LYCOPODIUM LIMITED — Annual Report 2012

Sep 11, 2012

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Shareholder Report 2012

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2 Managing Director’s Report 4 The Board of Directors 7 About Lycopodium

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Contents

1 Chairman’s Report

Financial Snapshot (As at 30 June 2012)

38,655,103 Shares on issue

12 Project Reviews 18 Financial Information

20 Shareholder Information

21 Corporate Directory

139.1 cents Net tangible assets per share

$232.3 million

Revenue

$22.4 million Net profit after tax

57.3 cents

Earnings per share after tax

33.0 cents

Dividend per share (fully franked)

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Chairman’s Report
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My name is Mick Caratti. I am one of the founders and presently chairman of Lycopodium. This publication is designed to introduce you to the company, telling you who we are, what we do and how we see our future. This report does not replace the statutory financial statements but is designed to provide an informative insight into Lycopodium in an easier to read layout.

To begin with some thoughts on the major trends that affects our industry as we see them.

• The 2011/2012 financial year has seen a steady reduction in the price of commodities which will lead to some fundamental changes. As juniors find it more difficult to raise capital for iron ore projects we expect to see some consolidation among the existing iron ore juniors around those that have achieved production. We have already seen the sale of a number of projects by juniors companies to China and will be watching to see how these projects proceed. We expect that the gold price will stay strong as commodity prices trend down as a result of the continuing uncertainty in Europe.

• To date there does not seem to have been a reduction in activity in Africa which is probably a result of the comparative lack of activity there over the past two decades, the recent realisation by the industry of the prospectivity of the region and increased government stability in many countries.

• Within Australia there have been few new projects though the size of the iron ore and gas projects has masked this fact. Explorers have in many cases have looked to other regions as the cost of development has increased in Australia.

• The competition for engineers and trades people in Australia has become very difficult as domestic housing and infrastructure projects compete with the oil and gas and minerals export sector. In spite of the sobering tone of the above comments we believe Lycopodium is in a good position.

• The reduction in commodity prices will lead to increased competition but will ease issues with access to people as the work will flow to those companies that can demonstrate that their teams and approach produce successful projects.

• As commodity prices stabilise or fall there will be a demand for brown field expansions to optimise previous investment in infrastructure.

• Finally the development of African projects by new owners will depend on the knowledge of companies with experience in the region Lycopodium has demonstrated its ability in all of these areas and we believe we are already seeing the results in our discussions with clients.

In addition the conservative approach that the company has taken with growth has resulted in the company being able to finance its growth without resorting to debt or dilution which provides confidence for both the shareholders and clients.

The last year has seen some interesting developments in Lycopodium.

The Canadian office that I mentioned in my letter last year has grown significantly and is now undertaking work for three major North American companies. Our aim in opening the office was to service North American clients with projects in Africa but it also offers the prospect of work in the future in North and South America. It currently has a focus on studies and design but is developing expertise in project development.

A new office has been opened in Newcastle to service the heavy rail industry. These services will also complement our process plant and infrastructure services on larger projects.

The opening of the Canadian office (with a 12 hour time difference to our Perth office) has shown the need for all Lycopodium offices to have common systems and for the organisation to be able to work together on projects as it is now common for two or three offices to be involved in a project or study. The management team has begun the process of further streamlining the procedures to allow work to be more efficiently shared according to the availability of resources.

This has been another record year for Lycopodium and I would like to thank the staff, managers and directors of Lycopodium and its subsidiaries for their efforts and commitment.

I hope you find the following information of interest and if you have any questions, please call me.

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M J Caratti Chairman

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Managing Directors Report
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On behalf of the Board of Directors I am pleased to report a record result for the 2011/12 financial year, reflecting the strong demand for services across the group and a significant portion of our project pipeline progressing from detailed design into construction.

Our workload remains spread across a range of commodities, notably gold, iron ore, nickel and copper and includes both domestic and international projects. Lycopodium has secured a number of feasibility studies and detailed design briefs which hopefully will maintain our project pipeline of opportunities.

Our organic growth initiatives have continued to gain momentum during the year with Lycopodium Minerals Canada and OMC Canada both progressively growing their teams and securing new work with Clients. Lycopodium Rail commenced operation to service the heavy rail sector in the Hunter Valley. Additionally the level of interaction amongst the various offices continues to develop in response to the needs of our multi-national Clients.

Our core strategy continues to concentrate on the delivery of EPCM consulting services. This focus has enabled the company to develop a world class capability in delivering large projects for leading multi-national companies. Our aim with this strategy is to consistently deliver quality and value in all aspects of our Clients’ projects. Lycopodium enjoys a strong repeat Client base as a result of this singular focus on project excellence.

Full Year Results

During the financial year ended 30 June 2012, Lycopodium realised record revenues of $232 million, a 37% increase from the $169 million in the previous financial year. Net profit after tax increased to $22 million, as compared to $17 million in the previous financial year, a 31% increase. There were no extraordinary items in the profit figures for 2012.

Basic earnings per share increased from 44 cents for the previous financial year to 57 cents. The Directors have resolved to pay a final dividend of 21 cents fully franked.

The total dividend for the year is 33 cents fully franked compared to 30 cents for the previous financial year.

Outlook

The outlook for Lycopodium’s services in 2012/13 will be supported by current major projects under construction. Feasibility studies and replacement projects will be needed during the year to maintain current revenue levels.

