MASTERMYNE GROUP LIMITED — Interim / Quarterly Report 2012

Feb 27, 2012

FY2012 Half Year Results P resen a t ti on February / March 2012

FY2012 Half Year Financial Results Operational Review Strategy & Outlook Summary & Corporate Overview

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Results Summary

Financial Highlights

• Group Revenue to the end of December was $124.299 million up 69% from the previous corresponding period (versus

guidance of $115 to $120 million).

• Statutory Net Profit After Tax (NPAT) was $7.840 million (versus guidance of $7 to $7.5 million).

• EBITA margin increased to 10.1%.

• Expecting a strong second half result for the year.

• Order Book for FY 2013 has increased to $212 million from $141 million (excludes recurring revenue of approx $30M).

• Interim dividend of 3.0 cents per share fully franked.

• EPS up to 10.6 cps.

• Net Debt Down to $15.2 million.

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Results Summary

Operational Highlights

• Our safety transformation is gaining momentum and we are seeing ingrained change.

• Recruitment and retention strategies are working well with Full Time Employee (FTE) numbers at 1012 to December and

increasing. (up 23% from June).

• John Stuart-Robertson commenced in the COO role from early January.

• Board has approved a second larger Myne Start facility in Brisbane with operations commencing from May 2012.

• Demand for customary contract services remains very high from existing operating mines but there is a growing demand

for services to execute a pipeline of new underground Greenfields projects.

• Tenders have been submitted for 2 major underground Greenfield projects both commencing in the first half of FY13.

• This is the first wave of a significant pipeline of major underground projects coming on line over the next 3 to 5 years.

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Results Summary FY2012 Half Year Financial Results Operational Review Strategy & Outlook Summary & Corporate Overview

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FY12 Half Year Financial Review

HY2012 Financial Overview

Summary Income Statement	Summary Income Statement	Summary Income Statement
($’000)	HY 2012	**HY2011 **	Change( %)
Total Revenue	124,299	73,626	68.8%
EBITDA	15,472	5,963	159.5%
EBITA	12,630	3,719	239.6%
Profit before tax Tax expenses	11,708 (3,868)	2,809 1,616	85.1%
Statutory Profit after tax	7,840	4,425	72.2%
Adj t t us men s*		3,559
Tax Adjustments Adjusted EBITDA** Adjusted EBITA	15,472 12,630	(3,430) 9,523 7,279	62.5% 73.5%
Adjusted Profit after tax	7,840	4,554	72.2%
EBITA Margins	10.16%	9.89%	0.27%
EPS	10.6	6.1	73.7%
DPS	3.0	2.4	25.0%

• Revenue is up 69% resulting from increased scope of works on existing projects.

• Adjusted Profit is up 72.2% due to the increased revenues, resulting EPS increasing by 74% to 10.6cps.

• EBITA margins have remained strong and inline with expectations at 10.16%.

• Dividends will be paid at 3 cents per share up 25% on prior corresponding period. The board reaffirmed its policy of paying out 40% to 60% of profits after tax on a full year basis.

*** Adjustments to prior corresponding period EBITDA relate to Impairment on a continuous miner lost in**

Pike River mine and resulting bad debts provided for.

**Tax adjustments for prior corresponding period are a result of the abovementioned adjustments and a one off tax adjustment from forming a tax consolidated group.

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FY12 Half Year Financial Review

FY2012 Divisional Performance

Business Unit Performance	Business Unit Performance
	($’000)	Underground		Engineering		Services
		Dec 2011	Dec 2010	Dec 2011	Dec 2010	Dec 2011 Dec	2010
External Revenue		112,821	66,452	9,628	6,243	1,850	3,021
Inter Segment Revenue*		1,858	49	1,038	1,141	21	3,021
Total Divisional Revenues		114,679	66,501	10,666	7,384	1,871	3,952
Profit Before Tax		11,314	2,926	1,165	319	(633)	(146)
PBT%		9.9%	4.4%	10.9%	4.3%	(33.8%)	(3.7%)

*** Intersegment revenues are arms length transactions between the divisions for goods and services provided including capital equipment.**

• Underground division performed well increasing both revenues and profit margins as a result of increased scope of works on existing projects.

