IMDEX LIMITED — Interim / Quarterly Report 2008

Feb 17, 2008

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Imdex News

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Issue 14 - Imdex Group Newsletter - Februar y 2008
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Dear Shareholders

As the first edition of Imdex News for this calendar year, I would like to wish you and your families all the very best for a safe, happy and prosperous 2008.

The first half of the 2008 financial year has been a very positive one for the Imdex Group, both operationally and financially, and it is pleasing to report that all of the companies within Imdex’s two Divisions, including the Company’s recent acquisitions, performed well and contributed to the profit for the period.

Drilling Fluids and Chemicals Division

Revenues increased 46% from $29.1 million to $42.3 million and operational EBIT increased 70% from $4.5 million to $7.6 million. It is expected that organic growth will continue in the future and will be boosted by the following activities:

• Samchem completed an upgrade to its plant in November;

• Southernland has located larger premises in Chile with the view to moving and expanding its operations;

• A similar process is also being undertaken by Poly-Drill in Canada to allow for expansion of its operations;

• Suay has increased its presence in the onshore oil and gas market in the Caspian Sea region. Additional local engineers have been recruited;

• Samchem has achieved success with its new dust suppression products in South Africa and these products are currently being tested for use in Australia;

• A Divisional General Manager for the Drilling Fluids and Chemicals division has been appointed.

Drilling Products & Services

Revenues increased (excluding those of Surtron) 59% from $16.9 million to $26.8 million and operational EBIT increased 112% from $5.0 million to $10.5 million.

Notable achievements for the period included:

• The refinement of down hole instruments to ensure technology leadership;

• Increasing awareness in the market of the

• Reflex ACT Core Orientation Tool;

• Further integration of the individual companies which has resulted in back office cost reductions;

• A General Manager for Reflex has been appointed.

A summary of the Group’s financial

performance, acquisitions, highlights for the first half of the FY08 and outlook for the remainder of the financial year is set out below.

Revenue by Division

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Financial Performance – 1H08

Imdex’s positive financial performance for the first half of this financial year resulted in earnings per share from continuing operations increasing 74% from 3.65 cents per share to 6.34 cents per share, and the principal headline numbers are as follows:

• Total revenues increased 45% from $53.1 million to $76.8 million.

• Total EBITA increased 87% from $11.2 million to $21.1 million.

• Total net profit after tax (continuing operations) increased 115% from $6.0 million to $12.9 million.

• Net cash from operating activities before tax increased by 44% to $11.9 million.

• Net assets increased by 168% to $100.5 million. These excellent results have reinforced the Company’s strategic initiatives to position Imdex as a leading supplier of drilling products and services to the global market.

(All monetary references are AUD$ except where stated otherwise)

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IMDEX LIMITED
DRILLING FLUIDS & DRILLING PRODUCTS
CHEMICALS DIVISION & SERVICES DIVISION
AUSTRALIAN
SUAY SOUTHERN-
SAMCHEM MUD POLY-DRILL SEG REFLEX CHARDEC FLEXIT
ENERGY LAND
COMPANY
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Acquisitions

During 2Q08, the acquisition of Southernland was finalised and on 25 January 2008, System Entwicklungs GmbH (SEG), was purchased. These acquisitions extend Imdex’s global reach, improve technological capabilities, provide further growth into the oil & gas sector and support the Company’s global alliances with major international drilling and supply companies.

Southernland S.A. (Southernland)

Southernland is a Chilean based company which manufactures and sells drilling fluids and chemicals. The company is based in Santiago and supplies drilling fluids and chemicals to Peru, Bolivia, Argentina, Mexico and a number of other Latin American countries.

Strong growth and significant opportunities are expected within the Latin American market. The Metals Economics Group estimates that this market represented 24% of the world’s total non ferrous exploration expenditure in 2007, making it the world’s largest exploration expenditure region.

The acquisition of Southernland complements Imdex’s Drilling Fluids and Chemicals Division and facilitates expansion as a significant drilling and chemicals supplier to the mining, oil & gas and water well industries in this region.

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Imdex has significant experience in Latin America with its existing Australian Mud Company and Reflex operations and an Australian senior manager, with previous experience in Latin America, has relocated to Santiago to oversee the successful integration and operations of Southernland.

Southernland was purchased on 1 November 2007 for US$2.55 million, of which US$1.275 million was paid in cash at settlement and the remainder in Imdex shares at an issue price determined by the closing weighted average share price on the five business days prior to settlement. These shares are held in voluntary escrow for two years from the date of settlement.

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System Entwicklungs GmbH (SEG)

SEG is based in Riegel, Germany, and is a developer of technologically advanced down hole instrumentation primarily for the oil & gas industry. Of particular note is the company’s development of the Target INS down hole survey system. This survey system, which has north seeking capability, will facilitate Imdex’s penetration of the down hole instrumentation market in the oil & gas industry. The Target INS technology is relatively new and is at the beginning of its product life cycle. Imdex aims to offer a suite of down hole instrumentation products, including the Target INS, to the oil & gas industry.