At present the overall outlook is more difficult to forecast as compared to the same point in time in the financial year just completed.

On the down side, global economic uncertainty, escalation pressures associated with capital projects and the softening of commodity pricing will potentially result in a reduced pipeline of projects. This will be reflected in the resource services sector through junior mining companies struggling to secure finance for projects and major multi-national companies reining in the scale and/or number of major development projects.

On the up side, efforts by companies to drive operational efficiencies and reduce capital spends will create opportunities in brownfield projects and feasibility studies. Additionally gold remains a strong commodity and offers potential projects, particularly outside of Australia. Lycopodium remains well placed to service these opportunities.

Given the current uncertainty the company will return to our historical norm of providing a revenue and profit guidance as part of the mid-year results, when there is improved visibility for the overall 2012/13 financial year.

Corporate Overview

As reported in the prior year, we opened an office in Toronto, Canada for Lycopodium Minerals and for OMC.

Since commencement of operations this organic initiative has continued to grow with current staff levels at 65. The office has secured several studies and consulting briefs from major North American clients with projects predominantly in Africa.

Within Australia, Lycopodium Rail was established during the year to service the heavy rail sector in the Hunter Valley. This Newcastle, NSW based team is intended as a small niche consultancy complementing the range of services provided by Lycopodium.

SUPL changed their corporate name to Lycopodium Asset Management during the year to reflect their industry sector. Additionally the group established a presence in Brisbane to service eastern states clients and in Manila to access additional resources.

During the past year there was a high level of capital investment in core infrastructure for the existing operating entities in support of the increased operating levels.

• Lycopodium Minerals in Manila installed a new IT data centre and refreshed its PC fleet.

• Lycopodium Minerals in Toronto expanded its office lease facilities to accommodate the increasing staff levels.

It is planned for continued high levels of capital investment in the business in 2012/13.

Operational Highlights

This year has been highlighted by the progression of three strategic projects through the design phase and into site construction. These major projects are complemented by a range of smaller projects and significant feasibility studies across the group.

Provided below is an update on the three major projects previously highlighted. Each of these projects will remain under construction through the 2012/13 financial year.

• The Akyem Project in Ghana West Africa for Newmont is complete from a design and procurement perspective and is now focussed on construction. Early infrastructure is complete and operational. The main process plant and balance of the infrastructure are under construction. Within the main process plant the earthworks are complete, concrete and field erected tanks are well advanced and the structural, mechanical and piping installation has commenced.

• The Marandoo Project in Western Australia for Rio Tinto is nearing completion of the detailed design. Early infrastructure is complete and operational. The mine dewatering is well advanced with the initial bores now operational. The main construction phase on the iron ore processing plant and balance of the infrastructure has commenced.

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2 Shareholder Report 2012

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232.3
169.8
146.8
120.5 120.3
104.64
07 08 09 10 11 12
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Revenue ($ Millions)

• The Tropicana Project in Western Australia for the Tropicana Joint Venture (AngloGold Ashanti – 70%, Independence Group – 30%) is complete from a design and procurement perspective and is now focussed on construction. The access road, air strip and early infrastructure works are complete and operational. Construction is in progress on the process plant, permanent accommodation village and balance of the infrastructure. Within the main process plant the earthworks are complete, concrete and field erected tanks are in progress and the structural, mechanical and piping contractor is preparing to mobilise to site.

Lycopodium Minerals, via the Brisbane, Perth and Toronto offices, has also progressed or completed the following projects during the year:

• The Tasiast Dump Leach Project in Mauritania for Kinross was completed and handed over to the operations. Additional work has also been completed in relation to expansion of the accommodation facilities. An upgrade to the existing processing plant has progressed through detailed design.

• Ongoing assistance is being provided to the Hidden Valley Operations as part of the debottlenecking and improvement activities. The Hidden Valley Operations in PNG is a joint venture between Newcrest Mining and Harmony Gold.

• Detailed design and procurement were completed for the Bissa Gold Project in Burkina Faso on behalf of Bissa Gold SA. Construction is in progress on site with concrete and field erected tanks nearing completion and structural, mechanical and piping installation commenced.

• Construction and commissioning of the Sabodala Gold Project Upgrade in Senegal on behalf of Sabodala Gold Operations SA was completed.

• Detailed design of the Sentinel Project copper concentrator facilities in Zambia commenced during the year.

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33.0
30.0
27.0
25.0 25.0
17.5
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22.4
17.1
16.0
14.1
12.4
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Net Profit After Tax ($ Millions)

Dividends (Cents)

HSE & Community

• The feasibility study for the Nammuldi Project in Western Australia for Rio Tinto was completed during the year. Lycopodium, in joint venture with URS, was subsequently awarded EPCM services associated with the infrastructure for the project.

There has been a continued focus on health, safety and the environment as the construction activities reach record levels within the company and the industry abroad. To this end additional management capability has been added to ensure a proactive and hands on approach to HSE across the domestic and international sites.

Lycopodium Process Industries remained active in the chemicals and manufacturing sectors. Key projects and studies undertaken during the year have included multiple briefs on behalf of Thales in relation to acid handling and gas scrubbing within a chemicals manufacturing plant producing propellants and explosives, detailed design of facilities to enable an alternative feedstock to be processed through a biodiesel facility, and front end engineering design of a gas scrubbing facility for a metal refinery.

In 2010/11 there were 8.6 million manhours worked across the Lycopodium managed projects with a LTIFR of 0.82 against a 13.7 construction industry average. Targeted training initiatives were implemented during the year in order to further enhance the safe working environment across our sites.

