XRF SCIENTIFIC LIMITED — AGM Information 2012

Nov 14, 2012

2012 AGM CEO Presentation

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2012 Annual General Meeting, 15 November 2012, Perth:

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Good morning ladies and gentlemen. It is with pleasure that I will now report to you our 2012 financial year in review.

2012 brought with it another set of record results, with increases across all financial metrics. Revenues increased by 27% to $25.4m, with bottom line profits before tax increasing by 36% to $3.6m. Although earnings per share did not increase correspondingly, and was only up 12% to 2.8 cents per share, the Board was still able to declare a 50% increase in the full‐year dividend to 1.5c.

The dilution in earnings per share was a result of the heavily oversubscribed placement and share purchase plan in July and August of 2011, which raised $4.34m before costs. 5m convertible notes were also converted into ordinary shares during July 2011, which were originally issued to help fund the Sigma acquisition.

The business continued to run mean and lean with 66 employees contributing to our 2012 results. On this note I would like to thank all of our employees, some of who are here today, as without their hard work this result would not have been possible. Our team at XRF are highly competent, committed and have helped drive the Company into the success it is today.

The Company strengthened its position at Board level with the appointment of Mr Fred Grimwade and Mr David Kiggins in May of this year, who I welcome here today to their first AGM.

Organic growth was strong in all three of XRF’s divisions, being Consumables, Precious Metals and Capital Equipment. There was also a 12 month contribution from the Sigma Flux and Precious Metals Acquisition as opposed to 11 months in the prior year.

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2012 AGM CEO Presentation

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Looking at each of our divisions we will commence with Consumables, which delivered 53% of the groups profits for the year. The division supplies mining laboratories with analytical chemicals and consumables, both in Australia and internationally. The analytical chemicals are heavily linked to sample analysis in production mining, which is critical to their operations.

Revenue in the Consumables division increased by 14% to $7.4m, which delivered a 33% increase to net profit before tax of $2.7m. The key driver of this result was the increased amount of sample analysis being performed by the resource sector.

In relation to the outlook for 2013, trading conditions for the first four months of the year have remained strong. Sales revenue to 31 October 2012 increased by 13% on the previous corresponding period to $2.6m.

Despite volatility in the iron ore price over the past few months, we expect demand for our

consumables to increase throughout the year, as their use is linked to production volumes. As new production mines come online, especially in WA, it should provide an increased level of consumables being sold into the industry on a repeat basis.

We will also be continuing with our geographical expansion efforts, with particular focus on Brazil and Russia.

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The precious metals division delivered a record result in 2012 for the second year in a row. As mining labs, in particular throughout WA expanded, it resulted in increased requirements for new platinum labware. Revenue increased by 20% to $10.7m for the year, which generated a net profit before tax of $1.7m.

Looking forward to 2013, sales revenue for the period ended 31 October 2012 was up 26% to $3.9m, as compared to $3.1m in the previous corresponding period. A significant amount of this revenue increase is a result of new precious metal sales, which attracts a lower margin than remanufacturing income.

We are expecting a recovery of sales internationally, which have been somewhat subdued since the GFC. We will also be continuing to automate certain aspects of production, to future proof the business, which have been traditionally all hand made products. Automation provides repeatability, reliability and cost control.

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Our Capital Equipment division successfully rebounded back in 2012, following what has been a tough market for new equipment during the past few years. I’m pleased to report that these conditions have also continued into 2013, with inquiry, quotation and sales levels remaining steady.

A substantial portion of the 56% increase in revenue for the year was generated from a low margin OEM contract we held with a European customer. This agreement was exited early in the 2013 financial year for the benefit of both parties. We continue to work with this customer, providing products that are of mutual benefit.

Support was also provided to sales through the CAPEX programs of the big commercial laboratory groups, who have been expanding their facilities in Australia, Canada and other mining regions of the world. These CAPEX programs continued into the 2013 financial year.

As with our other divisions, conditions have remained buoyant into the first four months of the year. Sales revenue is up 23% on the previous corresponding period to $2.7m, after adjusting for $600,000 of low margin OEM product revenue in the previous corresponding period. The removal of this low margin revenue should provide a significant increase to profitability, which will become evident in the December 2012 half‐year results.

We will also be working on some new product developments in the fusion machine area, aimed at providing equipment to high throughput mining laboratories.

The new XRock Automation joint venture with Scott Technology of New Zealand commenced in July of this year, which has been well accepted by the market. The standard equipment Rocklabs sales and support side of the business has been progressing well, and we continue to work on obtaining the first major automation contract with our new partners.

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In conclusion, 2012 presented shareholders with a second consecutive year of record results. Trading conditions have remained steady into the first four months of the year across all of our divisions, and we remain cautiously optimistic about the remainder of 2013. Most importantly, the products we sell into the resource sector are critical for production mining, which will continue to provide a level of stability for our revenue, well into the future.

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