  In closing I would like to thank Taanya and all the staff that have contributed to our Newsletter as I get a real buzz out of reading it.

  
  

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

  
  

  Ron Sayers

  
  

  AUSBITS PAGE 1

  SHAREHOLDER CORNER

  HALF-YEAR FINANCIAL RESULTS TO 31 DEC 2015

  KEY POINTS - HY16 RESULTS

• Profit after tax attributable to Ausdrill shareholders of $9.3m, up from loss of $177.4m

• Proactive response being taken by the business to defend traditional markets

• Sales Revenue 6.5% up on previous half, down 9.3% compared with previous corresponding period from

  $413.6m to $375.2m

• Margin improvement in key segments driven by impact of business improvement initiatives and business rationalisation

• EBITDA(1) up 5.4% from $59.1m to

  $62.4m

• EBIT(1) up 82.0% from $15.0m to

  $27.2m

• Deleveraging strategy continues,

  $46.5m in debt repayment

• Basic earnings per share up from a loss of 56.81 cents per share to a profit of 2.99 cents per share

• Cautious approach to dividend policy in light of market uncertainty

Ausdrill has responded well to challenging market conditions, delivering profit after tax of $9.3 million during the six months to 31 December 2015, a 105.3% increase from the previous corresponding period.

During the half-year to 31 December 2015, the Company focused on its core competencies to ensure it continued to remain cost competitive in its traditional markets.

Sales revenue has remained relatively stable over the past 12 months, up 6.5% on the previous half but down 9.3% compared with the previous corresponding period to $375.2 million.

In spite of this, margins have improved across most businesses, driven by the impact of improvement initiatives and business rationalisation. Importantly, EBITDA(1) increased by 5.4% on the previous corresponding period to $62.4 million while EBIT(1) increased 82% to $27.2 million. The EBITDA(1) margin (excluding equity accounted profits) increased from 13.8% to 14.7% over the same comparative periods.

Ausdrill maintained its strategy of deleveraging and made debt repayments of $46.5 million while restricting capital expenditure to $6.1 million during the half. Over the past 18 months, debt repayments have totalled $141.9 million. Gearing (net debt to net debt plus equity) reduced from 39.1% reported at 30 June 2015 to 36.3% at

31 December 2015.

Cash flow from operations of $47.7 million was down from $76.9 million for the previous corresponding period, with higher cash flow in the previous corresponding period being driven by working capital movements.

Earnings per share increased to 2.99 cents per share, compared to the loss of 56.81 cents per share reported in the previous corresponding period.

In light of the ongoing market uncertainty, a cautious approach to dividend policy has been taken with no interim ordinary dividend declared for the half-year ended 31 December 2015.

These results represent a turning point for Ausdrill with further opportunity for improvement.

Ausdrill has a long established presence and local know-how in both Australia and Africa, where the resources sector is expected to recover over the medium to long term.

The Company remains very well placed to remain a long-term profitable service provider in what we expect will be a more rationalised and consolidated industry.

Outlook

Ausdrill continues to expect demand for mining services to remain tight in the near term with margin pressure stemming from tougher price competition. However, the Company's focus on delivering upon its business improvement initiatives, will enable it to more ably assist its customers to reduce their costs and increase the productivity of their operations.

Tender activity, particularly in Africa, is robust, driven mainly by gold mining opportunities, which are being actively pursued and will potentially be a future source of earnings stabilisation in the near to medium term.

Theresa Mlikota

Chief Financial Officer

(1)Figures exclude the effects of any significant items in previous corresponding period

Revenue by Business Activity 1

Revenue by Geography 1

Supply Logistics 5.5% Waterwell Drilling 1.9%

Manufacturing 5.8%

Guinea 6.2%

Other 7.1%

Other 7.0%

Exploration 9.2%

Oil and Gas 0.9%

Other 18.4%

Explor. 9.2%

Production 72.4%

Contract Mining Africa 36.7%

Mali 9.3%

Africa 37.0%

Other 7.1%

Aust 55.9%

Aust 55.9%

Ghana 21.5%

Drill & Blast 16.1%

Equipment Hire 16.9%

1Based on HY16 sales. Figures may not add due to rounding

AUSBITS PAGE 2

ROCKY'S REWARD

Rewarding Work for Drill and Blast Team at BHP Nickel Mine

Ausdrill has worked with various divisions of BHP Billiton over many years, perhaps most notably at many of the mining giant's iconic iron ore projects in the Pilbara region of Western Australia.

The long-standing relationship between our two organisations has now been extended in a new direction, with Ausdrill providing drill and blast services at Rocky's Reward, an open pit nickel mine which forms part of BHP Billiton's Nickel West operations.

Nickel West is a fully integrated 'mine to market' business comprising mines, concentrators, a smelter and refinery.

Rocky's Reward is located at Leinster, approximately 400 kilometres north of Kalgoorlie in Western Australia.

Thiess Pty Ltd, which has a contract to undertake operations at the mine, subcontracted Ausdrill to provide drill and blast contract works commencing August 2015 for an initial term of 28 months. The contract has an estimated value of approximately $38 million.

The scope of the services includes:

• Blast Hole Drilling - including the provision of initially 4-5 x DRA Rock Commander/Atlas D65 Drills (which has since expanded to 7-8 drills);

• Grade Control Drilling - including the provision of 1 x DRA GC600 Drill;

• Shotcrew Services - including for the loading, tie-up and initiation of circa 800kbcm per month of blasted rock.

It's a case of "back to the future" for some long-serving employees, as Ausdrill completed the original Rocky's Reward open pit drill and blast, contracting first to Western Mining Corporation and then Leighton Contractors during the period 1989 to 1992. At its peak the company had 10 rigs and 60 people on site.

AUSBITS PAGE 3