IMDEX LIMITED — Call Transcript 2012

Aug 19, 2012

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8 Pitino Court, Osborne Park Western Australia 6017 PO Box 1262, Osborne Park Western Australia 6916

Tel: +61 (0) 8 9445 4010 Fax: +61 (0) 8 9445 4055 imdex@imdexlimited.com www.imdexlimited.com ABN 78 008 947 813

20 August 2012

Company Announcements Office ASX Limited Exchange Centre 20 Bridge Street SYDNEY NSW 2001

Dear Sir/Madam

FY12 Full Year Results Conference Call and Slide Show

Please find attached the script from today’s FY12 Full Year Results Conference Call and Slide Show.

Yours faithfully Imdex Limited

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Paul Evans

Company Secretary

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Providing innovative drilling fluids and advanced down hole instrumentation worldwide.

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Hello, everyone and thank you for participating in Imdex’s results presentation conference call for our 2012 full year results.

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I will begin by providing an overview of the Imdex Group results for FY12. Paul Evans, Imdex’s CFO and Company Secretary, will then present a more detailed analysis of the financials. I will then cover the operations and divisional performance, comment on the outlook regarding Imdex’s main end markets of mining and oil and gas, and outline Imdex's strategy and opportunities for growth in FY13 and beyond.

Time has been allowed for questions at the conclusion of the presentation. For listeners who are not familiar with the Imdex Group further information can be found on our website.

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The 2012 financial year has been an exceptional, dynamic and rewarding one for Imdex, with the Company achieving its best ever results across all key metrics:

• Record revenue and earnings;

• Record financial performance in the four mining regions of Asia/Pacific, the Americas, Africa and Europe;

• Record number of Reflex instruments on rent at the end of June 2012;

• Net assets have grown to new highs; and

• A record dividend payout was declared, whilst preserving the financial capacity of the business to fund further growth initiatives.

We have successfully integrated several bolt-on acquisitions and these are adding to margin and expanding our geographic footprint.

We have a strong technology portfolio and an exciting new product pipeline.

We have a number of excellent growth opportunities that should continue to drive revenue and earnings growth despite signs of weakening caused by the Juniors in our traditional mining markets.

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Now let’s get a little more specific and turn to Slide 5 which provides an overview of the key financial results. Combined revenue, including our 30% share of revenue from the DHS joint venture, was up 36% to $278.9 million.

Reflecting Imdex’s growing margins, earnings grew faster than revenue, with EBITA up 56% to $75.2 million, and net profit after tax up 58% to $45.8 million.

The Company performed strongly in the solid market conditions experienced throughout the 2012 financial year.

Our pre-tax operational cash flow performance was strong, growing from $44.0 million in FY11 to $56.9 million in FY12, and gearing remained low at 22.3% even after substantial investments made through acquisitions over the past 12 months.

Our financial strength can also be seen through our very healthy interest cover to EBITA ratio of 43 times.

We have continued to make attractive bolt-on acquisitions and recruit selectively to be able to meet and exceed our customers’ requirements. As a result, we have seen our global workforce grow by 36% to 543 people over the year of which more than 60% live and work outside of Australia. This reflects our strategy of investing in our team and business so we remain well positioned longer term to benefit from activity across international markets.

The Directors have declared a fully franked final dividend of 4.00 cents per share, bringing the total dividend for FY12 to 7.25 cents per share, fully franked. This represents an increase of 61% from FY11, and reflects the strength of Imdex’s underlying earnings and cash flows, the Company’s future growth opportunities, as well as the Board’s commitment to paying a sustainable and growing dividend stream while balancing the Company’s capital as it continues to grow.

The solid trading conditions experienced in FY12 have continued into the early stages of FY13. We expect that the scaling back of activity by the Junior explorers will have some impact on the market. However, Imdex generates the majority of its revenue from major/intermediate miners, and we are confident that we will be able to offset the softening from the Juniors by increasing our market share generally, rolling out new products and increasing our footprint in the global oil & gas sector.

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As illustrated by the bar charts on slide 6, Imdex generated record revenue in FY12. Our FY12 combined revenue of $278.9 million, was up 36% on the previous peak of $205.2 million in FY11 reflecting success in increasing market share and solid trading conditions. The Minerals division was particularly strong with solid demand for both drilling fluids and down hole instrumentation.