On the community side, Lycopodium remains an active sponsor and supporter of the Clontarf Foundation, a charitable not-for-profit organisation improving the education, discipline, self-esteem, life skills and employment prospects of young Aboriginal men. Lycopodium also continues to provide support to a number of universities. The company supports a number of charitable initiatives championed by staff.

Lycopodium Asset Management continued to provide services to long term clients during the year, based on major reliability and maintenance engineering briefs with Woodside in the oil and gas sector and BHP Billiton and Citic Pacific in the minerals sector. The new Brisbane office secured an initial brief in the sugar industry.

Orway Mineral Consultants provided comminution circuit design and optimisation services across a wide range of commodities, with the gold and iron ore sectors being particularly buoyant. Hydrometallurgical services were provided in uranium, manganese, cobalt and nickel.

Acknowledgement

Lycopodium is extremely proud of the achievements of our personnel over the last year. The Board of Directors acknowledges that the company’s ability to continue to deliver world class services to our Clients and to maintain and enhance the company’s performance and capability is dependent on the continued commitment and support of our personnel.

Lycopodium Infrastructure provided design services to several of the major greenfield projects being undertaken in the minerals sector, both directly to clients and as part of major projects being undertaken by Lycopodium Minerals.

We would also like to thank our Clients for their continued trust in Lycopodium to deliver services to their projects and studies. We will as always work hard to maintain these valued relationships.

Lycopodium Rail has secured a number of consulting briefs in rail infrastructure management since establishing this past year.

On behalf of my fellow Directors I take this opportunity to sincerely thank all personnel for their highly valued contribution over the last year.

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Rod Leonard Managing Director

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Board of Directors
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Non Executive Chairman Michael (Mick) Caratti

Mick has over 36 years’ experience in the mineral processing industry with involvement in conceptual evaluation, engineering, commissioning and study management for new and existing projects in Australia and overseas.

Mick has extensive experience in company management having been a director and shareholder of a successful engineering consulting company from 1982 to 1987, and then as a director and shareholder of Lycopodium from its formation in 1992.

Mick’s primary role as Chairman is to take a global view of the engineering industry and Lycopodium’s place in it whilst maintaining the Company’s founding philosophies and strategies. However, Mick continues to be involved at a project level as a Senior Consultant as required.

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Rodney (Rod) Leonard Managing Director

Rod has been the Managing Director of Lycopodium Limited since January 2010.

One of the founding partners of Lycopodium and an Executive Director of Lycopodium Limited since listing in 2004, Rod has been a Director and Chairman of Lycopodium Minerals and a Non Executive Director of Orway Mineral Consultants.

His management roles within Lycopodium Minerals have included that of Technical Director for the Risk Management Group, Managing Director, General Manager of Operations and Manager of Metallurgy.

Rod has over 27 years’ experience in a variety of roles in the operation and project development of major projects in North and South America, Africa, Asia and Australia and has been involved in many aspects of the mineral processing industry from process development, feasibility studies, and design assignments as well as commissioning of projects.

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Non Executive Director Lawrence (Laurie) Marshall

Laurie was Lycopodium Limited’s Managing Director until early 2010 when, with the appointment of Rod Leonard, Laurie took up the positions of Non Executive Director and Consultant. He is also a Non Executive Director of Lycopodium Minerals Queensland and Lycopodium Process Industries.

As a founding partner and Certified Practicing Accountant with over 40 years’ experience in corporate, financial and operational management, Laurie has been instrumental in the development of Lycopodium from its early days as a privately owned engineering consultancy to that of a public company.

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Executive Director Bruno Ruggiero

Bruno is a Mechanical Engineer with over 27 years’ experience in the minerals industry and a founding partner of Lycopodium.

Currently the Technical Director for Lycopodium Minerals, Bruno sets the technical direction and standards for new project initiatives that the company undertakes. Over the past 18 months, he has been the Project Director for the Tropicana Gold Project.

Bruno is an Executive Director of Lycopodium Minerals and a Non Executive Director of Lycopodium Asset Management.

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Peter De Leo Executive Director

Peter is Managing Director of Lycopodium Minerals Pty Ltd, Peter has previously held the roles of General Manager – Operations, Manager of Projects and Project Director within the organisation. Peter is a Civil Engineer with over 24 years’ experience within the construction and engineering industries. Peter possesses strong business management and project implementation skills and has been responsible for the successful delivery of manyof Lycopodium’s pioneering and large scale projects.

A Fellow of the Institute of Engineers Australia, Peter maintains an active involvement with industry associations and tertiary education institutions both as a representative of the organisation and of industry.

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Executive Director Robert (Bob) Osmetti

Bob is a Civil Engineer with over 34 years’ experience in the project management and construction management of projects in an EPCM role and has worked for major construction contractors in the mining sector.

He brings direct experience in all aspects of project implementation, estimating, scheduling and construction management as well as the management of a number of feasibility studies for major resource projects in Australia and overseas.

Bob is one of the founding partners of Lycopodium and has held diverse positions within the group and continues to apply his expertise across the group companies as Director – Projects. Bob is also a director of Lycopodium QLD and Lycopodium Infrastructure.

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Keith Bakker Company Secretary / Chief Financial Officer

Keith has been with Lycopodium for 16 years and in that time has carried out the roles of Commercial Manager and General Manager Finance.

