IMDEX LIMITED — Interim / Quarterly Report 2008

Apr 22, 2008

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Imdex News

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Issue 15 - Imdex Group Newsletter - April 2008
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Dear Shareholders

Since the last edition of Imdex News, there has been significant volatility in the global financial markets, largely due to the sub prime mortgage market and credit crisis in the United States. During uncertain financial times such as these, investors typically seek low risk investment opportunities with strong fundamentals. Imdex is able to offer such qualities with a healthy operational cash flow, alliances with major drilling and distribution companies, and high demand for its products which is forecast to continue. An overview of the Company’s financial performance for the third quarter 2008 is detailed below. Figures quoted for the third quarter 2008 are unaudited.

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Stop Press!

From 20 March 2008, Imdex was included in the S&P/ASX 300 and the ASX All Ordinaries indices for the first time, a significant achievement for the Company and one that the Management team is very proud of.

S&P/ASX 300 constituents are drawn from eligible companies listed on the Australian Stock Exchange. This index is designed to address investment managers’ benchmarking needs against a portfolio of companies characterized by sufficient size and liquidity.

The ASX All Ordinaries represents the 500 largest companies in the Australian equities market.

Financial Performance – Third Quarter 2008

Imdex’s strong financial performance in the first half of FY08 has continued into the third quarter, with both the Drilling Fluids Division and the Down Hole Instrumentation Division performing above budget.

Revenue for January to March 2008 was $32.8 million, bringing year to date revenue to $109.5 million, an increase of 32.5% on the nine months to 31 March 2007. Year to date revenue of

$109.5 million included $63.1 million from the Drilling Fluids Division, and $46.4 million from the Down Hole Instrumentation Division.

Increased revenues were generated from organic growth from existing businesses, and contributions from the recent acquisitions of Suay Energy Services, Poly-Drill, Southernland and SEG. EBITA for January to March 2008 was $9.2 million, resulting in a year to date EBITA of $30.2

million, an increase of 72% on the nine months to 31 March 2007. The EBITA margin for the nine months is 27.5% compared to 21.3% for the previous corresponding period.

The increased profitability can be attributed to Imdex’s recent acquisitions, as well as outstanding performances by the Australian Mud Company, Samchem and Reflex. Flexit also performed well and exceeded budget for the nine month period.

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Strategic Developments

There have been a number of significant developments during the third quarter of the 2008 financial year, which support Imdex’s principal strategies, including enhancement of its product range, increasing market share in prospective geographical regions, and increasing market share in new industries, particularly the oil & gas industry.

Enhancing Imdex’s Product Range & Growing Current & Prospective Growing New Industries Geographic Markets

Imdex purchased System Entwicklungs GmbH (SEG) (effective 1 January 2008), a German based company which develops technologically advanced down hole instrumentation, principally for the oil & gas industry. The integration of SEG into the Imdex Group has progressed well to date, and production capacity is currently being expanded to meet demand for its Target Inertial Navigation System. The acquisition of SEG aligns with Imdex’s strategy of expanding its presence in the oil & gas industry and remaining at the leading edge of research, development and new technologies.

The Flexit team is currently testing two new down hole survey instruments for oil & gas applications: a multi-purpose magnetic survey instrument capable of single or multi-shot surveys and a MEMS based Gyro survey instrument. These new instruments have been developed to withstand the higher pressures and temperatures encountered in oil & gas applications, and they offer advanced features not currently available to that market. Prototypes are being evaluated in the United States and the Middle East, and extensive field testing will occur over the coming months.

Imdex’s research and development team is also finalising designs for two new generation instruments for Reflex. These instruments have been designed to keep the brand at the forefront of down hole instrumentation for the mining and mineral exploration industries and to satisfy the demands of customers for robust and highly accurate instruments.

in the region and it is expected to be finalised by August 2008.

Production capacity upgrades and the securing of additional warehouse space at Southernland in Chile are progressing to plan. The project is expected to be completed by August 2008 and will allow Southernland to meet the increasing demands forecast for that region. Such upgrades are also planned for Poly-Drill in Calgary, where demand is also anticipated to increase.

On 18 February 2008, Imdex announced that it had negotiated a Heads of Agreement to acquire the remaining 25% interest in Suay Energy Services LLP (Suay) for A$1 million. Suay provides drilling fluids to the oil & gas industry in Kazakhstan and surrounding regions such as Russia, Georgia, Turkmenistan, Kurdistan, Azerbaijan, Uzbekistan and Kyrgyzstan. This is a robust and growing market for drilling fluids, and the market size is estimated to be US $200 million per annum. Suay is targeting a market share of at least 15% within 3 years. The acquisition is expected to be settled prior to 30 June 2008.

