MASTERMYNE GROUP LIMITED - Annual Report 2016

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FY 2016 ANNUAL REPORT

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Chairman’s Report
Managing Director’s Report
FY2016 Summary
Board of Directors
Financial Summary
Health, Safety, Environment and Quality
Human Resources
Corporate Overview

Operations Overview
Mastermyne Mining
Mastertec
Orderbook and Pipeline
Outlook and Strategy
Mastermyne Group Limited

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Corporate Governance Statement
Directors’ Report
Lead Auditor’s Independence Declaration
Consolidated Statement of Financial Position

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Company remains well positioned amidst continuing challenges

53.��

Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report to the Members
ASX Additional Information
Corporate Directory

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Chairman’s

Report

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Dear Shareholder,
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��[th] June 2016 has proven �� experienced since listing. Continued poor commodity prices across the period drove relentless cost reduction across coal and related sectors as participants sought to generate cash returns from their operations. Most players in the mining services sector were affected by these particularly poor conditions. Some restructuring of the Group’s business has been necessary to generate better returns in the periods ahead.

Coal markets have been on a negative trajectory for �� experienced last year. The supply side response has taken a long time in this down cycle but we have now seen job losses, production cutbacks, mine closures and asset sales occurring. These are good signals that the market has bottomed and in recent months there have been tentative signs of recovery in the sector. It �� will lead to a sustained recovery, however, much further downside appears unlikely.

Our response to poor conditions and deteriorating �� Group’s operations. Underperforming assets were sold �� This led to substantial non-cash charges which have impaired the Group result. In addition, all overhead costs have been examined and substantially reduced. This reduction commenced at Board level with the reduction of two Directors and other Board related costs. Management overheads were reduced in line with lower revenue levels and, while painful for all involved, these changes were necessary for the Group to retain its long ��

I wish to acknowledge all of the people who have made a great contribution to the Group but have left us during our restructuring. In particular, I would like to thank Darren Hamblin and James Wentworth our retiring Directors. Darren founded Mastermyne with Andrew Watts and built a wonderful business from scratch that now employs hundreds of people. His vision, determination, ethics and good humour have been the backbone of Mastermyne for more than twenty years. Darren remains a substantial shareholder with a strong interest in the Group. James has been an integral part of Mastermyne’s transition from private to public company and his experience has helped guide the company through both the highs and lows of resources sector.

The Group has emerged leaner with a lower cost base and well positioned for any sectoral recovery. Our priority has been to maintain strength in our balance sheet giving us the ability to pursue growth options as they arise in an �� and we are optimistic that changes in mine ownership will lead to new business for the Group.

While it has been a tough year for our leadership team �� for the future of the Group. Their focus has been to ensure that our people perform strongly in our client’s operations maintaining the Group’s strong reputation for performance. Perhaps the best indicator has been outstanding safety performance with a record low injury rate for the business. Strong safety leadership from the senior team has been integral to this result.

Finally, I would like to thank our shareholders for your �� we are looking forward to improved conditions for your investment in the years ahead.

Yours Sincerely,

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�� Chairman Mastermyne Group Limited

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$20
$15
$10
$5
Cash Advance Debt
Finance Lease Debt
$0 Principal Repayments
2015 2016 2017 2018
Millions (AUD)
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300
200
100
3
0
2013 2014 2015 2016
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10.0
8.0
6.0
4.0
2.0
-
Opening Operating Interest Net Capex Net Dividends Closing
Cash Cash Received Borrowing Cash
Millions (AUD)
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Annual Report 2016

Managing Director’s Report

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FY2016 has been a tough year for mining services as operators of mines and adjacent infrastructure have continued to focus on cost reduction strategies amidst ongoing weakness in commodity prices. The Mastermyne Group has not been immune from these strategies which �� FY2016 results. The Company has taken prudent steps during the year to restructure our operations in line with the current conditions and to ensure that we continue to remain cash positive as we wait for the current cycle of low commodity prices to improve.

The restructuring of the Company resulted in actions taken in two key areas, the exiting of fabrication and machining workshops and rightsizing of the Group overheads to match the work in hand. The decision to exit the workshops has not diminished the capability of the Group with the workshops being largely standalone operations. The workshops, whilst synergistic with the �� that cannot be replaced through outsourcing similar �� same time have not impacted on the Groups capability or capacity, which is important as we start to see the early signs of improvement in the sector.

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In a year with very few highlights, one area that has really stood out has been the Company’s improved safety performance. Amidst a backdrop of constant operational changes and the relentless focus on costs I am very pleased �� its safety outcomes. This year we have worked relentlessly on our approach to safety leadership and we have seen great results as our people lead a transformation in our safety culture. We also continue to focus on a stronger understanding and recognition of the critical risks and controls in our business and identifying and eliminating hazards in our day to day operations. The culmination of this has been our lowest recorded injury rate since the Company’s inception.

�� 5 well and we will be ready when the sector recovers. In the meantime, we have restructured to ensure that we will continue to generate cash and maintain the capacity and capability of the Mastermyne Group which will ensure we retain our strong market share and position as a leading supplier of contracting services to our clients.

The Mastertec division has continued to improve �� We have seen the value of the tender pipeline increasing consistently in the past 12 months with opportunities now tendered across multiple sectors and disciplines. Unfortunately, in conjunction with this we have seen �� and the emergence of the larger established engineering and maintenance contractors looking for work in areas they previously did not compete. Our Mastertec division, like our Mining division will be well placed as the sector improves and we remain committed to our strategy of �� ground services to the coal and adjacent sectors.

Finally, I would like to take this opportunity to thank �� year dominated by challenging conditions and relentless change. Throughout the year the team has responded professionally and enthusiastically which has resulted in our ability to maintain a strong organisation that is well positioned for future growth. I would also like to thank our board, in particular our recently resigned Directors, Darren Hamblin and James Wentworth for their ongoing support and guidance.

Our mining business has continued to hold its strong position as a leading underground coal services supplier across the sector. We have, however, been impacted from the trend by operators electing to engage labour hired workforces to carry out work under the mines supervision as a means of reducing costs. This was the case in the second half of the year for the mining business and was the primary reason for the reduced earnings between the �� of the cycle but as the sector recovers we expect, as we have seen previously, that there will be a shift back to contracting companies who can manage more complex and larger packages of work utilizing their supervision, equipment and workforces.

�� this commodity cycle has reached the bottom and that we are starting to witness the early stages of improving conditions. We are encouraged by recent transactions within the sector and the opportunities that will come along with the reopening of mines and the management of existing mines under different operating models. Our mining division is well placed to support these new owners as they consider alternate operating arrangements.

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Tony Caruso Managing Director & CEO Mastermyne Group Limited

Annual Report 2016

FY2016 Summary

Restructured for work in hand and to ensure strong cash generation

Debt reducing, maintaining a strong balance sheet
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Restructured for work in hand and to ensure strong ��
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($’000)	($’000)	��	��	��	��	��
Total Revenue		168,434		174,195		(3.31%)
��		1,368		6,182		(77.87%)
Goodwill Impairment		(7,999)		(4,538)		(76.27%)
Gain on Bargain Purchase				2,221
�� ��		(15,041)		(4,549)		(230.64%)
��		1,855		195		(851.28%)
�� ��		(13,186)		(4,354)		(202.85%)
��		��		��		(130.40%)
��		4,484		8,689		(48.40%)
�� ��		��		99		��

�� Margins	2.66%		5.0%		(2.33%)
��	(14.4)		(5.2)		176.92%
��			0.1		(100.00%)
��	0.0		2.0		(100.00%)

Sector conditions stabilising but not translating to material increase in activity at this point

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� Goodwill Impairment of $4.538 million

� Acquisition, integration and restructuring costs of $1.872 million

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� Gain on bargain purchase ($2.221) million

� �� Not all these expenses are deductible for tax purposes resulting in a total after tax adjustment of $4.453 million.

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� Goodwill impairment of $7.999 million

� Restructuring costs of $1.113 million

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� �� Not all these expenses are deductible for tax purposes resulting in a total after ��

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Annual Report 2016

Board of Directors

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�� CEO & Managing Director

�� Non-executive Chairman

Tony was appointed CEO in 2005 and Managing Director in 2008. Tony has overall corporate responsibility for the Mastermyne Group. He has more than 20 years’ experience in mining services working on major underground mining projects across QLD and NSW before moving into management roles. He has worked alongside several mining services contractors and has a comprehensive understanding of the sector. Tony’s �� with a degree in Business Management.

Colin brings to the Company over 27 years of mining experience in technical, operations, management and corporate roles.

Until recently Colin led BHP Billiton’s Illawarra Coal Group as President Illawarra Coal, a role he was appointed to in 2004.

�� Competency in Mine Management and has managed underground coal mines in Australia. His former roles at BHP Billiton include Vice President: Health, Safety and Environment and Project

Tony’s propensity for Project Management drives Mastermyne’s focus for safe and productive projects. He is highly regarded for his innovative approach to solving complex issues and for actively turning issues into opportunities.

Director for the BHP Billiton merger integration.

Colin has previous experience as a Director at the NSW Minerals Council for almost nine years including three as Chairman.

Known for being strategic as well as results focused, �� in the Mastermyne business.

He was also Chairman of Port Kembla Coal Terminal for over eight years. He is also a non-executive director with The Flagstaff Group.

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�� Non-Executive Director

�� Non-executive Director

Gabe brings to the Company over 30 years’ experience in the steel, mining and stevedoring industry covering operations, maintenance and engineering. Currently Mr Meena is General Manager Operations with Patrick Terminals.

Andrew co-founded Mastermyne in 1996 and has been involved in the mining services sector since 1994. Prior to moving to a board role, Andrew was directly responsible for all aspects of Mastermyne’s operations until the appointment of Tony Caruso as CEO.

Andrew’s detailed understanding of mining and construction projects has been an invaluable contribution in shaping Mastermyne’s operating systems. This experience will be relied on as Mastermyne continues to grow and diversify its business.

Gabe has held senior operational and management roles with Bluescope Steel as General Manager Mills and Coating, Bluescope Steel China as President China Coated and BHP Collieries as General Manager of a number of coal mines.

He brings a wealth of experience to Mastermyne from working across multiple sectors and his skill set is valuable in helping the Group grow the Mastertec Products and Services division across a number of sectors.

Annual Report 2016

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� Net Debt of $11.1 million at 30 June

Financial Summary

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Maintained
our
strong
balance sheet
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second half
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$AUD($’000)	��	��
��	1,368	6,182
Movements in WorkingCapital	(2,566)	2,571
Non cash items	2,032	41
Interest Costs	(907)	(1,101)
Income taxpayments	454	(558)
��	381	7,135
Net Capex (includes intangibles)	(2,053)	(914)
��	(4,363)	6,039
Interest Received	59	202
Acquisition of Subsidiary	-	(10,581)
Free Cash Flow	(5,976)	1,881
Dividends	(911)	(1,968)
�� ��	(6,887)	(87)
Cash and cash equivalents at beginning ofperiod	8,723	8,810
�� period	��	��

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$AUD($’000)	��	��
��
��	1,836	8,723
��	29,084	38,568
��	3,408	3,002
��	226	259
��	��	��
��	8,579	7,146
��	21,540	29,070
Intangible assets	7,089	14,912
��	37,208	51,128
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Trade and otherpayables	11,039	18,101
Loans and borrowings	3,543	4,363
��	3,237	7,725
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Loans and borrowings	9,408	12,793
��	102	197
��	��	��
��	27,329	43,179
Net assets	��	��

Annual Report 2016

Health, Safety, Environment and Quality

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No compromising on safety

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TM TM TM
Environment Health & Safety Quality
ISO 14001 AS 4801 ISO 9001
Certified System Certified System Certified System
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In FY2016 FY2016 the Group recorded 1,551,420 hours worked and completed the year with a Total Recordable Injury Frequency Rate (TRIFR) of 8.38, down from 21.43. Our Lost Time Injury Frequency Rate (LTIFR) of 0.64 was also much improved, down from 3.15.

Mastermyne Mining and Mastertec both recorded very good TRIFR improvement. Mining fell to 10.14, down from 23.82, while Mastertec fell to 4.17, down from 21.87. There was just one Lost Time Injury recorded within Mining, for a LTIFR of 0.85, down from 3.97. There were no Lost Time Injuries recorded within the Mastertec business.

�� Health and Safety, ISO9001 Quality and ISO14001 Environmental management systems, completing the annual audit in February with no major non-conformances.

These are very good results and are the outcome of a continued focus on proactive safety leadership at all levels.

NOTE: This year the Group is moving to reporting TRIFR, �� in alignment with the majority of our clients.

30 2,000 �� 25 �� 1,500 20 Hours (‘000) TRIFR 15 1000 LTIFR 10 �� 500 5 27.82 17.34 21.02 21.43 8.38 3.97 5.42 3.39 3.15 0.64 0 0 FY 12 FY 13 FY 14 FY 15 FY 16

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1.25 1.04 1.06 �� 1.10 1.11 1.12 1.12
1.10 1.00 1.06
��
1.00
0.75
0.50
0.25
Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16
1.08 0.95 1.04 1.12 1.13 1.06 1.16 1.19 1.15 1.18 1.19 1.11
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The Mastermyne HSEQ Index, which is a measure of the degree of implementation of several proactive hands-on HSEQ activities, has been maintained at very high levels. This result is even more pleasing considering that the Mastertec sites engaged with the full range of measures for the entire year and the overall performance expectations were lifted above the previous year’s targets.