A Fellow of the Certified Practicing Accountants of Australia, he brings to his role of Company Secretary and Chief Financial Officer, over 30 years’ experience in company secretarial and finance roles within the airline, human resource management and mining services sectors.

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6 Shareholder Report 2012
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About Lycopodium
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Lycopodium Limited is a leading Australian headquartered engineering and project management consultancy with offices nationally in Perth, Melbourne, Brisbane and Newcastle and internationally in Canada, Ghana and the Philippines.

Our Company

Lycopodium delivers consistently high quality, diverse and cost effective services across a broad range of commodities in the mining and mineral processing industries as well as a wide range of sectors in the process industries. Services are provided through the following subsidiaries:

• Lycopodium Minerals

• Lycopodium Minerals Queensland

• Lycopodium Minerals Canada

• Lycopodium Process Industries

• Lycopodium Infrastructure

• Lycopodium Asset Management

• Lycopodium Rail

• Orway Mineral Consultants

Listed on the Australian Stock Exchange in 2004, Lycopodium’s board, executives and employees are a diverse and experienced team with a strong knowledge of the engineering industry.

Our Business

Lycopodium’s business model is based on consistently delivering a quality service to clients by delivering studies, engineering, projects, and maintenance advice that are fit for purpose and that exceed established acceptance criteria. In this way Lycopodium adds value to a client’s business leading to long term beneficial relationships.

We work closely with our clients to evaluate, develop and implement engineering solutions for their projects and our involvement starts from the early conceptual planning moving through the feasibility phases to the completion of design, construction, commissioning and handover, continuing with reliability engineering and maintenance services on operational sites.

Our contracting model is predominantly EPCM based (Engineering, Procurement, Construction Management).

Our work, reflecting diversity in not only client background, but commodity, technology, scale of operation and geographic location, falls into six broad groups:

Mineral Processing

Projects, undertaken in diverse environments including tropical, arid, arctic and high altitude conditions, range in scope from large greenfields projects involving process plant and equipment, civil and building works, control systems, services and infrastructure to small skid-mounted pilot plants.

Our Mining and Mineral Processing clients range from major multinational producers through to junior exploration companies and their projects involve a wide range of commodities: gold, silver, copper, cobalt, iron ore, nickel, zinc, lead, manganese, uranium, tin, tantalum, mineral sands, rare earth minerals and platinum group metals.

Infrastructure

Lycopodium has wide-ranging experience managing the assessment, design, planning and implementation of a variety of infrastructure elements, both independently and in conjunction with mineral processing projects. Infrastructure elements include power supply, water supply, accommodation, industrial buildings, roads and general infrastructure.

Process Industries

Our Process Industries clients, many of them household names, produce a wide variety of products in the manufacturing, pharmaceutical, chemical, food and beverage, healthcare, oil and gas and petrochemical sectors.

With this diversity of sectors, Lycopodium’s expertise is wide, ranging from greenfield production facilities through to cutting-edge biotechnology and scientific research projects.

Renewables

Lycopodium is at the forefront of developments in renewable energy and energy efficient including solar, biofuels, and heat energy recovery.

Rail

Lycopodium provides rail infrastructure asset management services, feasibility study and detailed design services to the heavy rail industry. These services are often complimentary in nature to larger projects undertaken within the group which include a rail component.

Maintenance & Reliability Engineering

Maintenance and Reliability Engineering clients come from the oil and gas, petrochemical, power and water utilities, mining and minerals processing industries.

In this sector, there is significant experience in re-engineering existing systems for brownfield operations as well as developing and implementing new maintenance management systems for greenfield operations.

Project examples of the various commodities and industry sectors in which Lycopodium has worked during the 2011/12 year follow later in this shareholder report.

Our Services

Over the years, Lycopodium has developed a reputation for providing technically innovative and cost effective engineering solutions as well as delivering projects which exceed the client’s project criteria and performance targets.

Our services fall generally into four areas of expertise:

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About Lycopodium
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Process

Lycopodium’s process group has a wide range of experience to undertake the development of new processes and determine the viability of new and existing processes, including:

• Planning, design, supervision and interpretation of laboratory, bench-scale and pilot-scale test programs.

• Flowsheet development, mass and energy balances, process modelling, process design specification.

• Management and co-ordination of necessary skills in the production of studies. These studies are done at different levels of confidence depending on the stage of investigation and are usually defined as concept study, prefeasibility study and detailed feasibility study.

• Evaluation and selection of new and alternative processes at the conceptual and pre-feasibility study stages to determine the viability of new and existing processes.

• Comminution circuit design using specialist database and in-house software to design crushing and grinding circuits and predict their performance.

• Hydrometallurgy for base metals and uranium.

• Commissioning, training and operations services.

• Design, construction management and operation of pilot plant installations.

• Plant audits, debottlenecking evaluations and staged development planning.

• Environmental compliance processes, e.g. cyanide recovery and destruction, arsenic fixation and disposal, metal precipitation and water management.

Engineering

Lycopodium’s engineering group can offer a wide range of expertise for the development of a project, including:

• Conceptual and detailed design of treatment plants.

• Conceptual and detailed design of plant associated infrastructure including earthworks, roads, drainage, power

• supply and transmission systems, buildings and villages, water and wastewater systems.

• Design expertise covering all relevant disciplines including:

• Architectural

• Civil

• Structural

• Mechanical

• Piping

• Electrical

• Instrumentation

• Process controls

• Design, program, test and commission plant automation control systems.

