IMDEX LIMITED — Interim / Quarterly Report 2012

Apr 26, 2012

Imdex Limited Newsletter | Issue 30 | April 2012

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Contents
Our performance 1
Minerals division 4
Oil & Gas division 5
Products update 5
Outlook 8
Key priorities for 4Q12 8
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Key Performance Indicators

Combined 3Q12 YTD revenue (m) EBITA YTD (m) revenue $ $ 35[%] 206[.5] 54[.1] up from 3Q11 Including DHS JV up 63% from 3Q11

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Record third quarter

Dear Shareholders

Welcome to Imdex News, the newsletter for shareholders of Imdex Limited. We are delighted to bring you this edition with insights for investors about our performance in the third quarter (3Q12) for the nine months to 31 March 2012. The Group is continuing to perform strongly through growing market share in the key mining regions of the world and progressing the oil & gas growth initiatives.

In the nine months to 31 March 2012, Imdex’s year-to-date performance was strong. The unaudited financial results from continuing operations were:

• Combined revenue (including equity accounted DHS JV revenue of $5.7 million) of $206.5 million, which exceeds our revenue for the whole of FY11

• EBITA (including equity accounted DHS JV result) of $54.1 million and up 63% on the previous corresponding period (3Q11: $33.2 million) and more than $6 million up on the EBITA for the whole of FY11.

The unaudited financial results for the third quarter (3Q12) to 31 March 2012 were:

• Combined revenue of $66.6 million (including equity accounted DHS JV revenue of $4.4 million), a 35% increase on the previous corresponding period of $49.2 million

• EBITA of $15.8 million, a 32% increase on the previous corresponding period of $12.0 million.

Our performance

Imdex’s combined revenue of $206.5 million is a nine month record for the Company, exceeding the YTD 31 March 2011 high of $145.1 million by 42%. The strong growth in YTD EBITA to $54.1 million reflects robust business activity in all four major mining regions of Asia Pacific, Africa, the Americas and Europe. Growth in Imdex’s Minerals division, up 45% to $180.3 million, was the key driver for the Group’s revenue growth, and reflected continued strength in global drilling activity and increased mineral exploration expenditure. However the 3Q12 result was negatively impacted by the transition from the winter drilling season to the summer drilling season in Canada and abnormally wet weather conditions in Australia.

Minerals industry initiatives

The global minerals industry we service requires solutions to help overcome limitations to the drilling process in environmentally sensitive areas and where water access is limited. Few solutions are more important than a way to reduce the environmental impact and consumption of water during exploration drilling operations. AMC’s Solids Removal Unit (SRU), currently being rolled out in Australia, is the solution for companies committed to safe, environmentally-acceptable drilling operations.

Imdex Limited Newsletter | Issue 30 | April 2012 | Page 1 of 8

Imdex Limited Newsletter | Issue 30 | April 2012

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The SRU is at the forefront of fluid recycling technology, combining our knowledge of drilling fluids with unique centrifugal engineering for solids removal. To keep up with the growing demand for technology in the minerals industry, the new SRU was developed specifically for the diamond drilling industry. Further information about the SRU is detailed on page 5.

We are also releasing a number of new products under the Reflex brand. Further information about the latest market leading technology within our Group is outlined on pages 5 to 7.

Oil & Gas industry initiative

As announced in January 2012, the DHS JV acquired the highly successful US-based oil & gas down hole survey provider, Vaughn Energy, for US$100 million. This is an exciting venture for the Group, particularly for the Oil & Gas division, and the DHS JV. Further information is contained on page 5.

Looking at the global resources markets, robust precious and base metals prices and profitable operations for many mining companies around the world has lead to the industry’s aggregate market cap breaking US$2 trillion for the first time since August 2011. Drilling for copper and gold dominates global non ferrous exploration expenditure according to Metals Economics Group, Canada (as shown in the MEG graphs on page 3). MEG is forecasting a 5-15% increase in non ferrous minerals exploration budgets for calendar year 2012 on top of the 50% growth in budgets for last year (2011). This takes mineral exploration budgets in 2012 to unprecedented levels – likely to be just over US$20 billion for non-ferrous minerals and an additional $2.5 billion for iron ore.