HSEQ Month Actual HSEQ FY Average HSEQ Index Target (Minimum Standard)

Continued focus on developing a hazard aware culture

Mastermyne has maintained a high degree of focus on hazard recognition and control over the past 12 months. This has �� coupled with active promotion and awareness surrounding the critical risks in each part of the business - critical risks being �� has improved by 24% when compared to the previous year. These programs will be ongoing in FY17.

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�� Hazard FR TRIFR
40 1200
30 900
20 600
10 300
0 0
Jul Aug �� Nov �� Jan �� Mar �� May Jun
15 15 15 15 15 15 16 16 16 16 16 16
705 732 790 798 783 736 736 796 829 883 962 1008
18.90 18.00 �� 16.15 16.60 16.40 14.30 13.95 12.20 11.85 10.00 8.35
TRIFR
Hours FR
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Annual Report 2016

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Employment and industrial relations risk mitigated in a challenging labour market

Human Resources

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��
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��
��
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0-3 Month
4-9 Months
10-24 Months
25-48 Months
49 Months+
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resulting in no lost time disputes or penalties being
incurred. During the year two Enterprise Agreements
were negotiated and approved by Fair Work Commission
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competitive labour arrangements until 2019.
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Despite a contraction of labour, effective workforce planning has enabled us to retain senior and frontline leaders and highly skilled personnel. Additionally, an ongoing investment to grow capability, with a focus on leadership knowhow, has been an ongoing throughout the year.

More than third of our workforce have a tenure of longer than 3 years. This core base of long serving employee’s plays a vital role in maintaining our positive culture. A target within Group business plan was met when an Employee Values Survey returned an 83% positive score, indicating that positive behaviours that support our values are visible Group wide. Additionally, other Human Resource goals of the Business Plan were met in relation to labour mobilisation meeting project plans, workforce capability targets being achieved and labour engagement platforms suitably meeting tendering opportunities.

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Annual Report 2016
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�� MYE Share Price
Volume of shares traded
0.25
0.23
0.20
0.18
0.15
0.13
0.10
2M
0M
Sep ‘15 Oct ‘15 Dec ‘15 Feb Mar Apr May Jun Jul Aug
�� 2016
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Corporate Overview

��	��
��	0.19
��	91.1
��	17.3
��	11.1
��	28.4
��
��	Non-executive Chairman
��	ManagingDirector
��	Non-Executive Director
��	Non-Executive Director
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��	13.46%
��	11.94%
��	10.65%
��	6.91%
��	6.41%
��	6.01%

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Board & Management Institutional Investors Retail Investors

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Annual Report 2016
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Mastermyne is a multi-disciplined contractor that can provide an expansive range of services�� cost effectively

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Protective Coatings (Blast & Paint)

Structure, Mechanical & Electrical

Access Solutions (Scaffolding & Rigging)

Pipeline Services

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Machining

Engineering & Technical

Fabrication

Consumables

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QLD ��
1. Broadmeadow ��
2. Carborough Downs
3. Crinum 9
10
1
4. Eagle Downs
8
5. Grasstree 5
6 2
�� 4
1
7. Kestrel 3 5
3
8. Moranbah North 7 4
2
9. Newlands
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NSW QLD NSW
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1. Abel Mine 2. Appin 3. Austar 4. Chain Valley Colliery 5. Narrabri

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�� Mastermyne Mining Mastertec

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Mastermyne Contracts Mastertec Contract Mastermyne Recurring Mastertec Recurring

Mastermyne Mining Mastertec

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Roadway Development

Conveyor Installations, Recoveries and Maintenance

Longwall Relocations, Installations, Recoveries and Maintenance

Inseam Directional Drilling

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Outbye services including Project Management maintenance works and Engineering Support

Ventilation Control Devices and Chemical Injection

Fleet

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QLD ��
1. Blackwater ��
2. Boyne Smelter
20
3. Broadmeadow
21 10
17
4. Carborough Downs 14
4
5. Caval Ridge 3
9 2
�� 19 16 22 5 9
7. Cook Colliery 5 6 12 13 7 4
15 2 8 6
8. Crinum 8
18 1 10
1
9. Daunia 11 7 3
��
Terminal
QLD NSW
11. Ensham
12. Foxleigh NSW
13. RG Tanna Coal Terminal 18. Kestrel 1. Appin ��
14. Goonyella Riverside 19. Moranbah North 2. Austar 7. Ulan
15. Grasstree �� 3. Dendrobium 8. Ulan West
�� 21. North Goonyella 4. Myuna 9. Wambo
17. Hail Creek 22. Norwich Park 5. Narrabri ��
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Annual Report 2016

Mastermyne Mining

Labour engagement strategies have impacted the underground business

The Mastermyne Mining business has continued to maintain a strong share of the underground contracting market and continues to grow its presence in the NSW markets. There has been a continued focus by the major mining houses on cost management which has resulted in a decrease in long term projects and the tender pipeline has contracted accordingly in the underground area. Despite this the Company has continued to expand its service offering through the chemical injection area and short term project delivery in areas of ventilation services and longwall relocations. The equipment �� change to utilisation rates on equipment.

� ��

� No material changes to remaining contracts

� ��

($’000) FY16 ��

Annual Report 2016

Mastertec

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Mastertec pipeline increasing but revenues still down from lack of maintenance spending

�� remains constrained

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�� alongside coal
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($’000) FY16 ��

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Annual Report 2016

Tier 1 contracts but order book reduces

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Anglo Moranbah Region Umbrella Contract
Anglo Moranbah Region Drivage Contract
Appin Area 9
Broadmeadow Conveyor Installation
DBCT Scaffolding Services
Kestrel Development Contract
Kestrel Strata Support
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
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Previous Contracts
Current Contracts
Option
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There is currently a number of Tier 1 mine owners divesting assets which is likely to create opportunities with new owners around contract mining services. The strategy of diversifying through Mastertec has led to an increase in the current pipeline of tendered opportunities which supports the expected growth for the division in FY2017.

FY17 order book provides the base to build from

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Outlook

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��
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�� for contract mining
�� is providing a platform for growth
Restructured business will ensure strong cash generation

Annual Report 2016

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Mastermyne

Group Limited and its

Controlled

Entities

Annual Report 30 June 2016

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Contents Page

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Corporate Governance Statement
Directors’ report
Lead Auditor’s Independence Declaration
Consolidated Statement of Financial Position
�� and Other Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the Members of Mastermyne Group Limited
ASX Additional Information

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Annual Report 2016
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Corporate Governance Statement

The Company and its Board of Directors ��

The ASX Listing Rules require listed companies to provide a statement in their Annual Report disclosing the extent to which they have followed the ASX Corporate Governance Principles and Recommendations adopted by the ASX Corporate Governance Council (“Recommendations”) in the reporting period. These Recommendations are guidelines, designed �� Recommendations are not prescriptive, but if a company considers that a recommendation should not be followed having regard to its own �� Annual Report it must identify which Recommendations have not been followed and give reasons for not following them.

This Corporate Governance Statement (“Statement”) and the Company’s suite of corporate governance documents referred to in the Statement, and other relevant information for stakeholders, are displayed on the Company’s website www.mastermyne.com.au. The Company has complied with the Recommendations, to the extent outlined in this Statement, throughout the year or as otherwise noted.

1.1 Scope of Responsibility of Board

Responsibility for the Company’s proper corporate governance rests with the Board. The Board’s guiding principle in meeting this responsibility is to act honestly, conscientiously and fairly, in accordance with the law, in the interests of Mastermyne Group’s Shareholders (with a view to building sustainable value for the Shareholders) and those of employees and other stakeholders. The Board’s broad function is to:

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�� and

1.2 Composition of board

The Board performs its roles and function, consistent with the above statement of its overall corporate governance responsibility, in accordance with the Council’s guidelines

The Board currently comprises four Directors as follows:

� ��

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� ��

��

� ��

��

� ��

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and expertise, their involvement in Board and committee meetings, and the period for which they have been in �� apart from the CEO, are subject to re-election by rotation at least every three years at the Company’s annual general meeting.

The Board’s view is that an independent Director is a non-executive Director who does not have a relationship affecting independence on the basis set out in the Council’s guidelines. During the reporting period the Company had two non-executive directors resign resulting in a total of 2 independent directors and 2 non-independent directors. Whilst this does not meet the council’s recommendation requiring a majority of independent Directors, the company believes the current skills & experience of the current board members is more important than independence at this time.

The Board periodically conducts a review of the skills and experience Directors to ensure they are appropriate for the Company’s activities. The results of the most recent review conducted in the last period are shown below.

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��	High
��	Medium
��	Low
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��	Medium
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��	High
��	Low
��	Low
��	High
��	Low
Strategic
��	High
��	High
��	High
��	Medium
��	Medium
��	High
��	Medium

In each area assessed as “Low” the Board has at least one “subject matter expert” who the Board considers provides adequate coverage in the current circumstances. Where appropriate, external advice is sought to supplement Board skills and experience.

��

�� These areas include:

��
��
��
��
��
��

The Board has delegated functions, responsibilities and authorities to the Managing Director and senior executives to enable them to effectively manage the Company’s day-to-day activities.

Annual Report 2016

�� Good Corporate Governance Commitment

1.3 Board Charter

The Board has adopted a Board Charter to give formal recognition to the matters outlined above. This Charter sets out various other matters that are important for effective corporate governance including the following:

��
�� 
��
��
��

� ��

��
��

These initiatives, together with other matters provided for in the Board Charter, are designed to promote good corporate governance and generally build a culture of best practice in Mastermyne Group’s own internal practices and in its dealings with others.

1.4 Audit & Risk Management Committee

The Company has established this committee to advise on the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the Company. The committee comprises the following members:

��
��
��

The committee performs a variety of functions relevant to risk management and internal and external reporting and reports to the Board following each meeting. Among other matters for which the committee is responsible are the following:

��
��
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��
��

� �� and manage business risk, and legal and ethical ��

�� but not limited to their assessments of the

��

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��
��
��

��

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��
��
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Meetings are held often enough to undertake the Audit & Risk Management Committee’s role effectively, being at least four times each year. The committee may invite such other persons to its meetings as it deems necessary.

1.5 Remuneration & Nomination Committee

The purpose of this committee is to assist the Board and make recommendations to it in relation to the appointment of new Directors (both executive and non-executive) and senior executives and to oversee the remuneration framework for Directors and senior executives. The Board does not consider separate committees to cover these matters are warranted at this stage of the Company’s evolution. The committee comprises the following members:

��
��
��

Functions performed by the committee include the following:

��
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��
��
��
��
��
��
��
��
��
��
��
��

The Remuneration & Nomination Committee will meet as often as necessary, but must meet at least twice a year.

The Company is committed to achieving and maintaining the highest standards of conduct and has undertaken various initiatives, as outlined in this Statement, that are designed to achieve this objective. Mastermyne Group’s suite of corporate governance documents is intended to develop good corporate governance and, generally, to build a culture of best practice both in Mastermyne Group’s own internal practices and in its dealings with others. The following are a tangible demonstration of Mastermyne Group’s corporate governance commitment.

��

With the prior approval of the Chairman, which may not be unreasonably withheld or delayed, each Director has the right to seek independent legal and other professional advice concerning any aspect of the Company’s operations �� responsibilities as Directors. Any costs incurred are borne by Mastermyne Group.

��

Mastermyne Group has developed and adopted detailed Codes of Conduct to guide Directors, Senior Executives and employees in the performance of their duties.

��

Mastermyne Group has developed and adopted a formal Securities Trading Policy to regulate dealings in securities by Directors, key management personnel and other employees, and their associates. This is designed to ensure fair and transparent trading in accordance with both the law and best practice. The policy includes restrictions and clearance procedures in relation to when trading can and cannot occur during stated ‘closed’ and ‘prohibited’ periods and whilst in possession of price sensitive information. Otherwise, those persons may generally deal in securities during stated ‘trading windows’. The Board will ensure that restrictions on dealings in securities are strictly enforced.

1.7 Compliance with the ASX Corporate Governance Council Recommendations

The Board has assessed the Company’s current practices against the Recommendations and outlines its assessment below:

�� Lay solid foundations for management and oversight

The role of the Board and delegation to management have been formalised as described in this Statement �� in accordance with the Recommendations, in light of practical experience gained in operating as a listed company.

Annual Report 2016

1.7 Compliance with the ASX Corporate Governance Council Recommendations (continued)

Mastermyne ensures that appropriate checks are undertaken before it appoints a person, or puts forward to shareholders a new candidate for election, as a director. Information about a candidate standing for election or re-election as a director is provided to shareholders to enable them to make an informed decision on whether or not to elect or re-elect the candidate.

Directors are provided with a letter on appointment which details the terms and conditions of their appointment, provides clear guidance on what input is required by them, and includes materials to assist with induction into the Company. The Company has a similar approach for all senior executives whereby they are provided with a formal letter of appointment setting out �� as well as a detailed job description. The Board has delegated responsibilities and authorities to the CEO and other executives to enable management to conduct the Company’s day to day activities. Matters which exceed ��

The processes for evaluating the performance of senior executives, the board and its committees and individual directors, are set out in the Board Charter, Audit & Risk Management Committee Charter and Remuneration & Nomination Committee Charter. All reviews have taken place in accordance with these charters. Mastermyne Group complies with the Recommendations in this area.