• Engineering has expanded in both Queensland and New South Wales with the introduction of bigger workshops providing increased capacity.

• Services successfully tendered a large project on the development of Kestrel Mine Extension (KME). Upfront mobilisation, access interruptions out of the company’s control and overhead on the demobilised workshop have resulted in the loss year to date. The project

is expected to record a profit largely delivered in FY2013 when full access on the KME project becomes available.

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FY12 Half Year Financial Review

FY2012 Working Capital & Cash Flow

$AUD (000's)	Dec 2011	Dec 2010
EBITDA (Statutory)	15,472	5,963
Movements in Working Capital	(4,020)	(7,596)
Non cash items	162	3,077
Net Interest Costs	(720)	(615)
Income tax payments	(1,438)	(1,374)
Net Operating Cash Flow	9,456	(545)
Proceeds from exercise of share options	1,840
Net Capex (includes intangibles)	(3 511) ,	(1 567) ,
Net borrowings/(repayments)	(3,704)	(3,522)
Interest Received	91	43
Free Cash Flow	4,172	(5,591)
Dividends	(2,789)	(875)
Net increase/(decrease) in cash and cash equivalents	1,383	(6,466)
Cash and cash equivalents at beginning of period	6,020	8,718
Cash and cash equivalents at end of period	7,403	2,252

 Positive Operating Cash Flows of $9.4 million. Working Capital requirements increased during the period due to funding the significant growth in the first half, but are down on previous corresponding period due to decreasing debtor days.

 Net ca p ex increased with cash outflows for the refurbishment of Joy Continuous Miners purchased in FY11. These machines are expected to be in service by the 4[th] quarter of FY2012.

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FY12 Half Year Financial Review

FY12 Balance Sheet $AUD (000's)	Dec 2011 Dec 2010
Assets
Cash and cash equivalents Trade and other receivables Inventories Total current assets Deferred tax assets Property, plant and equipment Intangible assets Total non-current assets	7,403 6,020 40,851 31,929 1,858 1,654
	50,112 39,603
	665 - 34,599 30,680 19,992 20,253
	55,256 50,933
Total assets	105,368 90,536
Liabilities
Trade and other payables Loans and borrowings Employee benefits Current tax payable Total current liabilities Loans and borrowings Employee benefits Deferred tax liabilities Total non-current liabilities Total liabilities	21,598 18,808 5,289 5,955 6,158 3,846 4,973 1,195
	38,018 29,804
	17,363 17,135 91 87 - 684
	17,454 17,906
	55,472 47,710
Net assets	49,896 42,826

• Net Assets up to $49.9 million.

• Net Debt down to $15.2 million from $17 million from the 30 Jun 2011.

• Increase in payables and receivables as a result of the growth of operating activities.

• Increase in current tax payable as a result of th e grow th i n opera ti ng ac ti v iti es.

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Results Summary FY2012 Half Year Financial Results Operational Review Strategy & Outlook Summary & Corporate Overview

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Operational Review

Safety

• Improvement in safety performance is a result of a transformation in safety management across all divisions and sites.

• Lagging statistics are not yet reflecting the full effect of this transformation but based on current performance this will

change in the 2[nd] half of the year.

• First half has seen stringent compliance to the adopted OSHA reporting standards, as well as the monitoring of non-

• recordable injuries giving a holistic picture of safety performance.

• Formal settin g of Leadin g tar g ets is drivin g a p roactive safet y a pp roach.

• Undertaken a gap analysis and implementation of compliance to new Model Work Health and Safety Act 2012.

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Operational Review

People

• Workforce has increased since June from 823 to 1012 – 23% net growth.

• Retention rates are stable but recruitment of experienced labour has become more difficult.

• Labour rates have escalated in the first half of the year. We expect this trend to continue more aggressively.

• Our recruitment and retention strategy is working well but we expect to see the labour market continue to hot up on the back of a pipeline of new underground projects in Qld and NSW.

• Welcomed our first intake of experienced Miners from Poland with additional overseas experienced underground miners commencing in Mastermyne projects over the remainder of this calendar year.