• Conceptual and detailed design of portable and skid-mounted plants.

• Plant debottlenecking, upgrading and improvements.

• Troubleshooting and modification of mechanical and electrical installations.

• Design expertise in tropical, arid, arctic and high altitude locations.

• General engineering consulting services including due diligence reports, project valuations and debottlenecking studies.

Project Delivery

Lycopodium undertakes the engineering, design, procurement and construction management (EPCM) of clients’ projects, including:

• Full project management on a predominantly EPCM basis to deliver complete projects.

• Project controls including cost control and scheduling.

• Tender preparation and evaluation.

• Procurement, expediting and inspection services.

• Plant evaluations and assessments for insurance or sales purposes.

• Capital and operating cost estimates.

• Financial evaluation of projects.

• Client representation.

• Development and implementation of project accounting services.

• Development and implementation of project maintenance and reliability engineering services.

• Logistical and transport management.

Maintenance and Reliability Engineering Services

Lycopodium can assist plant site operators to reduce operating costs and increase productivity, whilst complying with statutory regulations and duty of care obligations, by re-engineering their maintenance management practices and implementing the required change processes.

These services fall within the following areas:

• Maintenance System Development – the preparation of work instructions to provide comprehensive maintenance actions.

• Optimisation – the fine tuning of systems, procedures and processes to cost effectively provide the highest availability and reliability for an operational site.

• Materials Management and Optimisation – encompasses all aspects of identifying, categorising and organising equipment in a facility or system.

• Operational Readiness – the provision of services to assist clients to initiate operation of new projects.

• Planning – the detailed processes and practices that form the maintenance planning cycle.

• Plant refurbishment and relocation.

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8 Shareholder Report 2012

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About Lycopodium
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Our People

Engineering consulting is a service industry and Lycopodium is dependent on its people for the quality of service it provides. Lycopodium is proud of the professionalism and loyalty of the team it has assembled and their achievements in the innovative and cost effective design and construction of projects in diverse industries and regions.

Lycopodium uses a team approach to its work where each project has a team drawn from the disciplines required and is led by a project manager. Each discipline is headed by a discipline manager who is responsible for monitoring and controlling the quality of work within the discipline and ensuring each project manager has sufficient resources to run the project team. Regular formal management meetings are held to review progress, cost and quality and ensure all projects are fully resourced, on time and on budget.

Our Projects

Lycopodium, while Australian based, operates both nationally and internationally and has undertaken projects and studies in over 50 countries in diverse locations such as Burkina Faso, Cameroon, Canada, Cote D Ivoire, Democratic Republic of the Congo, Egypt, Finland, Ghana, Kazakhstan, Malaysia, Mauritania, Papua New Guinea, Philippines, Senegal and Tanzania.

Our Clients

Lycopodium services a wide range of organisations headquartered throughout the world including:

• AngloGold Ashanti

• Barrick

• BHP Billiton

• Bluescope Steel

Our Goals

Lycopodium’s aim is to be the best in its field and believes its success is a function of the success of its clients’ projects. Lycopodium has a proven track record of meeting budgets and schedules and achieving project performance criteria on both large and small projects and in greenfield (new) and brownfield (existing operating plant) environments.

A successful company doesn’t stand still – it grows, accepting new challenges and resetting goals, which for Lycopodium reflects in larger, more complex projects and work in new areas, be they technical or geographic. In order to assist this growth Lycopodium’s strategies are as follow:

Clients Lycopodium focuses on achieving clients’ aims as its primary objective and its success is demonstrated by the high level of client satisfaction and repeat business the company enjoys.

People Lycopodium continues to build and retain a team of respected professionals in each of the disciplines required in an engineering consultancy and project delivery business. Our teams are based in offices nationally in Perth, Melbourne, Sydney, Gladstone and Brisbane, and internationally in Ghana, the Philippines, and on project sites as required.

Profitability Lycopodium’s objective is to maintain consistent profit margins while not exposing the Company to unacceptable risk.

Growth Lycopodium continues to focus on organic growth in alternative geographic locations and through strategic acquisition where clear added value to the business can be demonstrated.

• Dulux

• Endeavour Mining

• First Quantum Minerals

• GlaxoSmithKline

• Gold Fields

• Independence Group

• Kinross

• Newmont Gold

• Newcrest Mining

• Orica

• Outotec

• Pfizer

• Port Waratah Coal Services

• Rio Tinto

• Teranga Gold

• Thales

• Xstrata

• Toyota Motor Corporation

• Yakult

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10 Shareholder Report 2012

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Project Reviews
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Project: Bissa Location: Burkina Faso Client: Bissa Gold SA Sector: Minerals - Gold

Project: Sabodala Location: Senegal Client: Teranga Gold Corporation / Sabodala Gold Operations SA Sector: Gold

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Burkina Faso, is a landlocked country located to the north of Ghana in West Africa that relies on cotton and gold exports for revenue. About 90% of the population is engaged in subsistence agriculture vulnerable to periodic drought, with cotton as the main cash crop. Since 1998, Burkina Faso has embarked upon a gradual privatisation of state-owned enterprises and in 2004 revised its investment code to attract foreign investment. As a result of this new code and other legislation favouring the mining sector, the country has seen an upswing in gold exploration and production. Gold mining production doubled between 2009 and 2010 and by 2010, gold had become the main source of export revenue.