The Company Secretary is accountable directly to the Board, through the Chair, on all matters to do with the proper functioning of the Board.

�� Structure the board to add value

The Board currently consists of four directors, including �� of other listed companies (including those held at any time in the 3 years immediately before the end of the �� in the Directors’ Report.

�� Meena, are independent (in terms of the criteria detailed �� of independent and unfettered judgment. The other two Directors, comprising one founder who is a non-executive Director and the Managing Director, are not independent.

The Board considers that a four person board is appropriate for a company with the size and growth �� industry knowledge of the two non-independent Directors �� maintaining its current culture and focus. The Board further considers that to add additional independent

directors at this time would increase the Board’s size �� seek to add additional independent directors in the future.

There are procedures in place to allow Directors to seek, at Mastermyne Group’s expense, independent advice concerning any aspect of Mastermyne Group’s operations.

A Remuneration & Nomination Committee has been established with its own charter, as detailed above.

The Board is committed to a performance evaluation process, with a self-assessment evaluation being undertaken during each year.

�� Promote ethical and responsible decision making

The Board has adopted detailed Codes of Conduct to guide Directors, executives and employees in the performance of their duties.

The codes have been designed with a view to ensuring the highest ethical and professional standards, as well as compliance with legal obligations, and therefore compliance with the Recommendations.

�� the organisation from diversity in the workplace covering gender, age, ethnicity and cultural background and in various other areas. So, the Board has approved a Diversity Policy which details the Company’s approach to promoting a corporate culture that embraces diversity when selecting and appointing its employees and Directors.

This policy outlines measurable objectives for achieving gender diversity throughout the Company over the longer term, and progress towards achieving them has been assessed as follows:

��
��
��
��
�� of gender
��
��
�� foreseeable requirements.

��

The Audit & Risk Management Committee, with its own charter, complied with the Recommendations for the majority of the year. However with resignation of the Audit & Risk Management Committee chair during the year the chairman of the board was appointed the chair of the Audit & Risk Management Committee, as he was �� based on skills should any new board members be appointed in the future. All the members of this committee ��

�� Make timely and balanced disclosure

Mastermyne Group’s current practice on disclosure is consistent with the Recommendations. Policies for compliance with ASX Listing Rule disclosure requirements are included in the Company’s Board Charter and Continuous Disclosure Policy.

�� Respect the rights of shareholders

The Board recognises the importance of this principle and strives to communicate with Shareholders regularly and clearly, both by electronic means and using more traditional communication methods. Shareholders are encouraged to attend and participate at general meetings. The Company’s auditors are required to attend the annual general meeting and are available to answer Shareholder’s questions relevant to the audit. Security holders are able to ask questions of the company or the auditors electronically as detailed in the company’s notice of meeting. Security holders can also request to receive communications electronically via the Company’s share registry Link Market Services.

As part of the Company’s management of investor �� with investors and analysts to assist their understanding of the Company and its operations, and provide explanatory background and technical information.

The Company has not published a formal communications policy because it sees no need as its stated practices generally comply with the Recommendations, and it has covered a number of aspects of this principle in its Continuous Disclosure Policy, including in relation to ��

�� Recognise and manage risks

The company operates under an enterprise wide risk management framework summarised in the risk management policy adopted by the board which can be found on the Company’s website. The framework in place �� understanding of areas where it may expose itself to risk and implement effective management of those risks.

Oversight of the risk management framework is undertaken by the Audit and Risk Committee which assists the board in its oversight role by:

��
��
��

The Board considers that the Company does not currently have any material exposure to economic, environmental and social sustainability risks which require active management.

The Company does not have a separate internal audit function due to its relatively small size and less complex �� engage a third party annually to conduct forensic testing on the Company’s internal controls.

The Board has received assurance from the Chief �� declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation ��

�� Remunerate fairly and responsibly

Remuneration of Directors and executives is fully disclosed in the Remuneration Report (contained in the Directors’ Report) and any material changes with respect to key executives will be announced in accordance with continuous disclosure principles. In accordance with the Recommendations, the Remuneration & Nomination Committee has three non-executive Director members of which two are independent including its Chair, and the committee oversees the ambit of this principle.

The aggregate level of non-executive Directors’ remuneration is currently set at $300,000 approved on 22 March 2010 and any increase must be approved by shareholders. Non-executive Directors are not �� statutory superannuation.

Annual Report 2016

Directors’ Report

��

�� report of Mastermyne Group Limited (‘the Company’) and ��

1.��

��

�[��]

�� of Management

Independent Chairman

��

Colin brings to the Company over 27 years of mining experience in technical, operations, management and �� Billiton’s Illawarra Coal Group as President Illawarra Coal, a role he was appointed to in 2004. During his time as �� improvement in safety performance, steered Illawarra Coal towards growth and secured, with his team, a number of critically important approvals. He holds a First Class �� managed underground coal mines in Australia.

Colin’s former roles include Vice President Health, Safety and Environment for BHP Billiton where he had global responsibility for the function. Previously he was Project Director for the BHP Billiton merger integration and a member of the BHP deal team for that transaction. ��

Colin has previous experience as a Director at the NSW Minerals Council for almost nine years including three as Chairman. He was also Chairman of Port Kembla Coal Terminal for over eight years.

��

�[Mr A. Watts ]

��

Non - executive Director

��

Andrew has been involved in contracting within the mining industry since 1994 and co-founded Mastermyne in 1996.

Andrew was responsible for all aspects of Mastermyne’s operations until the appointment of Tony Caruso as CEO in 2005. Andrew relocated to Sydney in early 2010 to focus on the New South Wales market.

��

�[��]

��

- Bachelor of Engineering (Mechanical)

Non - executive Director

��

Gabe is an executive with over 30 years experience in the steel, mining and stevedoring industry covering operations, maintenance and engineering. Gabe has held senior operational and management roles with Bluescope Steel as General Manager Mills and Coating, Bluescope Steel China as President China Coated and BHP Collieries as General Manager of a number of coal mines. Gabe’s most recent role was General Manager Operations with Patrick Terminals. Gabe has a Bachelor in Mechanical Engineering and is graduate of the Australian Institute of Company Directors.

��

�[��]

�� Business Management

Managing Director

��

Tony was appointed CEO of Mastermyne in 2005 and Managing Director in 2008 and has overall corporate responsibility for Mastermyne.

Tony has over 20 years experience in underground mine contracting services. Prior to joining Mastermyne, Tony was the General Manager of Allied Mining in Queensland and a consultant to the underground mining sector. He has a trade background plus a post graduate degree in Business Management and is a Fellow of the Australian Institute of Management.

�[��]

�� of Engineering (Mechanical)

Non - executive Director

��

Darren has been involved in the mining industry since graduating as a mechanical engineer in 1991. He has worked directly for mine owners as well as contractors in operations, planning and maintenance roles. Darren co-founded Mastermyne in 1996.

Following the appointment of Tony Caruso as CEO in 2005, Darren focused on developing Mastermyne’s longer term business strategies and systems. Darren became a non-executive Director in 2008.

��

�[��]

�� of Laws (Hons), Bachelor of Commerce

Non - executive Director (independent)

��

James has been CFO of ASX listed Finders Resources �� of the company’s Wetar Copper Project. Prior to that, �� including private equity transactions, acquisitions and integration, management and exit of investments, strategy �� worked at Champ Ventures, Goldman Sachs and Macquarie Bank. He has international experience and a background in the legal profession.

��

2.��

Mr C Kneipp was appointed Joint Company Secretary of the Company on 24 August 2011 and appointed 37 Sole Company Secretary on 26 February 2015. Chris �� Accountant and is a graduate of the Australian Institute of Company Directors. Chris has been with the Group since March 2006 and has over 12 years experience in the mining industry.

��

Annual Report 2016

��

The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended ��

��	��	��	�� ��	�� ��	�� ��	�� ��
	�	�	�	�	�	�
��	8	8	2	2	2	2
��	8	8	1	1	2	2
��	7	7	3	3	2	2
��	7	7	3	3	-	-
��	6	5	3	3	-	-
Mr A. Caruso	8	8	-	-	-	-

��

Despite the second half result the Company has positioned its operations to generate strong cash returns throughout the upcoming year.

�� year include:

�� 
��
Net debt at 30 June 2016 of $11.115 million
��
��

��

The prudent steps the Company has taken will ensure that it will generate strong cash in the coming year. The outlook moving into FY2017 sees current underground operations remaining subdued with an ongoing focus on costs by the Group’s clients. There is currently a number of Tier 1 mine owners divesting assets which is likely to create opportunities with new owners around contract mining services. The strategy of diversifying through Mastertec has lead to an increase in the current pipeline of tendered opportunities which supports the expected growth for the division in FY2017. Whilst the Company is not expecting much change to the current pricing environment it is ��

B – Number of meetings attended

��

Mastermyne Group Limited and its controlled subsidiaries recorded a loss after tax of $13.186 million for the year ended 30 June 2016, down on the previous corresponding period (net loss after tax for the year ended 30 June 2015 of $4.354 million). The result included a non-cash goodwill impairment of $7.999 million (2015: $4.538 million), and a loss on sale of assets of $2.003 million (2015: $0.006 million) as a result of the Group selling its Mackay workshop and closing it’s Rockhampton workshop during the period. The impact of these items increased the loss after tax by $9.401 million.

The Group’s revenues were lower than the previous corresponding period by 3.3%, down to $168.434 million (2015: $174.195 million) as a result of continued slower economic conditions in the Coal sector and the continued focus on costs by the Group’s clients. The remainder of the Group’s revenue decreased on the previous corresponding �� margins have also decreased resulting from the lower contracting activity, lower equipment utilisation and contraction in margins due to the current market climate.

��

The overall cash position reduced at year ending 30 June 2016 with a net decrease in cash and cash equivalents of $6.887 million (2015: net decrease of $0.087 million). The reduction was a result of some of the Group’s major clients delaying payments due at 30 June 2016 until July, ��

��
��
��

The balance sheet remains healthy despite net debt increasing by $2.682 million to $11.115 million (2015: $8.433 million), largely as a result of reduction in cash to $1.836 million (2015: $11.043 million). The reduction in cash is a result of the delayed client payments as detailed above. The Group still maintains headroom in its current bank facilities with working capital facilities totalling $6 million, of which $0.321 million is drawn in bank guarantees.

��

Mastermyne Group’s second half result has been dominated by the restructuring which took place over March and April this year. The restructuring was a result of the decision to exit workshops in Mackay and Rockhampton and rightsize the overheads across the group. The second half results were also impacted by a slowdown in the Mining division which is the effect of continued cost management by our major clients. The Mastertec Division has converted several small �� division has seen strong growth in the tender pipeline.

Safe and reliable operations continues to be the priority �� employee injury rates across all divisions in the business. Pleasingly FY2016 saw the Company achieve its lowest injury frequency rate in the Companies history. The �� of safety processes has underpinned this strong result. In parallel to the approach to behavioural safety leadership the Company has maintained a strong focus on safety compliance evidenced through the maintaining of the triple accreditation across the Group.

The Mastermyne Mining business has continued to maintain a strong share of the underground contracting market and continues to grow its presence in the NSW markets. There has been a continued focus by the major mining houses on cost management which has resulted in a decrease in long term projects and the tender pipeline has contracted accordingly in the underground area. Despite this the Company has continued to expand its service offering through the chemical injection area and short term project delivery in areas of ventilation services �� mostly off hire resulting in no material change to utilisation rates on equipment.

The Mastertec Division has continued to operate at similar levels of activity. Maintenance and Engineering work in the traditional mining areas continues to be subdued and highly competitive. The Mastertec Division has made good progress in diversifying into adjacent markets and now has a range of new project opportunities coming through a wide cross section of customers and sectors. As part of the restructure the Company took the decision to exit the workshops in Rockhampton and Mackay with the Rockhampton operation merged with the Gladstone workshop. Gladstone remains a strategic base for the business and provides a platform to access the heavy industrial sector in the region. As a result of the continued weakness accross the sector and the decision to to exit the workshops, the carrying amount of the Mastertec CGU was assessed to be higher than its recoverable amount, and the recognised value of goodwill associated with the Mastertec CGU of $7,999 thousand was fully impaired (2015: $4,538 thousand).

��

5.1 Principles of remuneration - audited

Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company and the Group, including directors of the Company and other executives. Key management personnel comprise the directors of the Company and executives listed below. 39

�� 
��
��
��
��
��

Compensation levels for Key Management Personnel (KMP) of the Group are competitively set to attract, retain �� directors and executives. The remuneration committee obtains independent data on the appropriateness of remuneration packages of the Group given trends in comparative companies and sectors both locally and nationally and the objectives of the Company’s compensation strategy.

Annual Report 2016

5.1 Principles of remuneration - audited (continued)

The remuneration structures of the group are designed �� the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. �� variable component, designed around KPI’s aligned with the short and long term strategic objectives of the group. ��

�� 
��
��

In addition to their salaries, the Group also provides �� their behalf. The reviews are conducted under the terms of reference set down for the Remuneration and Nomination Committee (RNC).

��

Fixed remuneration consists of base compensation (which is calculated on a total cost basis and includes any �� vehicles), as well as employer contributions to superannuation funds.