Market review

• Continued robust trading activity in every region (Asia Pacific, the Americas, Africa and Europe)

• Reflex rental fleet continues to perform well (see graph below)

• Exploration expenditure rises in all regions

• European debt crisis continues to make news

• New revenue and earnings records expected in 4Q12.

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Reflex rental fleet
Instrumentation on hire
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Imdex Limited Newsletter | Issue 30 | April 2012 | Page 2 of 8

Imdex Limited Newsletter | Issue 30 | April 2012

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Despite the massive growth in exploration expenditure for gold, the number of new world class discoveries (>2m ounces) has been in decline over recent years with only one new discovery in 2011 and three in 2010. It takes 10-14 years from discovery to production for the average gold project. Given the increasing difficulty in finding these new world class deposits, the heightened political risk, the lack of infrastructure in the higher sovereign risk jurisdictions and the environmental issues, it is realistic to expect that the discovery to development timeframes will increase rather than decrease.

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Source: MineSearch and Gold Reserves Replacement Strategies. Reproduced with permission from Metals Economics Group.

It is a similar story for copper, however the news is even worse. The number of new world-class discoveries (>500,000 tonnes) included only two world-class discoveries in 2009, none in 2010 and only one last year. MEG have stated that it takes approximately 20 years from discovery to production for the average copper project. Our comments in relation to development timeframes for gold projects apply equally to copper.

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Source: MineSearch and Copper Reserves Replacement Strategies. Reproduced with permission from Metals Economics Group.

Imdex Limited Newsletter | Issue 30 | April 2012 | Page 3 of 8

Imdex Limited Newsletter | Issue 30 | April 2012

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The Group has two district business divisions, Minerals and Oil & Gas. The following summarises their financial and operational performance in 3Q12.

Minerals division

Imdex’s Minerals division consists of AMC drilling fluids and chemicals, and Reflex down hole instrumentation. In 3Q12, revenue for the division was $56.3 million, representing 85% of Imdex’s quarterly revenue and reflected the continued strength in global drilling activity and increased mineral exploration expenditure. This was despite some negative affects from cyclones in Western Australia, flooding in Queensland and northern New South Wales, political unrest in PNG and Mali and seasonal factors in Canada.

Key operating highlights:

• Strong customer interest and support expressed at recent Indaba and PDAC Conferences

• Commercialisation of AMC’s Solids Removal Units for the diamond drilling industry

• Strong revenue across all of the major mining regions

• Continued growth in the Reflex rental fleet as a result of ongoing investment in product development, strong drilling activity and new product releases

• Finalisation of the acquisition of System Mud (Brazil) to further drive operational and geographic efficiencies and growth in South America, one of the key regions for Imdex.

Introducing System Mud Brazil

Imdex is pleased to welcome System Mud into the Group effective 1 August 2011. System Mud is a bolt on acquisition consistent with our focused strategy to grow the Company’s global presence in its core operations and strengthens Imdex’s market position in Latin America, particularly in Brazil. It is difficult to be competitive supplying drilling fluids to the Brazilian market from outside the country and AMC needed a presence in country.

System Mud was established in 1999 and is based in Itajai in Santa Catarina state, Brazil. System Mud is ISO 9001 accredited, manufactures its own products and has become the leading independent drilling fluids supplier to the minerals industry in Brazil. System Mud is focused on manufacturing and marketing drilling fluid systems primarily for the mining and exploration market in Brazil.

The acquisition settled on 19 April 2012 and is immediately earnings per share accretive.

Imdex Limited Newsletter | Issue 30 | April 2012 | Page 4 of 8

Imdex Limited Newsletter | Issue 30 | April 2012

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Oil & Gas division

The Oil & Gas division consists of AMC drilling fluid, production and completion chemicals, and down hole survey services through the DHS JV.

Combined revenue for this division in 3Q12 was $10.3 million, and represented 15% of Imdex’s 3Q12 revenue. This result includes our 30% share of the revenue from the DHS JV. Revenue was negatively affected by flooding in Queensland, New South Wales and central Australia.