• Introduced the Electrical MyneStart program in Mackay to accelerate electrical training for new underground electricians.

 Expanding the training at the Myne Start facilities to address skills shortages in other disciplines.

• Capital has been approved for a second Myne Start facility in Brisbane. Will commence operating from May 2012.

• Brisbane training centre will upskill labour with complimentary underground skills into coal operations.

• Implemented Southern Bowen Outbye Industrial Agreement.

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Total…
1012
823
490 518
386
FY08 FY09 FY10 FY11 HY12
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Operational Review

Operational Units - Underground

• Organic growth on the existing projects has underpinned significant increase in revenue in the first half of

FY2012.

• Margins are in line with budget forecast.

• Top line growth has been a result of expanded scopes requiring additional labour and equipment.

• Consolidation of operations in the first half has provided time to refine and embed operating systems and

recruit key roles.

• We continue to build the capability in the Management team and are ready for new projects in FY2013.

• All underground equipment is on hire and demand remains very strong.

• Directional drill rig has had consistent work and we have bid several long term drilling projects.

• Last of capex ordered in FY2011 being brought on line and commissioned on Mastermyne projects in Qld and

• NSW. The 2 continuous miners come on line in March and April respectively.

• Capex requirements for 2013 are being addressed and commitments made accordingly.

• Introduced Technical Services role to add additional strength across the operations.

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Operational Review

Operational Units - Engineering

• Revenue tracking ahead of budget for FY2012.

• Margins are in line with budget.

• Relocation into new workshops has provided extra capacity which is now being utilised in both Qld and NSW.

• Additional resources added to NSW workshop to manage continued growth.

• Engineering business is well placed to tap into pipeline of new Greenfield projects.

Operational Units - Services

• Division is tracking below budget for the half year.

• General Manager with experience in contract maintenance / services has been appointed.

• Major Kestrel Mine Extension (KME) contract commenced mobilisation in October but access to work areas has been limited.

• Loss in this division is attributed wholly to the up front mobilisation costs on this project.

• Majority of KME contract revenue will now be delivered in FY2013.

• Services division will benefit from the increase in construction activity in the Bowen Basin.

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Results Summary FY2012 Half Year Financial Results Operational Review Strategy & Outlook Summary & Corporate Overview

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Strategy & Outlook

Strategy 2nd Half FY2012

• Continue our safety transformation to achieve targeted reduction in lagging safety statistics.

• Look for new initiatives to recruit and retain our workforce.

• Focus on managing further growth from existing projects in the 2nd half of the financial year.

• Actively pursue tenders in the 2nd half of the year for projects commencing during FY2013.

• Review our capital requirements with a view to placing the orders to coincide with further growth.

• Target brownfield projects to compliment new greenfield project work to ensure we maintain a strong foothold in

• existing operating underground mines that are low on the cost curve.

Outlook

• Large pipeline of Greenfield projects commencing from 1st half FY2013.

• Significant expansion planned in the Qld coal fields where Mastermyne has its strongest footprint.

• Ongoing tendering opportunities on Brownfield operations.

• Mastermyne is well positioned to tender on all opportunities due to our range of underground capabilities.

• Contracted Order Book for 2013 has increased to $212 million from $141 million and contract visibility extends beyond

FY2014.

• Outlook for domestic coal production remains positive.

• Mastermyne is well positioned and ready for new projects in FY2013 underpinned by a solid order book.

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Strategy & Outlook – Contracted Order Book

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Duration $250
KME Infrastructure Contract Option duration
Re-forecasted order book
$210.20 Previously Reported Order book
Newstan Mine
$211.91
$200
Westcliff Colliery $178.62
Dendrobium Mine
$150
$141.70
Kestrel Mine
$112.24
Kestrel Mine Extension
$100
Oaky Creek Complex
$86.97
$65.79
Crinum North Ventillation
$50
Moranbah North Drivage
Moranbah North Umbrella
$- $0
Financial Year
Millions
2011 2012 2013 2014 2015 2016
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Results Summary FY2012 Half Year Financial Results Operational Review Strategy & Outlook

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Summary

Summary

• 1st half of FY2012 has delivered a stronger than expected performance in all areas.