�� are reviewed annually by the RNC through a process that considers individual, segment and overall performance of the Group. In addition, external data is provided for analysis of KMP’s remuneration to ensure it remains competitive by benchmarking against the market place. The chairman of the RNC sources data independently of management from appropriate independent advisors. For other key �� submit recommendations to the RNC along with relevant supporting data and externally independent comparative information. A senior executive’s compensation may also be reviewed upon promotion or in line with movements in the market place during the period.

��

Non-executive Directors are not eligible to participate in performance linked remuneration of either a short or long term nature.

Performance linked remuneration includes both shortterm and long-term incentives and is designed to reward �� objectives. The short-term incentive (STI) is an ‘at risk’ bonus provided in the form of cash.

��

The Mastermyne short term incentive plan was introduced as a structured incentive to reward Key Management Personnel’s (KMP) performance against predetermined KPIs. The KPIs include measures aligned with the strategic �� 5 or 6) for individual performance, group performance and underlying performance of the relevant segment. The measures are chosen to align the individual’s reward to the strategic goals of the Group.

�� compared to budgeted amounts approved by the board �� upon position and responsibility and are aligned with the measures and targets set to achieve the strategic objectives of the group on an annual basis. STI payments must be self funding.

�� performance of the Group, the relevant segment and individual against the KPI’s set at the beginning of the �� on the assessment of the RNC with recommendations from the Managing Director (for employees other than the Managing Director) taking into consideration the overall performance of the individual for the period. The Managing Director’s STI bonus is set by the Board �� agreed KPIs as assessed by the RNC and recommended to the Board. In all cases, the Board retains the discretion not to pay any STI; the Board also has the discretion to modify (down or up) payments based on recommendations from the RNC.

��

An employee performance rights plan was adopted by the board on 15 September 2015 and the plan was activated by resolution of the Board as of 16 November 2015. The purpose of the employee performance rights plan is to attract, motivate and retain executives, encouraging individuals to participate in the company through ownership of shares. The objective is to improve Mastermyne’s performance by aligning the interests to those of the shareholders and the Group.

The KMP including the Managing Director was issued 795,898 (Managing Director 347,436) performance rights �� vest in two tranches at 1 October 2018. The grant of these rights was made in accordance with the Company’s Employee Rights Plan voted upon by shareholders at the �� voted upon by shareholders at the 2015 AGM. The ability to exercise the rights is conditional on the Group meeting its performance hurdles.

Vesting of the rights will be subject to achievement of the vesting conditions set out below and the eligible participant being employed at the vesting date:

��
��
��
��
a. ��
b. ��
��

��	�� ��
��	0%
�� ��	50% plus 2% for each percentile above 50th percentile
��	100%

��

The RNC considers that the above performance-linked compensation structures will achieve the objectives of attracting, �� minimum of 50% of each KMP performance criteria were adversely affected by the slow down in the coal sector, resulting in no short term incentives being approved by the Board.

��

==> picture [487 x 15] intentionally omitted <==

----- Start of picture text -----

2016 �� 2012
----- End of picture text -----

	2016	��	��	��	2012

��	$13,156,000	$(4,376,000)	$2,963,000	$11,514,000	$14,664,000
��	$911,000	$1,968,121	$3,468,406	$6,105,000	$5,050,000
��	-31%	-65%	-35%	-67%	48%
��	-32.23%	-6.28%	8.08%	29.66%	45.60%

�� been calculated in accordance with Australian Accounting Standards (AASBs).

The overall level of KMP compensation takes into account the performance of the Group over a number of years. Over the �� the period, has resulted in a loss from ordinary activities after income tax in the current year. As a result of the softening coal industry both KMP and director remuneration has been reduced by 10% and 20% respectively during the period.

��

Annual Report 2016

5.1 Principles of remuneration - audited (continued)

5.2 ��

��

The RNC recommends Group remuneration policies for Key Management Personnel. The committee focuses mainly on the CEO’s remuneration but reviews agreements made with other KMP. In recommending the CEO remuneration package, the RNC takes advice from independent advisors in executive and non-executive remuneration as noted below.

The Group has entered into service agreements with each key management person that are capable of termination on 3 months’ notice. The Group retains the right to terminate an agreement immediately by making payment equal to 3 months’ pay ��

Key Management Personnel are also entitled to receive on termination of employment their statutory entitlements �� Directors are not eligible for annual leave, long service leave nor sick leave although they may be granted leave of absence ��

The service agreements outline the components of remuneration paid to the key management personnel but does not �� and take into consideration any change in the scope of the role performed by the senior executive or with any changes made to the remuneration policy during the period. Remuneration is benchmarked against the external market place with the objective to ensure senior executives are rewarded equitably by reference to their individual performance and the Group’s overall performance.

��

In the current year the RNC relied upon data provided by McDonald & Company Australasia (McDonald) with some detailed �� a useful guide to appropriate remuneration levels.

��

As with the Executives, remuneration of non-executive directors (NED) is usually reviewed based on comparative roles in the market place, however this year based on the continued softening in the coal sector current levels of remuneration were reduced by 20% resulting in the fees stated as follows:

��
��
��

In future years the aggregate remuneration of non executive directors will be an amount determined by the shareholders from time to time in the annual general meeting. The fees will be divided between directors in proportions agreed to from time to time by the total Board.

Details of the nature and amount of each major element of remuneration of each director of the company and other key management personnel of the consolidated entity are:

==> picture [548 x 338] intentionally omitted <==

----- Start of picture text -----

�� Share based
2016 ��
��
��
��
��
��
in AUD ��
Fees ($) ��
��
($)
��
Mr C
82,038 - - 82,038 7,793 - - 89,831 0.00%
��
��
39,625 - - 39,625 3,764 - - 43,389 0.00%
��
�� 44,346 - - 44,346 4,213 - - 48,559 0.00%
Mr J
40,351 - - 40,351 - - - 40,351 0.00%
��
�� 34,929 - - 34,929 3,318 - - 38,247 0.00%
��
Mr A Caruso 341,702 - 19,500 361,202 29,409 - 20,910 411,521 5.08%
��
�� 218,222 - 19,500 237,722 20,477 - 2,051 260,250 0.79%
�� 300,165 - - 300,165 27,248 - 2,847 330,260 0.86%
�� 75,829 - 4,595 80,424 4,032 - - 84,456 0.00%
�� 212,293 - - 212,293 20,153 - 1,972 234,418 0.84%
43
�� 168,287 - - 168,287 15,480 - 1,407 185,174 0.76%
�� - �� - ��
----- End of picture text -----

��

��
��
��
��
��
��
��

Annual Report 2016

5.2 ��

5.4 Equity Instruments - audited

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----- Start of picture text -----

�� Share based
2015 ��
��
��
��
��
in AUD ��
Fees ($)
($) ��
��
Mr C
59,924 - - 59,924 5,693 - - 65,617 0.00%
��
��
50,875 - - 50,875 4,833 - - 55,708 0.00%
��
�� 44,555 - - 44,555 4,233 - - 48,788 0.00%
Mr J
54,250 - - 54,250 - - - 54,250 0.00%
��
��
Mr A Caruso 347,004 - 19,500 366,504 27,697 - 35,307 429,508 8.22%
��
�� 221,840 - 19,500 241,340 23,196 - - 264,536 0.00%
�� 304,837 - - 304,837 30,067 - - 334,904 0.00%
�� 169,749 - 19,500 189,249 18,501 - - 207,750 0.00%
�� 119,597 - - 119,597 10,791 - - 130,388 0.00%
�� 168,286 - - 168,286 17,855 - - 186,141 0.00%
�� 92,877 - - 92,877 7,631 8,032 - 108,540 0.00%
Mr J
65,784 - - 65,784 7,235 20,769 - 93,788 0.00%
��
�� - ��
----- End of picture text -----

All rights refer to rights to acquire one ordinary share of Mastermyne Group Limited for no consideration which upon exercise are exchangeable on a one for one basis.

5.4.1 Rights over equity instruments granted as compensation - audited

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----- Start of picture text -----

��
��
��
��
2016 �� 2016
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	�� �� 2016	��	�� �� ��	�� ��	��	�� �� 2016

��
Mr A.Caruso	173,718	��	0.1116	-	��	-
��	55,555	��	0.1116	-	��	-
��	77,137	��	0.1116	-	��	-
��	53,419	��	0.1116	-	��	-
��	38,120	��	0.1116	-	��	-
Mr A.Caruso	173,718	��	0.1140	-	��	-
��	55,556	��	0.1140	-	��	-
��	77,137	��	0.1140	-	��	-
��	53,419	��	0.1140	-	��	-
��	38,119	��	0.1140	-	��	-

��

5.4.2 ��

No terms of equity-settled share-based payment transactions (including rights granted as compensation to a key ��

��

��

5.4.3 Exercise of rights granted as compensation - audited

��
��
��
��
��

5.3 Analysis of bonuses included in remuneration - audited

�� Group and other key management personnel are detailed below.

	�� �� $ (A)	�� ��	� �� ��
Directors
Mr A. Caruso	-	0.0%	100.0%
��
��	-	0.0%	100.0%
��	-	0.0%	100.0%
��	-	0.0%	100.0%
��	-	0.0%	100.0%

��

(B) The amounts forfeited are due to the performance or service criteria not being ��

During the reporting period no shares were issued on the exercise of rights previously granted as compensation.

5.4.4 Analysis of rights over equity instruments granted as compensation - audited

�� are detailed below.

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��
��
�� year year ��
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��	�� ��	��	�� year	�� year	�� ��	��

Mr A.Caruso	245,000	��	0%	100%	2016	FY2014 TSR
Mr A.Caruso	245,000	��	0%	100%	2016	FY2015 TSR
Mr A.Caruso	245,000	��	0%	100%	2016	FY2016 TSR
Mr A.Caruso	105,000	��	0%	100%	2016	FY2014 EPS
Mr A.Caruso	105,000	��	0%	100%	2016	FY2015 EPS
Mr A.Caruso	105,000	��	0%	100%	2016	FY2016 EPS
Mr A.Caruso	173,718	��	0%	0%	2018	FY16TRANCHE A
��	55,555	��	0%	0%	2018	FY16TRANCHE A
��	77,137	��	0%	0%	2018	FY16TRANCHE A
��	53,419	��	0%	0%	2018	FY16TRANCHE A
��	38,120	��	0%	0%	2018	FY16TRANCHE A
Mr A.Caruso	173,718	��	0%	0%	2018	FY16 TRANCHE B
��	55,556	��	0%	0%	2018	FY16 TRANCHE B
��	77,137	��	0%	0%	2018	FY16 TRANCHE B
��	53,419	��	0%	0%	2018	FY16 TRANCHE B
��	38,119	��	0%	0%	2018	FY16 TRANCHE B

Annual Report 2016

5.4.5 Analysis of movements in rights - audited

5.5.3 Key management personnel and director transactions - audited

	�� year $ (A)	�� �� �� year $ (B)	�� Year $(C)
��
Mr A.Caruso	39,191	-	-
��	12,533	-	-
��	17,402	-	-
��	12,051	-	-
��	8,600	-	-

The movement during the reporting period in the number of rights exchangeable for ordinary shares in Mastermyne Group ��

��	��	��	��	��	��	��	��	��
	�� ��	Granted as ��	��	Forfeited �� During the Year	�� June 2016	�� �� �� 2015	�� �� during the ��	�� �� at 30 June 2016
Directors
Mr A. Caruso	1,050,000	347,436	-	1,050,000	347,436	-	-	-
��
��	-	111,111	-	-	111,111	-	-	-
��	-	76,239	-	-	76,239	-	-	-
��	-	154,274	-	-	154,274	-	-	-
��	-	106,838	-	-	106,838	-	-	-

5.5.1 Individual directors and executives compensation disclosures - audited

Apart from the details disclosed in this note, no director has entered into a material contract with the Group since the end ��

5.5.2 Loans to key management personnel - audited

No loans were made, guaranteed or secured by the Company to key management personnel for the year.

A number of key management persons, or their related parties, hold positions in other entities that result in them having ��

A number of these entities transacted with the Group or its subsidiaries in the reporting period. The terms and conditions of the transactions with key management persons and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key managements persons related entities on an arm’s length basis.

The aggregate value of transactions and outstanding balances relating to key management personnel and entities over ��

		�� ��	�� ��	�� ��	�� ��
��	Note	2016	2015	2016	2015
��	(i)	255,536	255,536	-	-
��	(ii)	276,096	276,096	-	-
��	(iii)	56,727	93,600	-	-
		��	��	�	�

(i) The Group rents the premises at 45 River Street, Mackay which is owned by Andrew Watts through his company Watty Pty Ltd. Amounts paid for rent are at arm’s length and are due and payable under normal payment terms.

(ii) The Group is paying for leasehold improvements made by Watty Pty Ltd to the premises at 45 River Street, Mackay which is owned by Non - executive Director, Andrew Watts through his company Watty Pty Ltd.

��

From time to time key management personnel and directors of the Group, or their related entities, may purchase goods or services from the Group. These purchases are on the same terms and conditions as those entered into by other Group employees or customers and are trivial or domestic in nature.

5.5.4 Movements in shares - audited

The movement during the reporting period in the number of ordinary shares in Mastermyne Group Limited held directly, ��

��	��	��
	Shares held at 30 June 2015	Purchases	��	Sales	Shares held at 30 June 2016
Directors
��	100,000	1,000,000	-	-	1,100,000
��	-	100,000	-	-	100,000
��	11,262,245	1,000,000	-	-	12,262,245
Mr A. Caruso	1,419,693	-	-	-	1,419,693
��
��	-	88,703	-	-	88,703
��	13,366	-	-	-	13,366

Annual Report 2016

6.��

The principal activities of the Group during the course of �� the underground long wall mining operations and industrial �� industries of Queensland and New South Wales.