The acquisition of Vaughn by our DHS JV supports our strategy to expand our oil and gas business, diversify the Group’s revenue streams and generate approximately 30-40% of Group revenues from the oil and gas market within the next three to four years.

Key operating highlights:

• Progressing the DHS JV for down hole survey services and the subsequent acquisition of Vaughn (detailed below)

• Continued investment in engineering and product development on existing and new instrumentation.

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Vaughn Energy Services

DHS JV’s acquisition of Vaughn Energy Services

The US$100 million acquisition of Vaughn positions the DHS JV as a third global competitor in the approx. US$400-500 million per annum oil & gas down hole survey market, and provides the joint venture with a significant presence in the substantial US onshore oil & gas market.

Texas-headquartered, Vaughn is an oil & gas down hole survey provider with 125 employees, including 75 surveyors and wireline operators, across 13 locations in the US. In calendar year 2011, Vaughn generated revenue of US$39 million.

The combined revenue in calendar year 2012 for DHS Energy Services is expected to be in the range of US$60 million-70 million. The aim is to significantly grow the business over the next 5-7 years to capture around one-third of the projected US$400-500 million annual global onshore and offshore surveying and steering market.

Products update

Solids Removal Unit

An important requirement for most drilling operations is to reduce their impact on the environment. The drilling industry demands products and solutions to reduce the consumption of water and other resources. Imdex’s environmental solution is the Solids Removal Unit (SRU) and changes everything about the current mixing, processing and storage of drilling fluids on site. AMC’s SRU was developed specifically for the diamond drilling industry and employs revolutionary centrifugal technology, in a compact and mobile unit.

The unit is a new way to recycle drilling fluids and remove solids, reducing the consumption of water in operations. In the process of developing this

Imdex Limited Newsletter | Issue 30 | April 2012 | Page 5 of 8

Imdex Limited Newsletter | Issue 30 | April 2012

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Environmental impact of the traditional site using mud pits

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The SRU allows pit-free drilling

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The latest SRU units on the assembly line

technology, many other traditional drilling problems are addressed:

• Environmentally sound : Lowers water consumption, minimises environmental site impact and overcomes various environmental, heritage and physical limitations

• Versatile design : Suitable for both surface and underground drilling, the smallest centrifugal unit available, effective for low and high gravity solids removal, and powered by an onboard electric generator

• Quick, safe and mobile : Significantly quicker to mobilise, easy to use, trailer or skid mounted for convenience, ergonomic operation and set up, robust design for tough conditions.

AMC and Imdex have pursued the development of this exciting technology to meet the needs of the mineral exploration industry for sustainable drilling operations. We are soon to complete a small business acquisition regarding centrifuge technology for both mining and oil & gas through the issue of 0.5 million Imdex Limited shares.

The centrifugal technology is unique in mineral exploration, and particularly revolutionary in diamond drilling. This technology will gradually make the existence of drilling fluid pits and sumps alongside drilling rigs a thing of the past as mining companies and drilling contractors embrace the new technology. The unit is designed to complement AMC’s range of innovative drilling fluids and should handle the toughest environmental and production demands.

As previously announced, we plan to have a number of units (20) in the field by the end of the current financial year. The solids removal technology will have minimal financial impact in FY12, however, is on track to contribute meaningfully to the Group’s revenue and earnings in FY13 and beyond.

Reflex Instruments

Reflex continues to develop advanced instrumentation technology for the mining and mineral exploration markets. Two revolutionary instruments to be released to our customers include the EZ-Gyro and Smart Barrel.

The Reflex EZ-Gyro™ is a state-of-the-art north seeking gyro using cuttingedge, revolutionary technology for mineral exploration.

• North Seeking gyro data in minutes

• Ultra fast infra red data transfer to a hand-held PDA rather than a laptop

• No need for additional field experts, technicians or site supervision

• No complex post survey processing required.

Wide range of applications for the mineral exploration industry as follows:

• Allows the operator to accurately survey in underground operations, inside RC or diamond drill rods or casing

• Measures in all directions including horizontal

• Fully independent operation – no conducting cables, surveying vehicle or technician required.