During the year we experienced strong growth in the Reflex rental fleet with new highs achieved at 30 June 2012. Pleasingly, instrumentation numbers on active hire currently are close to the record high reached at the end of June 2012.

The record revenue was reached despite underperformance in the Oil & Gas Division.

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While Asia Pacific continued to be the revenue engine room during FY12, I’m pleased to report that we have achieved excellent growth in the Americas and Africa. Given our lower market share in The Americas and Africa and the growth initiatives in place, it is likely that the overseas markets will continue to grow at a greater pace than Asia Pacific.

The international expansion strategy that Imdex has implemented over recent years reduces our exposure to any one market and provides greater geographic diversity.

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Slide 8 clearly shows the continued growth in EBITA since the low point in FY10. Total EBITA was up 56% to $75.2 million, at an EBITA margin of 27% on combined revenue, an improvement from 23% in FY11. The strong minerals performance across all global mining regions drove EBITA growth.

As part of the Operational Review we will spend a few minutes explaining the background to the EBIT loss incurred in the oil & gas division, specifically what has driven that loss and the steps taken to address that underperformance.

Before moving onto the operational review and outlook for Imdex's principal markets, strategies and opportunities for future growth, I will hand over to Paul Evans for a more detailed look at Imdex's financial performance.

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<< Slide 10 - Profit and Loss >>

Thank you Bernie. Slide 10 outlines the financial results in more detail and compares the result for FY12 against the prior corresponding period. As Bernie indicated, combined revenue from continuing operations for the full year was up 36% to $278.9 million, and operating profit after tax was up 58% to $45.8 million.

Pre tax cashflows from operations were up 29% to $56.9 million compared to FY11. The increase largely reflects improved trading conditions and continuing strong customer collection levels.

Earnings per share was 22.3 cents, representing an increase of 52% from FY11.

<< Slide 11 – Strong balance sheet>>

Moving to slide 11, net assets have increased by $42.7 million since 30 June 2011, largely due to the improved trading of Imdex’s underlying businesses, and the acquisitions of ADS, Mud Data and System Mud.

Our working capital investment has increased in line with the growth in business activity, particularly in the area of stock in the Fluids business.

Our total gross debt position has increased by $25.1 million since 30 June 2011 following the introduction of the new Club Banking facility arrangement and the increase in facility limits secured for Imdex’s contribution to the Vaughn Energy Services acquisition by our DHS Joint Venture. Net debt (ie gross debt less cash) similarly increased during the year to $48.2 million resulting in a 22.3% gearing level (measured by net debt to capital) at 30 June 2012. We have a strong balance sheet and maintain a conservative capital structure for the business.

The increase in our ‘other assets’ arises largely due to prepayments made for the purchase of the SRU units for roll out in FY13.

I’ll now pass back to Bernie for the remaining part of the presentation.

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<< Slide 12 – Operational Review >>

<< Slide 13 – Minerals Division >>

Thanks, Paul. As many of you know Imdex operates two divisions being Minerals and Oil & Gas.

You can see the bar chart on Slide 13 which demonstrates the strength of our minerals division. Record revenue of $241.7 million, representing 87% of overall Group revenue, was up 36% on FY11. Asia Pacific continued to be the dominant region generating 47% of revenue, whilst the Americas and Africa contributed strongly with 31% and 19% of revenue respectively.

Mineral exploration expenditure in Asia Pacific, Africa, Canada and Latin America was strong throughout the year, with major customers such as Boart Longyear, Major Drilling, Layne Christensen, Energold, Foraco, Orbit Garant, Geosearch, Geodrill, Ausdrill, Swick and a host of other leading drilling contractors around the world experiencing increased drill rig utilisation that increased demand for Imdex’s products.

AMC is the leading brand of drilling fluids for the global mining industry and ongoing product development has ensured that Reflex remains the number one supplier of downhole instrumentation to the mining and mineral exploration industry globally.

The acquisition of Australian Drilling Specialties in July 2011 added considerable value during the period and the integration into AMC has been seamless. In addition, the acquisition of System Mud in Brazil, effective 1 August 2011, largely completed the geographical expansion of AMC.

We expect to drive further increases in the drilling fluids and downhole instrumentation mining business in FY13 and beyond.