SEG was purchased on 25 January 2008 (effective 1 January, 2008) for $13.8 million cash.

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Picture - Keith Steel Picture - Peter Jacobs

The Right People

Imdex recently appointed Keith Steel as Divisional General Manager of the Drilling Fluids & Chemicals Division and Peter Jacobs as General Manager of Reflex within the Drilling Products & Services Division. Both Keith and Peter have extensive drilling industry experience. Engaging the right people remains a high priority for the Group to ensure solid management, accurate reporting and maximum take-up of every opportunity in this market.

Keith Steel

Divisional General Manager – Drilling Fluids and Chemicals Division

Keith has a wealth of international drilling and management experience. Keith’s career within the drilling industry commenced as a University Graduate in 1971.

Prior to joining Imdex in 2001 as International Manager, based in Dubai, Keith was engaged by Baroid Drilling Fluids Incorporated where he remained for 20 years. During this time, Keith’s roles included Field Engineer, Staff Engineer, District Manager, Regional Technical Services Manager and Far East Manager.

As Divisional General Manager of Imdex’s Drilling Fluids & Chemicals Division, Keith is ultimately responsible for AMC, Samchem, PolyDrill, Suay Energy Services and Southernland.

Peter Jacobs

General Manager Reflex

Peter has been involved in the drilling industry for 27 years and commenced his career ‘hands on’ in the Goldfields of Western Australia.

Prior to joining Reflex, Peter was engaged by Boart Longyear, a leading global drilling company, for 18 years. During this time, Peter’s roles included product management, engineering, product sales, marketing, contract drilling management, business development and company mergers and acquisitions.

Peter has extensive international experience. He completed a Diploma of Executive Development at the International Institute for Management and Development in Lausanne, Switzerland, and has worked in Papua New Guinea, Indonesia, Canada, USA, Chile, Peru, Brazil and Ghana.

Imdex Limited

Imdex is Australia’s leading supplier of drilling products and services to the mineral, water well and horizontal directional drilling industries and is expanding its presence in the oil and gas industry.

Imdex News is published to keep our valued shareholders up to date with Imdex’s principal activities and the industries in which it operates. Your feedback or suggestions are always welcome.

Please email your comments to Kym Clements - Group Marketing & Communications Manager at: kym.clements@imdexlimited.com

As General Manager of Reflex, Peter is responsible for Reflex Asia Pacific, Reflex Americas, Reflex Europe and Reflex Africa operations and is based at the company’s office in Osborne Park, Western Australia.

Highlights for the Second Quarter

• 1 November 2007, acquisition of Southernland S.A.;

• Strengthening of Imdex’s Senior Management team with the addition of a number of key Managers with extensive and valuable industry experience;

• 1 November 2007, divestment of Surtron Technologies realising a profit on sale of $12.0 million;

• Effective 1 January 2008, acquisition of System Entwicklungs GmbH for $13.8 cash.

• Positive financial results achieved by recent acquisitions Flexit, Southernland, Poly-Drill Systems and Suay Energy Services;

Other Events

Sale of Surtron Technologies

During the second quarter, Imdex successfully finalised the divestment of Surtron Technologies which became effective 1 November 2007. The sale included $17.5 million cash paid at settlement and the repayment of inter-company debt of $2.6 million within four months of settlement. The sale realised a profit of $12.0 million for the Imdex Group.

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Outlook

Your Directors are confident that the second half of FY08 will also be very positive for Imdex. Commodity supply constraints and continuing demand is expected to maintain business growth. In addition, Imdex has achieved a sound financial platform, valuable human resources, advanced technological capabilities and strategic alliances, which will enable the company to capitalise on opportunities going forward.

Regionally:

• Asia Pacific is forecast to grow organically, fuelled by the commodity demands for its products and services within China, South East Asia and India.

• Imdex’s operations in Africa are expected to grow due to the increased levels of mining and exploration activity in a number of African countries. In particular, the Company’s East African operations will be boosted by Imdex’s growing presence in the onshore oil and gas market in this region.

• Growth is also expected in the Americas, largely due to Imdex’s global alliances, recent acquisitions and high levels of exploration expenditure in Latin America.

• The ongoing emphasis on research and development will help maintain the Company’s competitive edge in the resources industry and enable further expansion into the oil and gas market.

Based on current market conditions and Imdex’s performance to date, your Directors are pleased to forecast a full year revenue target of $152 million and an EBITA target, from normal operations, of $42 million.

For the remainder of the year, we will focus on Imdex’s core business, which is, providing the very best drilling fluids and down hole instruments, and continue to invest in the development of intellectual property.

In addition, we will continue to consolidate operations and increase Imdex’s capacity to manufacture products and support customers in all the major mining and exploration regions throughout the world.

Your continued support is greatly appreciated as we have a very strong commitment to ensuring Imdex is a leading global provider of drilling fluids and advanced down hole instrumentation to the resources and energy industries.

Yours Faithfully,

Bernie Ridgeway

Managing Director

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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