Imdex Limited Newsletter | Issue 30 | April 2012 | Page 6 of 8

Imdex Limited Newsletter | Issue 30 | April 2012

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No core sample
recovered
Ore body
Corrected path
Uncorrected path
Main ore body
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Current practice using down hole mud motor

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Core recovered
30 m, 5 g/t Au
Ore body
Main ore body Corrected path Uncorrected path
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Reflex Smart Barrel core recovery

Core drilling is an important part of the drilling process but various aspects make it very challenging, particularly at greater depths and as ground pressures affect the instrumentation. The Reflex Smart Barrel facilitates deeper and more accurate directional core drilling than ever. The Smart Barrel makes it possible to control deviation, steer the hole accurately to the target, and collect a core sample at the same time.

The current method largely used by the industry is to employ a down hole motor through the deviated section of the hole, however, this uses a full face bit which does not enable core recovery. This leaves the geologist in a difficult position because he does not know whether any significant mineralisation passed through the deviated section of the hole which could be 30m to 50m long. The Smart Barrel allows the geologist to recover core through the deviated section thereby eradicating guess work and the risk of passing through mineralised ground without knowing it. In addition, this method of uninterrupted drilling provides significant savings in time and money in reaching the target formation. Key features and benefits include the ability to penetrate faster, reduce maintenance costs, save time and does not require additional technical operators. The Smart Barrel is compatible with all Reflex survey and orientation instruments and is user friendly.

The range of Reflex instruments is designed to be user friendly, reduce the overall cost of exploration drilling programs and maximise efficiencies for our customers.

To ensure we remain at the forefront of technology development and as global competition intensifies, we are ensuring that this value and any Intellectual Property is adequately protected, both internally and externally.

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PDAC Conference 2012

The PDAC Conference is the largest gathering of prospectors, geologists, promoters, financiers, drillers and mineral exploration equipment and service suppliers in the world. In a new record, more than 30,000 people attended the 80th PDAC from 4 to 7 March 2012 – topping last year’s record of 27,000 delegates.

Imdex’s Minerals division was represented once again this year with both the AMC and Reflex brands and a multi-lingual team from our Australian, Canadian, Mexican, Chilean and Brazilian operations. AMC and Reflex met with each of our major global customers and many of our regional customers during the four day event, discussing their needs and our capabilities and new products. The mood of our customers was optimistic for 2012.

AMC and Reflex exhibiting at the PDAC conference

Imdex Limited Newsletter | Issue 30 | April 2012 | Page 7 of 8

Imdex Limited Newsletter | Issue 30 | April 2012

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Outlook

It has been a very positive year for Imdex so far as we continue to set new records with our financial performance. As reported by MEG, metals prices remain robust and continue to trade above their long-term averages. Drilling contractors continue to report strong demand from major, intermediate and junior mining/exploration companies, and rig utilisation rates are continuing to be strong, particularly in Africa and Latin America.

The transition from the winter drilling season to the summer drilling season in Canada, the unseasonally wet weather in parts of Australia and the political unrest in Mali and PNG which all impacted negatively late in 3Q12 are likely to flow into the early part of 4Q12.

This is an exciting time for our Group as we realise the benefits of our commitment to product development across the AMC and Reflex brands. We also continue to focus on integrating with our latest acquisitions and the DHS JV to maximise our customers’ chances of success in their operations with our innovative products and services.

As always, the latest news and updates from Imdex are available on our website at www.imdexlimited.com

Key priorities for 4Q12

In the next quarter, the Imdex Group will be focussed on:

• Delivering the much-anticipated Solids Removal technology to our customers in Asia Pacific ahead of other major mining markets in FY13

• Releasing new and improved products under the AMC and Reflex brands

• Driving growth in oil & gas revenues, especially through the acquisition of Vaughn by DHS

• Continuing to invest in mining and oil & gas technologies to maintain Imdex’s competitive advantage and grow market share globally.

Yours faithfully,

Bernie Ridgeway

Imdex Limited, Managing Director

Imdex Limited Newsletter | Issue 30 | April 2012 | Page 8 of 8