In addition to organic growth in each of the major mining regions, new product releases for both AMC and Reflex will assist in driving increased revenue and earnings going forward.

<< Slide 14 – Sustainable revenue base >>

There has been a lot of misunderstanding in relation to where Imdex derives its Minerals revenue and Slide 14 will assist in providing clarity on a number of issues.

Imdex’s FY12 Minerals revenue is broad based and sustainable with the following key features:

• 70% is from gold and copper projects, with iron ore also being important at 14%

• 70% is from the development and production phases of the mining cycle

• 80% is from major/intermediate resource companies.

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As a result, the softening by the Juniors is not expected to have a significant impact on our Minerals revenue, particularly as we roll out new products and increase exposure to the production phase through underground solids removal units, for example.

<< Slide 15 – Record Reflex rental fleet >>

Slide 15 demonstrates the benefit of our global structure, continued spending on product development, and being the technology market leader. Solid activity in the global mining industry, our regional support structure, and cross selling initiatives have all contributed to achieving record Reflex rental fleet numbers throughout the year. At 30 June 2012, instrumentation on active hire was double the previous peak in July 2008. Despite softening by the Juniors, our fleet of instruments on active hire today is close to the June 2012 peak reflecting our client mix and strength of product offering.

We expect the Reflex rental fleet to be solid throughout FY13 as new products are rolled out to the global mining industry.

<< Slide 16 – Oil & Gas Division >>

Slide 16 shows that in FY12, Oil & Gas Division revenue was up 36% to $37.2 million, and represented 13% of total Group combined revenue.

Imdex formed a 50:50 joint venture, effective 1 July 2011, with DHS Energy Services (DHS) based in Dubai. DHS was essentially a start-up business using Imdex technology, with the aim of becoming a serious competitor in the downhole survey business for the global oil & gas market which is estimated at US$400m-US$500m annually. The Dubai based business has performed below expectations and, in addressing this underperformance, a number of staffing and structural changes have been implemented. These changes are expected to generate profits in the second half of this calendar year.

The most important development for DHS during FY12 was the acquisition of Vaughn Energy Services in the US, effective 1 January 2012. This was a US$100m acquisition that provided a strong entry into the vibrant US land based market where Vaughn has established a strong business that continues to trade very well.

The combined technologies provide the Joint Venture with a comprehensive portfolio of products and an exciting product development pipeline as well as a wealth of industry expertise.

DHS is looking to add further bolt-on acquisitions to increase the global footprint in much the same way as Imdex has over recent years.

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AMC Oil & Gas has also under-performed during FY12 and it has taken longer and cost more than initially anticipated to position the business for growth in the US$10 billion market for drilling fluids globally. Performance was impacted by a variety of issues, including long periods of wet weather on the eastern seaboard and a slower ramp up in AMC Germany. In FY12 we have invested in people, facilities and inventory and we now believe it is well positioned for significant growth in FY13. Profitable trading in July, 2012 is a good sign that we are on track to turn this cost centre into a significant profit contributor in FY13.

We are also focused on expanding the market for AMC’s specialist range of production and completion chemicals as a means of growing revenue and earnings in this division.

In terms of our oil and gas capabilities, the DHS joint venture is supplying services to both the onshore and offshore oil & gas industry, whilst the AMC fluids business, is aimed at niche markets in the onshore industry.

<< Slide 17 – Outlook >>

<< Slide 18 – On track with strategy >>

Now I’d like to spend a few minutes on the Company’s strategy, outlook and prospects going forward.

Our focused strategy of supplying Drilling Fluids and Down Hole Instrumentation to the two end markets of mining and oil and gas is the right strategy as can be seen from the strength in Imdex’s results and continued positive outlook. As illustrated by slide 18, Imdex will continue to concentrate on late stage minerals applications and further penetrate underdeveloped mining markets globally while growing our oil and gas business.

Our medium term objective is to generate at least 40% of Group revenue from the oil and gas industry. In FY13, revenue from this sector should increase further from the 13% achieved in FY12.

We believe that this business sector diversification is logical and is an extension of our existing business into a sector in which we have built or acquired considerable expertise.

The middle row of pie charts shows the benefits of the geographical expansion whereby now over 50% of Group revenue is generated outside Australia and it is expected this theme will be continued in future years.