Construction has also commenced at Samchem in South Africa where a polymer (PHPA) plant is being developed. This initiative will enable Samchem to manufacture the PHPA in-house rather than rely on third parties for supply. The plant will facilitate further growth for Samchem

Global Reach

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GyroSmart Target INS

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Penetrating the Oil & Gas Industry with Gyro Technology

The acquisition of SEG and development projects for two new survey instruments for Flexit, will allow Imdex to offer a suite of advanced down hole survey instruments to the oil & gas industry, facilitating greater penetration into this key sector.

The worldwide depletion of accessible reserves magnifies the complexity of exploration and drilling, and heightens the need for advanced technologies such as gyroscopic survey instruments. These instruments are typically utilised during the drilling process when well bores are in

close proximity. This can cause magnetic interference on traditional measure-whiledrilling (MWD) tools. Imdex’s gyroscopic technology does not suffer from magnetic interference and provides an accurate down hole survey in these conditions.

Consolidating Growth

During the third quarter, Imdex has recruited experienced managers and continued to improve its branding, communication, information technology systems and reporting processes, with a view to ensuring ongoing improvement, business consolidation and continuing future growth.

Imdex Limited

Imdex is Australia’s leading supplier of drilling fluids and down hole instrumentation to the resources, water well and horizontal directional drilling industries and is rapidly expanding its presence in the oil & gas industry.

Imdex News is published to keep valued shareholders up to date with Imdex’s principal activities, achievements and the industries in which it operates. Feedback or requests for further information are always welcome.

Please do not hesitate to email any comments or suggestions to Kym Clements – Group Marketing & Communications Manager at: kym.clements@imdexlimited.com

Imdex Trading Structure

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Highlights for the Third Quarter

• Imdex was included in the S&P/ASX 300 and the ASX All Ordinaries indices for the first time.

• Strong financial performance in 1H08 continued in the 3Q08.

• Revenue was $32.8 million, bringing year to date revenue to $109.5 million, an increase of 32.5% on the nine months to 31 March 2007.

• EBITA for January to March 2008 was $9.2 million, resulting in a year to date EBITA of $30.2 million, an increase of 72% on the nine months to 31 March 2007.

• Both the Drilling Fluids Division & Down Hole Instrumentation Division exceeded targets for the quarter.

• Acquisition of German based System Entwicklungs GmbH (SEG) on 25 January 2008.

• Production capacity expansion at Southernland in Chile is progressing to plan.

• Production of a PHPA plant commenced at Samchem in Africa which will facilitate further growth in the region.

• Imdex negotiated a Heads of Agreement to purchase the remaining 25% of Suay Energy located in Kazakhstan.

Other Events

Imdex is progressing with its plan to sell its investment in Sino Gas & Energy. The sale is expected to be finalised by 30 June 2008.

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Outlook

The remainder of the 2008 financial year is forecast to be strong for Imdex, as demand for commodities remains high. This trend is expected to continue due to China’s robust economic growth and infrastructure development and demand from other emerging economies such as India, Russia and Brazil.

In addition, exploration activity is expected to increase due to the lack of activity and significant mine development in the late 1990’s and early 2000’s which resulted in tighter commodity markets. The Metals Economics Group in Canada estimates that 2008 global non ferrous exploration expenditure should exceed the US$10.5 billion estimate for 2007 by 25% to 35%.

Demand for energy is also continuing to grow despite a four fold increase in the oil price in recent years. The interest within the sector is reported to be at a 30 year high. The economics of sustained higher oil prices are making exploration projects that would have seemed impossible only three years ago very attractive.

Imdex’s presence in all of the major mining and exploration regions in the world, its strong product range, strategic distribution alliances and penetration into the energy sector ensure the Company is positioned to take advantage of these strong market conditions.

Based on market forecasts, continuing consolidation and improvement, and strong financial performance to date, your Directors are confident of achieving the full year forecast numbers announced in February 2008 of Group revenue of $152 million and EBITA of $42 million. We thank you again for your support, and look forward to further achievements in the current quarter and new financial year ahead.

Yours Faithfully,

Bernie Ridgeway Managing Director

Images

1 AMC Mud Testing, Western Australia 2 AMC Mud Testing, Western Australia 3 Reflex EZ-Trac, Bunbury Western Australia

4 AMC, Mt Magnet Western Australia

5 Reflex Maxibor II, Leinster Western Australia

6 AMC Products

7 AMC Mud Testing, Western Australia

8 Flexit, Greenland

9 Flexit, Mali

10 AMC Warehouse, Kwinana Western Australia

11 Reflex ACT

12 Reflex, Leinster Western Australia

Contact Details

Imdex Limited Level 1, 15 Rheola Street West Perth 6005 Western Australia PO Box 1325 West Perth 6872 Western Australia Telephone: +61 8 9481 5777 Fax: +61 8 9481 6527 Email: imdex@imdexlimited.com Website: www.imdexlimited.com

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