��

�� 30 June 2016.

7.��

The Group is subject to various environmental regulations under both Commonwealth and State legislation in relation to its involvement in the operation of mines.

The Board believes that the Group has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to the Group.

8.��

Dividends paid or declared by the Company to members ��

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��
��
��
share ��
$’000s
��
��
�� 0.010 911 Franked ��
��
�� 911
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Franked dividends declared as paid during the year were franked at the rate of 30 per cent.

�� ending 30 June 2016.

9.��

There has not arisen in the interval between the end �� transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, �� results of those operations, or the state of affairs of the ��

10.��

The outlook moving into FY2017 sees current operations remaining subdued with an ongoing focus on costs by the Group’s clients. There is currently a number of the Tier 1 mine owners divesting assets which is likely to create opportunities for with new owners around contract mining services. The strategy of diviersifying through Mastertec has led to an increase in the current pipeline of tendered opportunities which supports the expected growth for the division in FY2017.

Further information about likely developments in the operations of the Group and the expected results of those �� in this report because disclosure of the information would be likely to result in unreasonable prejudice to the Group.

11.��

The relevant interest of each director in the shares, debentures, interests in registered schemes and rights or options over such instruments issued by the companies �� Australian Securities Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:

��	��	��
	��	�� �� shares
��	1,100,000	-
��	100,000	-
��	12,262,245	-
Mr A. Caruso	1,419,693	347,436

12.��

��

At the date of this report there were no unissued ordinary shares of the Company under option.

��

The Company has agreed to indemnify the following �� Mr A Caruso, Mr A Watts and Mr G Meena for all liabilities to another person (other than the Company or a related body corporate) that may arise from their position within the company and its controlled entities, except where liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities including costs and expenses.

The company has not made a relevant agreement, �� is or has been an auditor of the company.

��

�� liability and legal expenses insurance contracts for the �� entity has paid or agreed to pay on behalf of the Company, premiums in respect of such insurance contracts for the year ending 30 June 2017. Such insurance contracts insure �� persons who are or have been directors or executive ��

The directors have not included details of the nature of the liabilities covered or the amount of the premiums �� legal expenses insurance contracts, as such disclosure is prohibited under the terms of the contracts.

��

During the year KPMG, the Company’s auditor, has performed certain other services in addition to their statutory duties.

The board has considered the non-audit services provided during the year by the auditor and in accordance with written advice provided by resolution of the Audit �� provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

��
��

Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for audit and non-audit services provided during the year are set out below. In 49 addition, amounts paid to other auditors for the statutory audit have been disclosed:

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��
�� 2016 2015
��
��
��
120,000 180,000
��
��
��
��
91,000 75,000
��
��
12,000 11,000
��
��
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Annual Report 2016

��

No person has applied for leave for Court to bring proceeding on behalf of the company or to intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a part to any such proceedings during the year.

16.��

�� ended 30 June 2016.

17.��

�� nearest thousand dollars, unless otherwise stated.

This report is made in accordance with a resolution of the Directors:

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��
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Chairman
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��

Lead Auditor’s ��

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��

�� 30 June 2016, there have been:
i. ��
ii. ��

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KPMG
M L Gray Partner
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��

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Annual Report 2016

Consolidated Statement ��

Consolidated Statement �� Comprehensive Income

��

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��
In thousands of AUD Note 2016 2015
��
Cash and cash equivalents 19 1,836 8,723
Trade and other receivables 18 29,084 38,568
Inventories 17 3,408 3,002
Current tax assets 16 226 259
��
Deferred tax assets 16 8,579 7,146
Property, plant and equipment 14 21,540 29,070
Intangible assets 15 7,089 14,912
��
��
��
Trade and other payables 25 11,039 18,101
Loans and borrowings 22 3,543 4,363
�� 23 3,237 7,725
��
Loans and borrowings 22 9,408 12,793
�� 23 102 197
��
��
Net assets ��
��
Share capital 55,234 55,234
Reserves (21,915) (21,944)
Retained earnings 10,716 24,783
��
��
��
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��

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��
In thousands of AUD Note 2016 2015
Revenue 8 168,434 174,195
Other income 9 257 35
Contract disbursements (35,612) (31,929)
Personnel expenses 11 (120,866) (126,061)
�� (7,672) (7,790)
Depreciation and amortisation expense 14,15 (7,562) (7,515)
Gain on bargain purchase 7 - 2,221
Impairment loss 15 (7,999) (4,538)
Other expenses 10 (3,173) (2,268)
��
Finance income 59 202
Finance expense (907) (1,101)
�� 12 ��
��
�� 13 1,855 195
��
Other comprehensive income for the period, net of income tax - -
��
��
Owners of the Company (13,156) (4,376)
Non-controlling interests (30) 22
��
��
Basic earnings per share (AUD) 21 (0.14) ��
Diluted earnings per share (AUD) 21 (0.14) ��
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��

Annual Report 2016

Consolidated Statement of Changes in Equity

��

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��
�� Common
��
Share Retained �� Control
In thousands of AUD �� Controlling ��
�� earnings ��
interests
(note 20) (note 20)
Consolidated
Balance at 1 July 2014 51,108 31,127 2,258 (24,237) 60,256 406 60,662
��
Loss for the period - (4,376) - - (4,376) 22 (4,354)
�� 22 ��
��
Share options exercised 4,126 - - - 4,126 - 4,126
Share-based payment transactions - - 35 - 35 - 35
Dividends to equity holders - (1,968) - - (1,968) - (1,968)
��
�� 428 ��
Balance at 1 July 2015 55,234 24,783 2,293 (24,237) 58,073 428 58,501
��
Loss for the period - (13,156) - - (13,156) (30) (13,186)
�� (30) ��
��
Issue of ordinary shares in relation to business
combinations - - - - - - -
Share-based payment transactions - - 29 - 29 - 29
Dividends to equity holders - (911) - - (911) - (911)
��
�� 398 ��
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Consolidated Statement of Cash Flows

��

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��
In thousands of AUD Note 2016 2015
��
Cash receipts from customers 204,277 199,535
Cash paid to suppliers and employees (203,443) (190,741)
Cash generated from operations 834 8,794
Interest paid (907) (1,101)
�� 454 (558)
�� 28 381 ��
��
Proceeds from sale of property, plant and equipment 418 104
Acquisition of property, plant and equipment 14 (2,244) (1,018)
Acquisition of intangibles (227) -
Interest received 59 202
Acquisition of subsidiary, net of cash acquired - (10,581)
��
��
Proceeds from borrowings - 11,500
Repayment of borrowings (4,363) (5,461)
Dividends paid 20 (911) (1,968)
��
Net decrease in cash and cash equivalents (6,887) (87)
Cash and cash equivalents at beginning of period 8,723 8,810
�� 19 ��
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��

Annual Report 2016

Notes to the Financial Statements

��

1.��

Mastermyne Group Limited (the ‘Company’) is a company domiciled in Australia. The address of the Company’s registered �� year ended 30 June 2016 comprise the Company and its subsidiaries (together referred to as the ‘Group’ and individually as ‘Group entities’).

�� New South Wales.

The Company is of a kind referred to in ASIC Corporations �� has been rounded to the nearest thousand unless otherwise stated.

2.��

(a) Statement of compliance

�� with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and �� report of the Group complies with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB).

(d) Use of estimates and judgements

�� requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

�� for issue by the Board of Directors on 16 August 2016.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

(b) Basis of measurement

�� on the historical cost basis.

�� year are included in the following notes:

(c) Functional and presentation currency

��

�� in Australian Dollars, which is the Company’s functional currency and the functional currency of each entity in the Group.

��
��
��

��

Accounting policies set out below have been applied consistently to all periods presented in these consolidated �� by the Group entities.

(a) Basis of consolidation

(i) Business Combinations

The Group accounts for business combinations using the acquisition method when control is transferred to the Group (see note 3(a)(iii)). The consideration transferred in the acquisition is generally measured at fair value, as �� arises is tested annually for impairment (see note 3(h)). Any �� immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. ��

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent �� and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent ��

(ii) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through �� statements from the date on which control commences until the date on which control ceases.

(iii) Acquisitions from entities under common control

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established; for this purpose comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group’s controlling �� components of equity of the acquired entities are added to the same components within the Group. Any cash paid for the acquisition is recognised directly in equity.

(iv) Loss of Control

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related Non-Controlling Interests (NCI) and other components of equity. Any resulting gain or loss �� the former subsidiary is measured at fair value when control is lost.

(v) Transactions eliminated on consolidation

Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated ��

(vi) Non-controlling interests

NCI are measured at their proportionate share of the ��

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

(b) Financial instruments

��

�� other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

�� initially at fair value plus, for instruments not at fair value �� costs. Subsequent to initial recognition, non-derivative ��

�� becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the �� or substantially all risks and rewards of the asset. Regular �� for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are �� contract expire or are discharged or cancelled.

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents ��

�� in note 3(m).

��

�� at amortised cost using the effective interest method, less any impairment losses (see note 3(h)(i)).

Annual Report 2016

(ii) Share capital

��

�� costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

��

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognised as a deduction from equity, net of any tax effects. Repurchased shares �� reserve for own shares. When treasury shares are sold or reissued subsequently, the amount received is recognised �� on the transaction is presented in retained earnings.

(c) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, the costs of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing costs.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised within �� revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings.

(ii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of �� cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised ��

(iii) Depreciation

Depreciation is based on the cost of an asset less its �� assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.

�� line or diminishing value basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term.

�� lives for the current and comparative periods are as follows:

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2016 ��
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	2016	��

��	7.50 - 50.00%	7.50 - 50.00%
��	12.50 - 30.00%	12.50 - 30.00%
��	37.50 - 50.00%	37.50 - 50.00%
�� ��	25.00 - 66.66%	25.00 - 66.66%
��	7.50 - 15.00%	7.50 - 15.00%

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(iv) Leasehold improvements

The cost of improvements to, or in, leasehold properties is amortised over the unexpired period of the lease or the estimated useful life of the improvements to the Group, whichever is shorter.

(d) Intangible assets

(i) Goodwill

Goodwill that arises upon the acquisition of the subsidiaries is included in intangible assets. For the measurement of goodwill at initial recognition, see note 3 (a)(i).

��

Goodwill is measured at cost less accumulated impairment losses.

(ii) Other intangible assets

Other intangible assets that are acquired by the �� at cost less accumulated amortisation and accumulated impairment losses.

(iii) Subsequent expenditure

Subsequent expenditure is capitalised only when it �� including expenditure on internally generated goodwill ��

(iv) Amortisation

Amortisation is based on the cost of an asset less its �� on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

	2016	��
��	3-7 years	3-7 years
��	8-10 years	8-10 years

Amortisation methods, useful lives and residual values are reviewed at each reporting date, and adjusted if appropriate.

(e) Leased assets

Leases in terms of which the Group assumes substantially �� measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

�� such, the leased assets are not recognised in the Group’s ��

(f) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on �� incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(g) Unbilled Revenue

Unbilled revenue is the estimated amount recoverable from customers in relation to unbilled services rendered as at balance date.

(h) Impairment

(i) Financial assets (including receivables)

�� or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. ��

that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect �� be estimated reliably.

�� securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy or the disappearance of an active market for a security. In addition, for an investment in an equity security, �� its cost is objective evidence of impairment.

�� measured at amortised cost is calculated as the difference between its carrying amount and the present value of �� original effective interest rate. Losses are recognised in �� receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed ��

��

�� other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For 59 �� lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.

The recoverable amount of an asset or Cash-Generating Unit (CGU) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the �� current market assessments of the time value of money �� of impairment testing, assets that cannot be tested individually are grouped together into the smallest group �� other assets or groups of assets (the CGU). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which �� goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated �� synergies of the combination.

The Group’s corporate assets do not generate separate �� may be impaired, the recoverable amount is determined for the CGU to which the corporate asset belongs.

Annual Report 2016

��

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable �� loss. Impairment losses recognised in respect of CGUs �� goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(i) ��

��

�� a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for �� services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

��

The Group’s net obligation in respect of long-term employee �� have earned in return for their service in the current and �� or loss in the period in which they arise.

��

�� when the Group can no longer withdraw the offer of �� settled wholly within 12 months of the reporting date, then they are discounted.

��

�� related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. These liabilities are calculated on an undiscounted basis on remuneration

wage and salary rates that the Group expects to pay as at reporting date including related on-costs, such as workers compensation, insurance and payroll tax.

�� medical care, housing, cars and free or subsidised goods and services are expensed based on the net marginal cost ��

(v) Bonus plans

�� “”sundry creditors and accruals”” when there is no realistic alternative but to settle the liability and at least one of the following conditions is met:

��
��
��

�� to be settled within 12 months and are measured at the amounts expected to be paid when they are settled.

(vi) Share-based payment transactions

The grant-date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is �� related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do not meet the related service and nonmarket performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is �� for differences between expected and actual outcomes.

(j) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an �� obligation. Provisions are determined by discounting the �� current market assessments of the time value of money ��

(k) Revenue

(i) Goods sold

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue �� ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably.