The pie charts on the bottom row show the benefit of the strategy in the instrumentation business to transition from a sales model to a rental model. In the past we did not rent any instrumentation,

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however, over the last 4-5 years we have been implementing a rental strategy and, in FY12, 32% of Group revenue was generated by rentals.

We will continue to invest in technology and employ the rental model going forward.

<< Slide 19 – Global exploration/development spend (non ferrous) >>

Metals Economics Group estimate that global non ferrous exploration expenditure in calendar year 2012 will be up 5%-15% on 2011 levels at US$20 billion. This estimate puts expenditure at unprecedented levels, however, there are headwinds for the Junior mining companies and explorers which may negatively impact this estimate.

Although off their highs, commodity prices are still solid and the major and intermediate resource companies are well funded and are continuing to spend.

The spending is occurring in all major mining regions. Globally, the main activity is around gold, copper, nickel and uranium. There is also much activity in the iron ore sector where MEG estimate a further US$2.5 billion of expenditure globally in CY12.

There are long lead times from discovery to production and discovery is becoming increasingly challenging. Ore bodies are deeper, more complicated and cost significantly more to bring into production and grades are generally on the decrease.

This is good news for Imdex because mining companies will need to continue spending on exploration and development requiring Down Hole instrumentation and Drilling Fluids to be able to access deeper and more complicated ore bodies.

A similar picture applies to the oil and gas industry where new discoveries are deeper and extraction is more complicated and more costly to develop.

<< Slide 20 – Solids removal units (SRU’s) >>

Slide 20 shows the old way of diamond drilling with sumps and the new way of drilling utilising AMC solids removal technology.

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<< Slide 21 – Solids removal units (SRU’s) >>

The technology works very well as evidenced by the quotes from Boart Longyear and Terra Drilling on slide 21. To drill a 1,200 metre hole without sumps is a global first in the industry and the SRU’s are a game changer. Accordingly, there is high demand for the SRUs and we are busily trying to satisfy that demand. Continuing cosmetic design changes, establishing proper manufacturing procedures and capacity, and dealing with differing design codes for different regions have all served to put us behind our original roll out schedule.

We have previously stated that we would have 20 units in the field by end of FY12 and a total of 50 on active hire by the end of FY13. We have 5 on active hire as of today and by 30 September 2012 we expect to be in front of the run rate required to meet the FY13 forecast.

This does not include the underground unit that is currently in development using the same base technology as for the surface unit. There is very strong demand for the underground unit which should be in field testing by the end of calendar 2012.

<< Slide 22 – Comprehensive product offering >>

Slide 22 shows the comprehensive product offering Imdex provides to the various stages of the mining cycle. As you can see, we are very much biased towards the late exploration/development and production stages. The solids removal units, the drilling fluids, the down hole surveys and directional equipment are all mainly utilised in these phases that are not dependent on spending by Junior exploration companies.

<< Slide 23 – Key business drivers and outlook >>

On Slide 23, we have listed the key drivers for our business where mineral exploration, mine development and production spend are largely driven by commodity prices.

The health of balance sheets and profitability of major and intermediate resource companies, together with their outlook on commodities, determines drilling activity and the flow on effect of demand for drilling fluid and down hole instrumentation. This in turn drives increases in the Reflex rental fleet and our growing relationships with global customers ensures a more sustainable business. Investing in research and product development to continue technology and market leadership while enhancing

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operational efficiencies are key components in maintaining these strong relationships and we will continue to do that.

Introducing new products to the same customer allows us to generate more revenue per rig and more revenue per customer.

<< Slide 24 – Record results across all key financial metrics >>

In summary, I would like to close with the following remarks on slide 24:

FY12 was another record year for Imdex with the company achieving its best ever results. Revenue and profits were the highest recorded by Imdex, and our Reflex rental fleet at 30 June 2012 was double the previous peak reached in July 2008.

We have a strong balance sheet with comfortable gearing levels and our total dividend for FY12 was up 61% on last year. The strength of our balance sheet has allowed us to pursue attractive growth opportunities that have strengthened the Company’s global platform and uniquely position Imdex to continue to grow the business.

Our end market exposures, market positioning, unique suite of proprietary technologies, customer relationships and global footprint are all positives to assist in growing revenue and profits in FY13 and beyond.

That brings the formal part of our presentation to an end. Paul and I are now happy to answer any questions you may have.

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