• We are seeing a transformation in our safety performance and we expect lagging statistics will reflect this over the

• remainder of the year.

• We have proven again that our recruitment and retention strategy is working with 23% growth in workforce numbers for the half year.

• We have invested significantly in people and systems which sets us up for new projects in FY2013.

• We are identifying and ordering capex for future growth in the organisation.

• The business is on track for a strong second half to the year and to deliver a full year performance substantially up on the

• previous financial year.

• Our order book is building for FY2013 and beyond giving good visibility to future earnings.

• We have positioned the business to be ready for the growth opportunities that will present from FY2013.

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Corporate Overview

Capital Structure

 Shares on issue 75,367,514

Market Capitalisation

$143 million (based on $1.90 share price)

Substantial Shareholders

 Andrew Watts 20.04%  Cogent Nominees 13.68%  Darren Hamblin 13.47%  N a ti ona l N om nees i 12 . 96%  HSBC Custody Nominees (Australia) Limited 2.41%

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Disclaimer and Important Notice

The following disclaimer applies to this presentation and any information provided regarding the information contained in this presentation (the Information). You are advised to read this disclaimer carefully before reading or making any other use of this presentation or any information contained in this presentation.

Except as required by law, no representation or warranty, express or implied, is made as the fairness, accuracy, completeness, reliability or correctness of the Information, opinions and conclusions, or as to the reasonableness of any assumption contained in this document. By receiving this document and to the extent permitted by law, you release Mastermyne Group Limited (“Mastermyne”), and its officers, employees, agents and associates from any liability (including in respect of direct, indirect or consequential loss or damage or loss or damage arising by negligence) arising as a result of the reliance by you or any other person on anything contained in or omitted from this document.

Statements contained in this material, particularly those regarding the possible or assumed future performance, costs, dividends, returns, production levels or rates, prices, reserves, potential growth of Mastermyne, industry growth or other trend projections and any estimated company earnings are or may be forward looking statements. Such statements relate to future events and expectations and as such involve known and unknown risks and uncertainties, many of which are outside the control of, and are unknown to, Mastermyne and its officers, employees, agents or associates. In particular, factors such as variable climatic conditions and regulatory decisions and processes may cause or may affect the future operating and financial performance of Mastermyne. Actual results, performance or achievement may vary materially f rom any f orwar d l oo ki ng s a emen s an t t t d th e assump ti ons on w hi c h th ose s a emen s are t t t b ase d . Th e I n orma f ti on a so assumes l th e success o f Mastermyne’s business strategies. The success of the strategies is subject to uncertainties and contingencies beyond Mastermyne’s control, and no assurance can be given that the anticipated benefits from the strategies will be realised in the periods for which forecasts have been prepared or otherwise. Given these uncertainties, you are cautioned to not place undue reliance on any such forward looking statements. Mastermyne undertakes no obligation to revise the forward looking statements included in this presentation to reflect any future events or circumstances.

In addition, Mastermyne’s results are reported under Australian International Financial Reporting Standards, or AIFRS. This presentation includes references to EBITA and NPAT. These references to EBITA and NPAT should not be viewed in isolation or considered as an indication of, or as an alternative to, measures AIFRS or as an indicator of operating performance or as an alternative to cash flow as a measure of liquidity.

The distribution of this Information in jurisdictions outside Australia may be restricted by law and you should observe any such restrictions. This Information does not constitute investment, legal, accounting, regulatory, taxation or other advice and the Information does not take into account any investment objectives or legal, accounting, regulatory, taxation or financial situation or particular needs. You are solely responsible for forming your own opinions and conclusions on such matters and the market and for making your own independent assessment of the Information. You are solely responsible for seeking independent professional advice in relation to the Information and any action taken on the basis of the Information. No responsibility or liability is accepted by Mastermyne or any of its officers, employees, agents or associates, nor any other person, for any of the Information or for any action taken by you or any of your officers, employees, agents or associates on the basis of the Information.

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Contact

www.mastermyne.com.au

Information for Investors / Analysts:

Tony Caruso – Chief Executive and Managing Director: (07) 4963 0400 Bill L y ne – Com p an y Secretar y : ( 07 ) 3378 7673

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