(ii) Services

�� or loss in proportion to the stage of completion of the �� and as services are provided for work completed on a �� work is assessed by reference to the tasks completed as per the agreed schedule of work provided. No revenue is �� recovery of the consideration.

(l) Lease payments

Payments made under operating leases are recognised �� the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

�� is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

(m) Finance income and expense

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues ��

Finance expenses comprise interest expense on borrowings, unwinding of the discount on provisions �� Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying �� interest method.

(n) Income tax

Income tax expense comprises current and deferred tax. �� to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying �� purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and �� differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously

In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Group believes that its accrual for tax liabilities are adequate based on its assessment of several factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of exiting tax liabilities; such changes to tax liabilities will impact income tax expense in the period that such a determination is made.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the �� be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer ��

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised. The Group does not distribute non-cash assets as dividends to its shareholders.

The Company and its wholly-owned Australian resident entities are part of a tax-consolidated group formed with effect from 7 May 2010. As a consequence, all members of the tax-consolidated group are taxed as a single entity. The head entity within the tax-consolidated group is Mastermyne Group Limited.

Annual Report 2016

(o) Goods and services tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable �� is included as a current asset or liability in the Group’s ��

��

(p) Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are regularly reviewed by the Board to make decisions about resources to be allocated to the segment and assess its performance, and for which ��

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly investments (other than investment property) and related revenue, loans and borrowings and related expenses, corporate assets (primarily the Group’s �� assets and liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill.

(q) Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated �� shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. �� attributable to ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

(r) New standards and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 July 2015, however, the Group has not applied the following new or amended standards in preparing these consolidated statements.

��

AASB 9 replaces the existing guidance in AASB 139 Financial Instruments: Recognition and Measurement. �� assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and ��

AASB 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

The Group is assessing the potential impact on its �� application of AASB 9.

��

AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including AASB 118 Revenue, AASB 111 Construction Contracts and AASB Interpretation 13 Customer Loyalty Programmes.

AASB 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Group is assessing the potential impact �� of AASB 15.

��

�� and requires all the leases (including operating leases) �� sheet test for lessees.

AASB is effective for annual reporting periods beginning on or after 1 January 2019, with early adoption permitted where AASB 15 Revenue from Contracts with Customers is adopted at the same time.

�� statements resulting from the application of AASB 16.

��

A number of the Group’s accounting policies and disclosures require the measurement of fair values, ��

The Group has an established control framework with respect to the measurement of fair values.

�� unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing �� team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of AASBs, including the level in the fair value hierarchy in which such valuations should ��

�� Audit and Risk Management Committee.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

��
��
��

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value �� to the entire measurement.

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following notes:

��
��
��

��

The Group has exposure to the following risks from its use ��

� credit risk

interest rate risk

� ��

This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout this ��

��

The Board, together with management, seeks to identify, monitor and mitigate risk. Internal controls are monitored on a continuous basis and, wherever possible, improved. �� corporate governance policies and will continue to be kept under regular review. Review takes place at both the Audit and Risk Management Committee level, with meetings at least four times a year, and at the Board level.

��

�� to meet its contractual obligations, and arises principally from the Group’s receivables from customers.

��

�� by the individual characteristics of each customer.

The majority of the Group’s customers are large multinational mining companies with strong payment track records and credit history. There is no formal credit policy in place, however, each customer is assessed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions (30 days) are offered. The Group operates under signed contracts, purchase orders and forward purchase agreements which all have agreed payment terms included.

The aged receivables are reviewed on a weekly basis by senior management and overdue amounts followed up with customers for payment. The Group does not require collateral in respect of trade and other receivables.

Annual Report 2016

� �� 65

��

The Group ensures that interest rates for equipment �� loan is entered into for the term of the loan; and the �� of the commercial bills.

��

Liquidity risk is the risk that the Group will not be able to �� approach to managing liquidity is to ensure, as far as �� to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

��

The Board’s policy is to maintain a strong capital base so �� and to sustain future development of the business. The Board of Directors monitors the return on capital, which �� capital. The Board also monitors the level of dividends to ordinary shareholders.

�� on demand and undrawn facilities to meet expected �� potential impact of extreme circumstances that cannot reasonably be predicted. The Group maintains the following lines of credit:

There were no changes in the Group’s approach to capital management during the year.

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

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----- Start of picture text -----

��
��
��
�� In thousands of AUD
�� 5,000 nil
�� 500 321
�� 500 nil
�� 6,000 321
�� 15,000 994
�� 10,450 10,450
�� 1,297 1,297
�� 51 51
��
----- End of picture text -----

6.��

��

The group has two reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different services and products and are managed separately because they require different skill bases and marketing strategies. For each of the strategic business units, the Group’s Managing Director reviews internal management reports on a monthly basis. The following summary describes the operations in each of the Group’s reportable segments:

��
��

Information regarding the results of each reportable segment is included on the following page. Performance is measured �� most relevant in evaluating results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm’s length basis.

==> picture [486 x 15] intentionally omitted <==

----- Start of picture text -----

��
----- End of picture text -----

	��	��	��	��	��	��

In thousands of AUD	2016	2015	2016	2015	2016	2015
��	130,585	140,863	37,849	33,332	168,434	174,195
��	73	5,600	2,564	1,801	2,637	7,401
��	130,658	146,463	40,413	35,133	171,071	181,596
��	(6,086)	(6,082)	(1,485)	(1,463)	(7,571)	(7,545)
��	(856)	(827)	8	(72)	(848)	(899)
��	-	-	(7,999)	(4,538)	(7,999)	(4,538)
��	2,040	3,256	(16,335)	(5,137)	(14,295)	(1,881)
��	45,303	60,400	27,714	35,441	73,017	95,841
��	1,113	752	1,132	347	2,245	1,099
��	(22,067)	(26,368)	(12,194)	(14,469)	(34,261)	(40,837)

��

The Group has two (2015: two) customers that individually represent in excess of 10% of Group revenues. The total revenue from these customers represents $103,838 thousand (2015: $134,364 thousand) of the Group’s total revenues, reported in the Mastermyne and the Mastertec segments as follows:

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----- Start of picture text -----

In thousands of AUD 2016 ��
��
�� 171,071 181,596
�� (2,637) (7,401)
��
��
�� (14,295) (1,881)
�� - (159)
��
(746) (2,509)
��
��
��
�� 73,017 95,841
�� 719 3,014
�� (8,640) -
��
6,666 2,825
��
��
��
�� (34,261) (40,837)
�� (1,708) (2,342)
�� 8,640 -
��
----- End of picture text -----

��

7.��

(i) ��

��

On 19 February 2016 the Group purchased the business of Group Engineering, a provider of engineering and design services to a range of industries, primarily focused on sustaining capital works for the coal mining and heavy industry on the east coast of Australia.

��

The Group has only operated in Australia during the current and comparative periods. All assets are held within Australia as at 30 June 2016 and 30 June 2015.

The acquisition of the Group Engineering business compliments the Mastertec division and allows the Group to be involved at the front of projects in the design phase. The addition of the engineering skills will bolster the project management and project delivery skills of the Mastertec division, ensuring the Group delivers projects of the highest quality.

There are varying levels of integration between the Mastermyne and Mastertec reportable segments. This integration includes transfers of human resources and shared overhead resources. The accounting policies of the reportable segments are the same as described in notes 2 and 3.

Annual Report 2016

7.��

��

a) Consideration transferred

The following table summarises the acquisition-date fair value of each major class of consideration transferred.

In thousands of AUD
��	229
��	159
��	388

b) Acquisition-related costs

The Group incurred acquisition-related costs of $7 thousand

��

The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.

In thousands of AUD
��	88
��	290
��	(87)
��	291

d) Goodwill

Goodwill arising from the acquisition has been recognised as follows.

In thousands of AUD
��	388
��	291
��	��

The goodwill is attributable mainly to the skills and technical talent of the Group Engineering work force, and the synergies expected to be achieved from integrating the company into the Group’s existing business.

None of the goodwill recognised is expected to be deductible for tax purposes.

(ii) ��

��

On 23 December 2014 the Group obtained control �� of services to a range of industries, primarily focused on maintenance and mining services in Queensland and New South Wales, by acquiring 100% of the shares and voting interests in the company.

The acquisition of DMS is in keeping with the Group’s strategy of expanding its service offering, and to compliment and leverage from the position that the Company has in the underground coal sector. The �� coal and will leverage off the synergies of combining with the Mastermyne Group.

DMS operates throughout the Bowen Basin, Gladstone, Mackay and the Hunter Valley for a range of blue chip clients in the mining, downstream metalliferous processing, prime contracting and mining infrastructure industries. In addition, DMS is a specialist in overwater scaffolding. DMS operates through three business units:

��
��
��

(a) Consideration transferred

The following table summarises the acquisition-date fair value of each major class of consideration transferred.

==> picture [231 x 60] intentionally omitted <==

----- Start of picture text -----

In thousands of AUD ��
�� 10,337
��
20 4,126
��
��
----- End of picture text -----

i. Equity instruments issued

The fair value of the ordinary shares issued was based on the listed share price of the Company at 23 December 2014 of $0.265 per share.

(b) Acquisition-related costs

The Group incurred acquisition-related costs of $1,272 thousand relating to external legal fees and due diligence costs. These amounts have been included in other ��

��

The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.

==> picture [231 x 134] intentionally omitted <==

----- Start of picture text -----

In thousands of AUD ��
�� 14 7,752
�� 1,808
�� 5,166
�� (244)
�� (73)
�� 16 9,258
�� (987)
�� (5,465)
�� 16 (531)
��
----- End of picture text -----

The trade and other receivables comprise gross contractual amounts due of $5,323 thousand, of which $157 thousand was expected to be uncollectible at the date of acquisition.

(d) Gain on bargain purchase

Gain on bargain purchase was recognised as a result of the acquisition as follows. The gain has been directly ��

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----- Start of picture text -----

In thousands of AUD ��
�� 14,463
�� 16,684
��
----- End of picture text -----

8.��

==> picture [231 x 75] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
�� 145,438 135,354
�� 22,961 33,332
�� 35 5,509
��
----- End of picture text -----

9.��

==> picture [231 x 51] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
�� 257 35
�� 35
----- End of picture text -----

10.��

==> picture [231 x 133] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
�� 104 5
��
6 -
��
��
2,003 6
��
�� 7 1,272
�� 28 28
�� 1,025 957
��
----- End of picture text -----

11.��

==> picture [293 x 131] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
�� 106,043 110,429
��
8,186 8,544
��
��
�� 6,608 7,053
�� 67
��
29 35
��
��
----- End of picture text -----

12.��

==> picture [231 x 110] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
�� 59 202
�� 202
�� (74) (255)
�� (592) (234)
�� (241) (612)
��
��
----- End of picture text -----

Annual Report 2016

��

==> picture [230 x 154] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
��
��
�� (4,512) (1,365)
��
�� 2,399 1,361
��
78 475
��
�� - (666)
��
180 -
��
��
----- End of picture text -----

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----- Start of picture text -----

��
In thousands of AUD 2016 2015
��
�� - 314
�� (334) (27)
(334) ��
��
��
(2,035) (509)
��
�� 514 27
��
��
----- End of picture text -----

��

==> picture [485 x 339] intentionally omitted <==

----- Start of picture text -----

�� Motor ��
In thousands of AUD ��
��
Cost or deemed cost
�� 55,093 1,049 2,082 460 2,021 60,705
�� 869 - 69 20 60 1,018
�� (59) (221) - - - (280)
�� 6,761 876 - - 115 7,752
�� 480 ��
�� 62,664 1,704 2,151 480 2,196 69,195
�� 1,933 205 106 - - 2,244
�� (7,703) (140) (650) - (1,804) (10,297)
�� 480 - - (480) - -
�� - 392 ��
��
�� 29,052 714 1,547 410 1,250 32,973
�� 6,357 187 195 28 556 7,323
�� - (171) - - - (171)
�� 438 ��
�� 35,409 730 1,742 438 1,806 40,125
�� 6,710 176 182 - 285 7,353
�� (5,433) (38) (630) - (1,775) (7,876)
�� 438 - - (438) - -
�� 868 �� - 316 ��
��
�� 26,041 335 535 50 771 27,732
�� 409 42 390 ��
�� 27,255 974 409 42 390 29,070
�� 901 313 - ��
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�� of leased property, plant and equipment was $4,380 thousand (2015: $10,837 thousand).

��

==> picture [231 x 207] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
Goodwill
�� 6,429 14,331
��
��
�� 2,945 2,945
�� (2,911) (2,841)
�� 34 104
��
�� 1,773 1,522
�� (1,147) (1,045)
�� 626 ��
��
�� 11,147 18,798
�� (4,058) (3,886)
��
----- End of picture text -----

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----- Start of picture text -----

��
In thousands of AUD 2016 2015
Goodwill
�� 14,331 18,869
�� 97 -
�� (7,999) (4,538)
��
��
�� 104 173
�� (70) (69)
�� 34 104
��
�� 477 600
�� 290 -
�� (2) -
�� (139) (123)
�� 626 ��
��
�� 14,912 19,642
�� 387 -
�� (2) -
�� (7,999) (4,538)
�� (209) (192)
��
----- End of picture text -----

Goodwill relates to the acquisition of Mastermyne Underground Pty Ltd.

��

The accounting policy for the recognition and measurement of intangible assets is set out in note 3(d).