Bissa Gold SA is a company 90% owned by High River Gold Mines Limited (which is a part of London-listed Nordgold company, LSE: NORD) and 10% owned by the Burkina Faso Government.

Bissa is a greenfield project comprising a carbon-in-leach plant and associated facilities capable of treating 3 Mtpa of gold bearing ore. Lycopodium’s scope has been to provide EPCM services for the design, construction and commissioning of the treatment plant and associated plant site buildings.

Work commenced on the project in April 2011 and, at July 2012, is on track to commence gold production in the first quarter of 2013. The project is located approximately 85 km north of Ouagadougou, the capital city of Burkina Faso. Most freight destined for the project arrives at the port city of Tema, in Ghana and is then trucked over 1,000 km to site. The project utilises Lycopodium’s 18 year track record of managing logistics through Ghanaian ports and calls upon operational support of the Lycopodium offices and facilities. As with all Lycopodium’s African projects, equipment and fabricated items will be procured internationally and contracts will be let to local, regional and international contractors to construct the facilities.

Teranga Gold Corporation, listed on the Toronto Stock Exchange and the Australian Securities Exchange and with head office in Toronto, was created in November 2010 to acquire the Sabodala gold mine along with a large exploration land package located in Senegal, West Africa.

Sabodala, an open pit mine and on-site processing operation located in south east Senegal near the Mali border, is in an area only recently opened for mining and exploration and is the only large scale gold mine to come into operation in Senegal. It is 650 km east of Senegal’s capital Dakar, within the West African Birimian geological belt in a region that is emerging as a significant new gold exploration area.

The Sabodala processing plant was constructed in 2008 with the first gold pour occurring in March 2009. Teranga believes the mine operation together with the prospective land package provides the basis for growth in reserves, production, earnings and cash flow. In 2011 Teranga set about expanding the processing plant to increase the design capacity to achieve a base of 200,000 oz of production per annum by incorporating a new partial secondary crushing circuit, secondary crushed ore stockpile with reclaim, expansion of the grinding circuit with the addition of a new ball mill and upgrading of the leaching circuit and tailings handling facilities.

Teranga awarded the contract to provide the EPCM services for this expansion to Lycopodium with work commencing in November 2011. Since then Lycopodium has completed the engineering, detailed design and procurement activities. Construction was essentially completed in 2Q 2012. The new facilities have been progressively commissioned and handed over to the operations. From 1 July efforts were focused on completion of the remaining punch list items and ramping up to full production capacity.

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12 Shareholder Report 2012

Project: Akyem Location: Ghana Client: Newmont Golden Ridge / Newmont Mining Corporation Sector: Minerals - Gold

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Project Reviews
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Project: Tasiast ADR and CIL Plant Upgrade Location: Mauritania Client: Kinross Gold Corporation Sector: Minerals - Gold

Project: Marandoo Mine Phase 2 Location: Australia Client: Rio Tinto Sector: Minerals – Iron Ore

Canadian-based gold mining company Kinross Gold Corporation owns 100% of Tasiast Mauritanie Ltd. S.A., operator of the Tasiast mine located in north-west Mauritania, approximately 300 km north of the capital Nouakchott. Acquired as part of its takeover of Red Back Mining in 2010, the project is considered by Kinross as a key component of its long term growth strategy. Tasiast is located within an extensive favourable geological system that is largely under explored in a country with natural resources which include iron ore, gypsum, copper, phosphate, gold and oil.

Upon acquisition, Kinross embarked on the initial phase of expansion plans for the operation. Lycopodium completed an initial study and was then awarded the EPCM services for the construction of a new adsorption, desorption and recovery (ADR) plant to recover gold from solutions generated from two dump leach operations.

The process design encompasses a gold adsorption and recovery plant processing the solution from two parallel 5.5 Mtpa capacity leach pads, which treat low-grade run-of-mine weathered material. The process flowsheet comprises the following features:

• Two-stage, countercurrent leach pad configuration

• Six stages of carbon column contactors

• Carbon elution circuit and carbon regeneration kiln

• Gold room with electrowinning and smelting facilities

• Reagents mixing/storage and plant services

The plant was successfully commissioned in November 2011 and at Kinross’ request, Lycopodium provided a post-startup presence on site to assist with operation of the plant and training of local operators.

Lycopodium has also been involved in debottlenecking and process improvements to the existing milling and CIL Plant by undertaking a conceptual scoping study and other detailed studies on specific plant areas. An engineering study report provided acceptable solutions and Lycopodium was awarded the engineering and procurement contract for debottlenecking and upgrade projects in November 2011. The brownfield project involves modification to the milling area cyclones, integration of a new gravity circuit, modification of the tailings thickener and ancillaries, and design of new tailings pipeline and new tailings disposal pumps.

Engineering, design and procurement commenced in December 2011 and it is envisaged that the final design will be handed over to a construction team in the 3Q 2012 with completion planned for 1Q 2013.

As well as Mauritania, Kinross operates mines and projects in Canada, the United States, Brazil, Chile, Ecuador, Russia and Ghana and maintains listings on the Toronto and the New York Stock Exchanges.

Rio Tinto is a leading international mining group listed on the London, New York and Australian stock exchanges with mining activities in Australia, North America, Asia, Europe, Africa and South America.