��

For the purpose of impairment testing, goodwill is allocated to the Group’s operating divisions which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes, which is not higher than the Group’s operating segments as reported in note 6.

The aggregate carrying amounts of goodwill allocated to each unit are as follows:

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----- Start of picture text -----

��
��
In thousands of AUD �� 2016 2015
��
�� 7,030 - (601) - 6,429 7,030
�� 7,301 97 601 (7,999) - 7,301
�� - ��
----- End of picture text -----

During the year, the Group acquired further goodwill of $97 thousand as a result of the acquisition of the Group Engineering business as explained in note 7, Business Combination.

During the year as a result of the ongoing weakness across the mining services sector the group reviewed its core business and made the decision that workshops were considered non-core activities and therefore exited the Groups workshop activities in Mackay and Rockhampton. As a result of exiting the workshops and continued weakness in the sector, the carrying amount of the Mastertec CGU was assessed to be higher than its recoverable amount, and the recognised value of goodwill associated with the Mastertec CGU of $7,999 thousand was fully impaired (2015: $4,538 thousand). The related impairment ��

Annual Report 2016

��

The recoverable amount of the cash-generating units as at 30 June 2016 was based on their value in use and was �� CGU, based on past experience, actual operating results and the business plans and long-term strategy for the relevant cash generating unit. For the Mastermyne Mining CGU the value in use was determined to be greater than the relevant carrying amount. The key assumptions for each cash generating unit were as follows:

==> picture [487 x 16] intentionally omitted <==

----- Start of picture text -----

��
----- End of picture text -----

	��	��	��	��	��	��

	�� ��	�� growth rate	�� discount rate	�� ��	�� growth rate	�� discount rate
��	6.8%	2.5%	16.2%	4.3%	2.5%	16.0%
�� ��	6.0%	2.5%	17.7%	5.0%	2.5%	16.4%

The discount rate was calculated based on the Group’s weighted average cost of capital, an industry average beta, risk-free rate based on Australian government 10-year treasury bonds with a minimum yield used of 4.5%, a market risk premium of 6% and a calculated cost of debt based on the Group’s current debt and interest rates payable on this debt.

16.��

��

The current tax asset for the Group of $226 thousand (2015: $259 thousand) represents the amount of income taxes refundable, in respect of current and prior periods.

��

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��
��
��
In thousands of AUD ��
��
�� 1626 (434) 528 1720
�� (1,813) 216 (431) (2,028)
�� - 101 (54) 47
�� (52) 21 - (31)
�� 345 (210) 321 456
�� (26) (52) 220 142
�� (2,140) 1,207 - (933)
�� (3) (19) 19 (3)
�� - (234) 234 -
�� - (114) 7,890 7,776
�� 482 ��
��
��
��
In thousands of AUD ��
��
�� 1,720 (718) - 1,002
�� (2,028) 372 - (1,656)
�� 47 (47) - -
�� (31) 22 (88) (97)
�� 456 (293) - 163
�� 142 (98) - 44
�� (933) (469) - (1,402)
�� (3) (1) - (4)
�� 7,776 2,753 - 10,529
��
71
----- End of picture text -----

��

Deferred tax assets and liabilities are attributable to the following:

==> picture [486 x 171] intentionally omitted <==

----- Start of picture text -----

�� Assets ��
In thousands of AUD 2016 2015 2016 2015 2016 2015
�� 1,002 1,720 - - 1,002 1,720
�� - 26 (1,656) (2,054) (1,656) (2,028)
�� - 47 - - - 47
�� - - (97) (31) (97) (31)
�� 163 456 - - 163 456
�� 75 173 (31) (31) 44 142
�� - - (1,402) (933) (1,402) (933)
�� - - (4) (3) (4) (3)
��
��
��
�� - - ��
----- End of picture text -----

17.��

==> picture [231 x 61] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
�� 1,072 978
�� 2,336 2,024
��
----- End of picture text -----

During the year ended 30 June 2016, raw materials, �� progress recognised as cost of sales amounted to $16,245 thousand (2015: $8,019 thousand).

18.��

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----- Start of picture text -----

��
In thousands of AUD 2016 2015
�� 21,018 30,691
�� 2,516 1,199
�� 5,413 6,081
�� 137 597
��
----- End of picture text -----

The Group’s exposure to credit risks and impairment losses related to trade and other receivables are disclosed in note 26.

At 30 June 2016 the Group has revenue losses totalling $34,818 thousand (2015: $25,920) which are available to be offset against future taxable income.

Annual Report 2016

19.��

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----- Start of picture text -----

��
In thousands of AUD 2016 2015
�� 1,835 8,718
�� 1 5
��
��
��
----- End of picture text -----

The Group’s exposure to interest rate risk and a sensitivity �� in note 26.

20.��

��

==> picture [231 x 15] intentionally omitted <==

----- Start of picture text -----

��
----- End of picture text -----

	��	��
	2016	2015
��	91,087,536	75,517,514
�� ��	-	15,570,022
��	91,087,536	91,087,536

��

The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

The Group has also issued performance rights (see note 24).

��

Share-based payments reserve

The share-based payments reserve represents the grant date fair value of equity instruments granted to senior managers or key management personnel of the Company (see note 24).

��

As a result of combinations of entities under common control, an equity account was created called the common control reserve. The balance of this account represents the excess of the fair value of Mastermyne Group Limited securities as at 7 May 2010 over the initial carrying value of Mastermyne Pty Ltd as at the date of Mastermyne Group Limited becoming the new parent entity of the Group.

��

Dividends recognised in the current year by the Group are:

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----- Start of picture text -----

��
��
��
�� (In
��
share thousands
of AUD)
2016
��
�� $0.010 911 Franked ��
��
�� 911
2015
��
�� $0.014 1,057 Franked ��
��
��
��
$0.010 911 Franked ��
��
��
��
----- End of picture text -----

Franked dividends declared or paid during the year were franked at the tax rate of 30 per cent.

There were no dividends declared after the balance sheet date.

��

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----- Start of picture text -----

��
----- End of picture text -----

	��	��

In thousands of AUD	2016	2015
�� �� ��	14,669	15,396

The balance of the dividend franking account represents the total of the individual franking accounts within the companies comprising the consolidated entity.

The above available amounts are based on the balance of the dividend franking account at year-end adjusted for:

i. ��
��
��
ii. ��
��
iii. ��
��
iv. ��
��

The ability to utilise the franking credits is dependent ��

��

21.��

The calculation of diluted earnings per share at 30 June 2016 was based on the loss attributable to ordinary shareholders of $13,156 thousand (2015: $4,376 thousand) and a weighted average number of ordinary shares outstanding of 91,088 thousand (2015: 83,580 thousand), calculated as follows:

��

The calculation of basic earnings per share at 30 June 2016 was based on the loss attributable to ordinary shareholders of $13,156 thousand (2015: $4,376 thousand) and a weighted average number of ordinary shares outstanding of 91,088 thousand (2015: 83,580 thousand), calculated as follows:

��

==> picture [231 x 16] intentionally omitted <==

----- Start of picture text -----

��
----- End of picture text -----

��

		��	��
�� In thousands of AUD 2016 2015 �� �� (13,156) (4,376)	In thousands of AUD	2016	2015
	�� ��	(13,156)	(4,376)
	�� ��

��

==> picture [231 x 71] intentionally omitted <==

----- Start of picture text -----

��
In thousands of shares 2016 2015
��
91,088 83,580
��
��
��
��
----- End of picture text -----

==> picture [231 x 83] intentionally omitted <==

----- Start of picture text -----

��
In thousands of shares 2016 2015
�� 91,088 75,518
��
- 8,062
��
��
��
��
----- End of picture text -----

22.��

This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings which are measured at amortised cost. For more information about the Group’s exposure to interest rate and liquidity risk, see note 26.

==> picture [232 x 145] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
��
�� 1,046 2,731
�� 2,497 1,632
��
��
Finance lease liabilities (secured) - 1,046
Contingent consideration
158 -
(unsecured)
Cash advance facility (secured) 9,250 11,747
��
----- End of picture text -----

��

Finance lease

Finance lease facilities are drawn with the Westpac Banking Corporation and Vendor Finance Pty Ltd, and are secured by a charge over the asset to which the facility �� of the Group.

Westpac cash advance facility

The Westpac cash advance facility is drawn with the Westpac Banking Corporation for the purpose of the DMS acquisition and equipment funding and is secured �� capital of the Group.

The impact on the dividend franking account of dividends proposed after balance date but not recognised as a liability is to reduce it by $0 thousand (2015: $390 thousand).

Annual Report 2016

��

22.��

��

Finance lease liabilities of the Group are payable as follows:

==> picture [486 x 119] intentionally omitted <==

----- Start of picture text -----

��
��
Future minimum Future minimum
�� minimum lease �� minimum lease
��
��
In thousands of AUD 2016 2016 2016 2015 2015 2015
�� 1,082 (36) 1,046 2,891 (160) 2,731
��
- - - 1,082 (36) 1,046
��
�� - - - - - -
��
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��

==> picture [230 x 134] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
Current
�� - 2,188
�� 1,955 3,212
�� 1,121 1,937
�� 161 388
��
��
�� 102 197
102 ��
----- End of picture text -----

��	��	��	��
�� �� ��	397,949	Vesting Conditions 1, 2, 3 and 4a	2.5 Years
�� �� ��	397,949	Vesting Conditions 1, 2, 3 and 4b	2.5 Years

Vesting of the rights will be subject to achievement of the vesting conditions set out below and the eligible participant being employed at the vesting date:

��
��
��
��
a. ��
b. ��
��

�� �� 0% �� 50% plus 2% for each percentile above 50th percentile �� 100% ��

��

At 30 June 2016, the Group has the following share-based payment arrangements:

��

An employee performance rights plan was adopted by the Board on 15 September 2015 and the plan was activated by resolution of the Board as of 16 November 2015. This plan entitles personnel to purchase shares in the Company provided performance conditions are met. In accordance with the plan, employees holding vested options are entitled to purchase shares in the Company at a set exercise price based on volume weighted average price in the two months preceding the offer.

The terms and conditions of the performance rights programme are as follows; all options are to be settled by physical delivery of shares.

��

The fair value of the rights granted through the employee performance rights programme was measured based on the Monte Carlo simulation. Expected volatility is estimated by considering historic average share price volatility based on Mastermyne and its peers.

��

The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as follows:

�� ��	�� ��
Fair value of share options and assumptions	2016
��	$0.1116
��	$0.1140
��	$0.21
��	$ nil
�� ��	71.1%
��	2.5 years
��	9.50%
�� ��	2.09%

Annual Report 2016

��

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----- Start of picture text -----

��
In thousands of AUD 2016 2015
�� 3,818 6,340
�� 7,221 11,761
��
----- End of picture text -----

26.��

��

Exposure to credit risk

�� represents the maximum credit exposure. The Group’s maximum exposure to credit risk at the reporting date was:

==> picture [230 x 62] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
�� 18 29,084 38,568
�� 19 1,836 8,723
��
----- End of picture text -----

�� each representing more than 10% of the carrying amount of trade receivables at 30 June 2016. The total of the receivables from these customers is $15,190 thousand (2015: $12,005 thousand).

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

In the current and comparative periods, the Group’s cash and cash equivalents are held with a AA-Rated Australian bank.

��

The aging of the Group’s trade receivables at the reporting date is as follows:

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----- Start of picture text -----

��
In thousands of AUD 2016 2015
�� 14,049 21,694
�� 6,064 7,881
�� 603 208
�� 85 517
�� 217 499
��
----- End of picture text -----

The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 26.

The movement in the allowance for impairment in respect of trade and other receivables during the year ended 30 June 2016 was as follows:

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----- Start of picture text -----

��
In thousands of AUD 2016 2015
�� (108) (1,033)
�� (16) (5)
�� 124 930
�� - ��
----- End of picture text -----

Impairment allowance utilised during the year relates to a number of customers that were placed into receivership during the year ended 30 June 2016. At the time the Group raised an allowance for the full amount of the receivable, and it is unlikely that that the amount will become recoverable.

Credit risk in trade receivables is managed in the following ways: payment terms being 30 days and credit evaluations performed on all new customers requiring credit over a certain amount. The Group does not require collateral in respect of trade receivables. An analysis of the credit quality of trade receivables not impaired is as follows:

==> picture [231 x 83] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
��
16,627 13,253
��
��
4,391 17,438
��
��
----- End of picture text -----

Amounts in the above table include all trade receivables at the reporting date that were not impaired.

��

�� the impact of netting agreements:

==> picture [486 x 297] intentionally omitted <==

----- Start of picture text -----

��
30 June 2016
��
�� Contractual 6 mths
In thousands of AUD Note �� than 5
amount �� or less
��
��
�� 22 1,046 (1,082) (567) (515) - - -
�� 22 11,747 (12,841) (2,167) (825) (1,612) (8,237) -
�� 25 11,039 (11,039) (11,039) - - - -
��
��
different amounts.
��
30 June 2015
��
�� Contractual 6 mths
In thousands of AUD Note �� than 5
amount �� or less
��
��
�� 22 3,777 (3,973) (1,815) (1,076) (1,082) - -
�� 22 13,379 (14,961) (1,092) (1,072) (2,095) (10,702) -
�� 25 18,101 (18,101) (18,101) - - - -
�� -
----- End of picture text -----

��

�� of changes in the interest rate, with all other variables remaining constant, would be as follows:

��

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----- Start of picture text -----

��
��
In thousands of AUD 2016 2015
��
��
(1,046) (3,777)
��
��
��
�� 1,836 8,723
�� (11,747) (13,379)
��
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==> picture [231 x 16] intentionally omitted <==

----- Start of picture text -----

��
----- End of picture text -----

	��	��

Effect In thousands of AUD	2016	2015
��
��	(99)	(47)
��	198	93

The above interest rate sensitivity analysis has been performed on the assumption that all other variables remain unchanged.