Marandoo, an open pit mine situated 45 km east of Tom Price in Western Australia, began operating in 1994 and is an integral part of Rio Tinto’s iron ore operations in the Pilbara. Rio Tinto intends that the mine’s current capacity of 15 Mtpa will be maintained for an estimated 17 years by the introduction of below water table (BWT) mining. BWT mining involves dewatering of the orebody ahead of mining and the construction of a wet ore processing plant with the excess water being used to supply the town of Tom Price and an agriculture system.

In April 2011, following completion of the Preliminary Engineering Study and the Definitive Engineering Study, Lycopodium was awarded the engineering, procurement and construction management (EPCM) services for the Marandoo Mine Phase 2 Project.

During the 2011/2012 period the following site activities occurred:

• In March 2012, the 220 kV substation was completed, commissioned and successfully incorporated into the Rio Tinto Pilbara 220 kV distribution system.

• The 33 kV distribution system which will provide power to the village, plant site and dewatering infrastructure is approximately 90% complete. Permanent power via the 220 kV substation has been connected to the village, existing plant and a portion of the borefield infrastructure.

• Laying of 37 km of cement lined pipe for the dewatering system for the open pit mine has been completed and discharge from 3 bores (of 24 total) has commenced.

• In May 2012, work commenced on the agricultural system, with clearing, construction of access tracks and the distribution pipework.

• Work on the 1,000 person permanent village accommodation and ablution facilities 11 km from the mine site has been completed. The village central facilities incorporating dining room, wet mess with beer garden, administration buildings and sporting facilities are approximately 80% complete with a scheduled completion of 3Q 2012.

• Bulk earthworks to the On Site Infrastructure area, the Wet Plant area and the Waste Fines Storage Facility are well advanced with concrete works for the Wet Plant and On Site Infrastructure areas commencing.

• Reticulation of services has commenced in the On Site Infrastructure area with building installation to commence in 3Q 2012.

• Procurement of equipment, structural steel and platework for the Wet Plant is almost complete with installation due to commence 3Q 2012.

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14 Shareholder Report 2012

Project: Tropicana Location: Australia Client: AngloGold Ashanti (70%) and Independence Group NL (30%) Sector: Minerals - Gold

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Project Reviews
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Project: Provision of Rail Infrastructure Management Services Location: Australia Client: BHP Billion Mt Arthur Coal Sector: Rail

Project: Tasiast Camp Location: Mauritania Client: Kinross Gold Corporation Sector: Infrastructure

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BHP Billiton is the world’s largest diversified natural resources company and one of its businesses is Energy Coal which provides thermal coal for use in general industry requirements and the electric power generation industry.

BHP Billiton’s Mt Arthur Coal is the largest individual coal production site in the Hunter Valley in New South Wales. Mt Arthur Coal currently produces around 20 million tonnes of run-of-mine thermal coal each year for local and international customers in the energy sector, with expansion plans underway to increase coal production to 24 million tonnes annually.

The majority of coal produced at Mt Arthur Coal is transported to Newcastle by rail for export.

Lycopodium has been engaged by Mt Arthur Coal to provide Rail Infrastructure Management services including the development of an inspection regime documented in a Technical Maintenance Plan (TMP) and development of an Asset Management Plan and works program. The engagement has subsequently been extended to cover engineering inspections of the rail assets at Mt Arthur Coal.

Kinross has identified the ongoing expansion of the Tasiast project in Mauritania as a top development priority in the company’s long term growth strategy. In 2011, Kinross completed the initial phase of the project expansion with the construction of the dump leach and ADR (Adsorption, Desorption and Refining) facilities and is currently analysing options for further expansion.

In 2011, as part of this expansion, Kinross awarded Lycopodium the engineering, procurement and construction management brief to put in place an accommodation camp that would support the proposed work.

The initial phase involved an extension of the existing camp, infrastructure and services sufficient to satisfy the early construction requirements and included 300 additional accommodation units and 32 ablution blocks providing a total expansion of 1,884 beds. This has been achieved with a mix of prefabricated and site constructed buildings.

The brief was later expanded to include an 800 person kitchen and dining facility plus two 500 person kitchen facilities, three dining facilities and 5 tea rooms. Other infrastructure included the following:

• Covered sports facilities comprising a soccer pitch, tennis/cricket pitch and gymnasium.

• All supporting services for accommodation facilities including, water, sewer and power upgrades.

• High voltage power supply upgrade to the camp.

• All earthworks including car parking and fencing.

• Workshop and central facilities separate from the camp.

• Waste water treatment plant.

• Potable water storage and distribution system.

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16 Shareholder Report 2012

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17
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Financial Results

	Consolidated
	2012	2011	2010
	$	$	$
Revenue	232,286,982	169,842,916	120,801,462
Employee and contractors expense	(170,826,564) (125,105,508)		(89,037,656)
Depreciation and amortisation expense	(1,784,442)	(1,286,219)	(1,608,491)
Other project expenses	(10,581,901)	(4,181,481)	(446,985)
Administration and management costs	(16,431,351)	(13,866,490)	(9,889,072)
Other	(890,947)	(495,329)	(1,107,480)
Proft before income tax	31,771,777	24,907,889	18,711,778
Income tax expense	(9,416,678)	(7,795,136)	(2,653,312)
Proft for the year	22,355,099	17,112,753	16,058,466
Dividend (fully franked) (cents)
Interim	12.0	10.0	5.0
Final	21.0	20.0	22.0
Total Dividend	33.0	30.00	27.0
Shares on issue	38,655,103	38,655,103	38,655,103
Share price as at 30 June (A$)	6.67	5.75	3.14
Earnings per share (cents)	57.3	44.3	41.6
Price earnings ratio	11.5	13.0	7.5
Net tangible assets per share (cents)	139.1	112.6	100.1

18 Shareholder Report 2012

Balance Sheet

	Consolidated
	2012 2011	2010
	$ $	$
ASSETS
Current assets
Cash and cash equivalents	27,768,444 26,199,742	23,395,487
Trade and other receivables	52,590,370 39,835,368	27,665,269
Other current assets	3,547,988 1,639,824	2,790,730
Total current assets	83,906,802 67,674,934	53,851,486
Non current assets
Property, plant and equipment	5,308,393 4,119,085	3,147,532
Other assets	1,523,099 1,661,874	1,891,515
Deferred tax assets	4,535,790 4,273,369	2,152,651
Intangible assets	6,113,748 6,150,895	6,018,211
Total non current assets	17,481,030 16,205,223	13,209,909
Total assets	101,387,832 83,880,157	67,061,395
LIABILITIES
Current liabilities
Trade and other payables	34,158,532 24,080,951	18,994,066
Borrowings	1,622,503 909,754	782,003
Current tax liabilities and provisions	3,274,910 6,559,179	475,000
Total current liabilities	39,055,945 31,549,884	20,251,069
Non current liabilities
Borrowings	1,535,136 1,781,208	1,473,918
Provisions	917,164 861,971	616,973
Total non current liabilities	2,452,300 2,643,179	2,090,891
Total liabilities	41,508,245 34,193,063	22,341,960
Net assets	59,879,587 49,687,094	44,719,435
EQUITY
Contributed equity	18,730,297 18,730,297	18,730,297
Reserves	294,906 89,318	(134,501)
Retained profts	40,689,644 30,916,243	26,123,639
Minority interest	164,740 (48,764)	0
Total equity	59,879,587 49,687,094	44,719,435

19

Shareholder Information

The shareholder information set out below was applicable as at 23 September 2011.

A. Distribution of equity securities

Analysis of numbers of equity security holders by size of holding:

			Total Holders
1	-	1,000	523
1,001	-	5,000	850
5,001	-	10,000	226
10,001	-	100,000	185
100,001	-	and over	29
			1,813

There were 45 holders of less than a marketable parcel of ordinary shares.

B. Equity security holders

The names of the twenty largest holders of quoted equity securities are listed as:

Name	Number held	Percentage of Units
1 Reesh Pty Ltd	9,104,637	23.55
2 HSBC Custody Nominees (Australia) Limited	3,508,443	9.08
3 Luala Pty Ltd	3,167,332	8.19
4 Caddy Fox Pty Ltd	2,612,332	6.76
5 Selso Pty Ltd	2,141,781	5.54
6 Accede Pty Ltd	1,942,332	5.02
7 National Nominees Limited	787,139	2.04
8 Citicorp Nominees Pty Ltd (Colonial First State Inv A/C)	744,194	1.93
9 Mr Peter De Leo	572,466	1.48
10 JP Morgan Nominees Australia Limited	546,344	1.41
11 Lycopodium Share Plan Pty Ltd	510,000	1.32
12 JP Morgan Nominees Australia Limited	489,972	1.27
13 De Leo Nominees Pty Ltd	407,900	1.06
14 Mirrabooka Investments Limited	325,000	0.84
15 Mr Glenn Robertson	309,997	0.80
16 Botech Pty Ltd	305,405	0.79
17 Bond Street Custodians Limited	290,000	0.75
18 Mr David James Taylor	236,754	0.61
19 Mr Peter De Leo & Mrs Tiana De Leo	216,405	0.56
20 Mr Ian Yovich & Ms Kay Somerville	200,103	0.52
Total	28,418,536	73.52

C. Substantial holders

Substantial holders in the company are set out below:

Name	Number held	Percentage of Units
1 Reesh Pty Ltd	9,104,637	23.55
2 HSBC Custody Nominees (Australia) Limited	3,508,443	9.08
3 Luala Pty Ltd	3,167,332	8.19
4 Caddy Fox Pty Ltd	2,612,332	6.76
5 Selso Pty Ltd	2,141,781	5.54
6 Accede Pty Ltd	1,942,332	5.02

Shareholder Report 2012

20

Corporate Directory

Directors

Michael (Mick) John Caratti Rodney (Rod) Lloyd Leonard Robert (Bob) Joseph Osmetti Bruno Ruggiero Peter De Leo Lawrence (Laurie) William Marshall

Company Secretary Keith Bakker

Registered and Principal Office Level 5, 1 Adelaide Terrace East Perth WA 6004 T: + 61 (0)8 6210 5222 E: limited@lycopodium.com.au www.lycopodium.com.au

Share Registry

Computershare Investor Services Pty Limited Level 2, 45 St George’s Terrace, Perth WA 6000 T: +61 (0)3 9415 4267 Direct line for Investors: 1300 764 130 www.computershare.com.au

Lawyers to the Company

Hardy Bowen Level 1, 28 Ord Street West Perth WA 6005 T: +61 (0)8 9211 3600 www.hardybowen.com

Auditor

PricewaterhouseCoopers QV1 Building, Levels 19 - 21 250 St George’s Terrace Perth WA 6000 T: +61 (0)8 9238 3000 www.pwc.com.au

Level 5, 1 Adelaide Terrace East Perth Western Australia 6004 T: + 61 (0)8 6210 5222 www.lycopodium.com.au