A change in interest rate on the above variable rate instruments would have had no impact on equity.

No sensitivity analysis has been performed on foreign exchange risk, as the Group is not directly exposed ��

��

�� Therefore, a change in interest rates at the reporting date ��

Impairment losses of $0 thousand were recognised at 30 June 2016 (2015: $108 thousand).

Annual Report 2016

26.��

��

Fair values versus carrying amounts

�� with the carrying amounts shown in the statement of ��

==> picture [231 x 201] intentionally omitted <==

----- Start of picture text -----

��
In thousands of �� Fair �� Fair
AUD amount �� amount ��
��
��
29,084 29,084 38,568 38,568
��
��
1,836 1,836 8,723 8,723
��
��
��
��
(1,046) (1,064) (3,777) (3,892)
��
��
(11,747) (11,747) (13,379) (13,379)
��
��
(11,039) (11,039) (18,101) (18,101)
��
��
----- End of picture text -----

27.��

��

Non-cancellable operating lease rentals are payable as follows:

==> picture [231 x 61] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
�� 1,632 2,220
�� 889 1,415
��
----- End of picture text -----

The Group leases a number of residential premises and �� premise leases typically run for a period of 1 year. The �� 1 and 5 years, with an option to renew the lease after that date in some cases.

The Group leases a number of motor vehicles under operating leases. The leases typically run for a period of 2-4 years.

The amount recognised in relation to operating lease payments for the year ended 30 June 2016 totalled $3,392 thousand (2015: $3,046 thousand) for the Group.

28.��

==> picture [486 x 283] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD Note 2016 2015
��
Loss for the period (13,186) (4,354)
��
Depreciation 14 7,353 7,323
Amortisation of intangible assets 15 209 192
Impairment loss 15 7,999 4,538
Loss on sale of property, plant and equipment 10 2,003 6
Share based payments 11 29 35
Bargain on acquisition 7 - (2,221)
�� 12 848 899
�� 13 (1,855) (195)
��
Change in trade and other receivables 9,484 4,515
Change in inventories (406) 1,549
Change in trade and other payables (7,061) (3,629)
�� (4,583) 136
834 ��
Interest paid (907) (1,101)
Income taxes paid 454 (558)
�� 381 ��
----- End of picture text -----

*After adjusting for changes due to business combinations

The basis for determining fair values is disclosed in note 4.

��

The interest rates used to discount estimated cash �� agreements and were as follows:

	2016	��
��	3.91%	4.09%

��

The following table shows the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the ��

��	��	�� ��
�� ��	��	Not Applicable

29.��

��

The key management personnel compensation included in ‘personnel expenses’ (see note 11) are as follows:

==> picture [231 x 86] intentionally omitted <==

----- Start of picture text -----

In whole AUD ��
2016 2015
�� 1,601,382 1,758,078
�� 135,887 157,732
�� - 28,801
�� 29,187 35,307
��
----- End of picture text -----

��

No loans were made, guaranteed or secured by the Company to key management personnel for the year.

��

A number of key management persons, or their related parties, hold positions in other entities that result in them �� or operating policies of those entities.

A number of these entities transacted with the Group in the reporting period. The terms and conditions of the transactions with key management persons and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management persons and their related entities on an arm’s length basis

Information regarding individual directors and executives compensation and some equity instruments disclosures, as required by Corporations Regulations 2M.3.03, is provided in the remuneration report section of the directors’ report.

Apart from the details disclosed in this note, no director has entered into a material contract with the Group since �� material contracts involving directors’ interests existing at year-end.

Annual Report 2016

29.��

��

As at 30 June 2016

The aggregate value of transactions and outstanding balances relating to key management personnel and entities over ��

==> picture [487 x 76] intentionally omitted <==

----- Start of picture text -----

��
�� Note 2016 2015 2016 2015
Andrew Watts - Watty Pty Ltd (i) 255,536 255,536 - -
Andrew Watts - Watty Pty Ltd (ii) 276,096 276,096 - -
Andrew Watts - Watty Pty Ltd (iii) 56,727 93,600 - -
�� - -
----- End of picture text -----

(ii) The Group is paying for leasehold improvements made by Watty Pty Ltd to the premises at 45 River Street, Mackay which is owned by Andrew Watts through his company, Watty Pty Ltd.

(iii) The Group rents a duplex at 56 Grosvenor Drive, Moranbah which is owned by Non - executive Director, Andrew Watts through his company Watty Pty Ltd. Amounts paid for rent are at arm’s length and are due and payable under normal payment terms. This rental agreement was ceased as at 12 March 2016.

��

==> picture [488 x 15] intentionally omitted <==

----- Start of picture text -----

��
----- End of picture text -----

��	��	��	��
iid	li
Mastermyne GroupLmte	Austraa	2016 %	2015 %
��
��	Australia	100	100
��	Australia	100	100
��	Australia	100	100
��	Australia	100	100
��	Australia	100	100
��	Australia	100	100
��	Australia	66.67	66.67
��	Australia	100	100
��	Australia	100	100
��	Australia	100	100
��	Australia	100	100
��	Australia	100	100
��	Australia	100	100
��	Australia	100	100
��	Australia	100	100
��	Australia	100	100
��	Australia	100	100

�� dated 13 August 1998, the wholly-owned subsidiaries listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of ��

It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound up. The deed took effect on 23 June 2010.

The subsidiaries subject to the deed are:

� ��

��
��
��
��
��
��
��
��
��
��
��
��
��
��

�� comprehensive income and consolidated statement of �� entities which are a party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee, at 30 June 2016 is set out as follows.

In thousands of AUD	2016	2015
��
��	1,635	8,320
��	28,444	37,735
��	3,408	3,002
��	190	295
��	��	��
��	723	723
��	8,589	7,146
��	21,474	28,997
��	6,315	14,138
��	��	��
��	��	��
��
��	11,199	17,765
��	3,543	4,363
��	3,100	7,616
��	��	��
��	9,408	12,793
��	102	197
��	��	��
��	��	��
Net assets	��	��
Equity
��	55,234	55,234
��	(21,915)	(21,944)
��	10,107	24,332
��	��	��

�� income

In thousands of AUD	2016	2015
Revenue	165,386	170,192
Other income	121	35
Contract disbursements	(35,507)	(31,315)
Personnel expenses	(118,230)	(123,107)
��	(7,386)	(7,548)
Depreciation and amortisation expense	(7,540)	(7,487)
Gain on bargain purchase	-	2,221
Impairment loss	(7,999)	(4,538)
Other expenses	(3,171)	(2,197)
��	��	��
Finance income	57	200
Finance expense	(905)	(1,099)
��	��	��
��	��	��
��	1,897	224
��	��	��
Other comprehensive income for theperiod,net of income tax	-	-
�� the period	��	��

Annual Report 2016

��

There has not arisen in the interval between the end �� transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect �� those operations, or the state of affairs of the Group ��

��

Auditors of the Company

==> picture [231 x 60] intentionally omitted <==

----- Start of picture text -----

In whole AUD ��
�� 2016 2015
��
120,000 180,000
��
��
----- End of picture text -----

��

Auditors of the Company

==> picture [231 x 64] intentionally omitted <==

----- Start of picture text -----

In whole AUD ��
�� 2016 2015
�� 91,000 75,000
�� 12,000 11,000
��
----- End of picture text -----

��

�� 2016 the parent company of the group was Mastermyne Group Limited.

==> picture [231 x 194] intentionally omitted <==

----- Start of picture text -----

��
In thousands of AUD 2016 2015
��
�� (860) (2,835)
��
��
��
��
�� - -
��
�� - -
�� - -
��
�� 55,234 55,234
�� 2,322 2,293
�� (4,696) (2,835)
��
----- End of picture text -----

��

There were no parent entity contingencies required for the year ending 30 June 2016 (2015: Nil).

��

There were no parent entity capital commitments at 30 June 2016 (2015: Nil).

��

The parent entity has entered into a Deed of Cross guarantee with the effect that the Company guarantees debts in respect of its subsidiaries.

Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed, are disclosed in note 31.

��

1.��

(a) �� section 5 of the Directors’ report, set out on pages 2 to 18, are in accordance with the Corporations Act 2001, including:

i. �� year ended on that date; and

ii. complying with Australian Accounting Standards and the Corporations Regulations 2001

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

2. ��

3.��

4. ��

Signed in accordance with a resolution of directors.

==> picture [293 x 103] intentionally omitted <==

----- Start of picture text -----

___________
��
Chairman
��
----- End of picture text -----

Annual Report 2016

Independent Audit Report to the Members of Mastermyne Group Limited

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Annual Report 2016

��

There are no restricted securities on issue

Ordinary shares in Mastermyne Group Limited are quoted on the ASX under the code “MYE” and on the German Stock Exchange (Berlin Open Market) trading under the code “A1CXTE”.

��

There is no current on-market buy-back of any securities

��

The Company has the following securities on issue:

Distribution of shares and the number of holders by size of holding are:

�� 91,087,536

Ordinary shares, each fully paid, held by 1,319 shareholders.

==> picture [231 x 131] intentionally omitted <==

----- Start of picture text -----

��
��
��
100,001 and
76,278,718 83.74 69 5.90
��
50,001 to
4,786,122 5.25 67 5.73
100,000
10,001 to 50,000 7,085,765 7.78 287 24.53
5,001 to 10,000 1,713,665 1.88 210 17.95
1,001 to 5,000 1,142,193 1.25 372 31.79
1 to 1,000 81,073 0.10 165 14.10
�� 100 �� 100
----- End of picture text -----

�� 795,898

Performance rights, having differing exercise prices, hurdles vesting periods and terms, with latest expiry 1 October 2018, held by 1 employee.

��

The voting rights attaching to ordinary shares are set out in rule 37 of the Company’s constitution and are summarised as follows:

��

There are 303 shareholders holding a total of 316,171 shares with less than a marketable parcel (of 2,127 shares based on the closing share price on 22 September 2016 of $0.22)

��
��
a. ��

��

==> picture [486 x 280] intentionally omitted <==

----- Start of picture text -----

��
1 �� 10,874,887 11.94
2 �� Hamblin Family 7,655,658 8.40
3 �� 5,919,696 6.50
4 �� 5,915,655 6.49
5 �� Mij Trust 4,000,000 4.39
6 �� Nz Residents 2,810,258 3.09
7 �� Coolabah 2,710,000 2.98
8 �� Ymmij 2,100,000 2.31
9 �� May Downs Trust 2,000,000 2.20
10 �� Au Residents 1,918,943 2.11
11 �� 1,847,440 2.03
12 �� The Carnhogan Family 1,695,428 1.86
13 �� 1,646,709 1.81
14 �� 1,300,000 1.43
15 �� The Mad Investments 1,173,001 1.29
16 �� The Zahra Discretionary Unit 1,159,810 1.27
17 �� 1,126,001 1.24
18 �� 1,100,000 1.21
19 �� 1,058,511 1.16
20 �� 1,000,000 1.10
20 �� 10,874,887 11.94
��
----- End of picture text -----

��

The following substantial shareholders have been disclosed in substantial holding notices given to the company:

==> picture [216 x 15] intentionally omitted <==

----- Start of picture text -----

��
----- End of picture text -----

��	��

��	12,262,245
��	10,039,646
��	9,702,658
��	6,288,279
��	5,837,257
��	5,477,323

b. ��

Annual Report 2016

�[��]

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�� Level 1, Riverside Plaza, 45 River Street, Mackay QLD 4740 �� +61 (7) 4963 0400 �� +61 (7) 4944 0822 ��

AI assistant

MASTERMYNE GROUP LIMITED — Annual Report 2016

65392_rns_2016-10-13_4204cc0e-4894-4865-b043-8e870c7789e3.pdf

Chairman’s

Report

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Managing Director’s Report

FY2016 Summary

Restructured for work in hand and to ensure strong cash generation

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Board of Directors

� Net Debt of $11.1 million at 30 June

Financial Summary

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Health, Safety, Environment and Quality

����������������������������������������������������������

No compromising on safety

Continued focus on developing a hazard aware culture

Human Resources

Corporate Overview

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Mastermyne Mining

Mastertec

Mastertec pipeline increasing but revenues still down from lack of maintenance spending

Outlook

Contents Page

Corporate Governance Statement

1.1 Scope of Responsibility of Board

1.2 Composition of board

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1.3 Board Charter

1.4 Audit & Risk Management Committee

1.5 Remuneration & Nomination Committee

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1.7 Compliance with the ASX Corporate Governance Council Recommendations

1.7 Compliance with the ASX Corporate Governance Council Recommendations (continued)

������������� Structure the board to add value

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������������� Make timely and balanced disclosure

������������� Respect the rights of shareholders

������������� Recognise and manage risks

������������� Remunerate fairly and responsibly

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Independent Chairman

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Non - executive Director

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Non - executive Director

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Managing Director

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Non - executive Director

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Non - executive Director (independent)

MASTERMYNE GROUP LIMITED Annual Report 2016

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