IMDEX Limited

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Managing Director’s Report

Bernie Ridgeway
Managing Director

Dear Shareholders,

I am pleased to provide you IMDEX’s Annual Report for the financial year ending 30 June 2018 (FY18).

Market Conditions

Throughout FY18, operating conditions were positive for our company due to the broad-based recovery in the mineral sector globally. The recovery spanned all key mining areas; however, it was particularly evident in the Americas, which remains a high-growth region for IMDEX.

Commodity prices strengthened during FY18 and were generally at the highest level in a little over three years. Recent macroeconomic developments such as the US Government’s decision to impose tariffs on Chinese imports have, however, had an adverse impact on commodity prices around the end of FY18.

Data from S&P Global Market Intelligence suggests that the 2017 calendar year mineral exploration budget of US$8.4 billion was up 14% on the previous calendar year and was forecast to increase by 15% – 20% to US$10 billion in 2018. In my view this increase for calendar 2018 is perhaps a little optimistic, however, the number of mineral exploration drill holes is rising steadily.

Gold and copper continue to represent approximately 70% - 75% of exploration expenditure and it was interesting to note the rising interest in battery metals such lithium and cobalt this year.

Exploration expenditure remains largely associated with brownfield projects, although some greenfield activity was evident.

As I have mentioned throughout the year, a key driver for exploration is the fundamental need for resource companies to replace diminishing reserves. An interesting development throughout FY18 was increased investment in junior explorers by major mining companies. Similarly, their risk appetite is likely to increase as mine life continues to be an issue.

Resource companies and drilling contractors are continuing to focus on achieving greater efficiencies and reducing the cost of their operations. Industry disruption and employing big data technology were common themes at key industry conventions and it was pleasing to see the increasing value placed on new technologies to drive productivity. This is good news for IMDEX.

REFLEX Instruments on Hire

There has always been a strong correlation between our REFLEX instruments on hire and activity within the global minerals market. Our instruments are not commodity specific, however, as I mentioned earlier, gold and copper remain the principal commodities driving activity.

As at 30 June 2018, the total number of instruments on hire was up 10% compared to 30 June 2017. It is important to note that the quality of the rental fleet is increasing, as our newer technologies provide additional benefits for clients and command higher rental revenue. The value clients place on these technologies is evidenced by the increase in the number of instruments on hire during 2014 – 2016, despite the sharp decrease in mineral exploration expenditure (see graph in Our Operating Environment).

Financial Performance

I am pleased to report our company benefited from the positive market conditions, together with growing interest in our leading technologies and our ability to provide integrated end-to-end solutions.

During the full year we generated revenue of $218.5 million, which represents a 24% uplift on FY17 (FY17: $176.2 million). Our corresponding EBITDA result was $42.4 million, which also exceeded the prior period (FY17: $31.5 million) by 35%. Further information regarding our revenue and earnings can be found on pages 16 to 19 of this report and our 2018 Financial Report. Our cash flow for FY18 was $15.9 million – this represents a 21% increase on the previous year.

As at 30 June 2018 our balance sheet was in a robust position – net assets had increased by $26.3 million and we had net cash of $7.9 million.

We remained committed to maintaining the strength of our balance sheet, while delivering sustainable earnings growth – via our organic and transformational growth strategy – within the mining value chain.

Operational Achievements

In addition to our continued investment in research and development, which resulted in the commercialisation of new technologies and additional revenue per month, there were a number of exciting operational achievements throughout FY18 that support our growth strategy including:

  • An option to acquire CoreVIBE™ and MagHAMMER™ technologies;
  • IMDEX Mining Solutions – a collaboration project for drill and blast applications, which provides greater exposure to the mining phase;
  • Progress with our transition towards One IMDEX – delivering integrated solutions for our clients; and
  • Advancement with our digital transformation programme.

CoreVIBE™ and MagHAMMER™ Technologies

As announced to the market in January 2018, we entered into an exclusive option agreement to acquire New Zealand based companies Flexidrill Limited and Flexidrill Construction Limited (together “Flexidrill”) and its patent protected technologies – the CoreVIBE™ and MagHAMMER™.

Since then, we have been co-developing these new technologies, which are generating considerable interest from our industry.

Should we exercise our option, the CoreVIBE™ and MagHAMMER™ are expected to provide a significant additional global revenue stream for our company in FY20 and beyond and be EPS accretive within 12 months of option exercise.

The CoreVIBE™ technology has the potential to increase average drilling productivity rates by approximately 30% in traditional diamond coring applications – results that have been supported to date by IMDEX field trials.

The MagHAMMER™ technology allows for RC drilling to be run without compressed air resulting in significant economic, safety and operational benefits. It may also be used for blast hole drilling applications.

The CoreVIBE™ and MagHAMMER™ technologies are patent protected and align with IMDEX’s rental model. These technologies complement IMDEX’s Drilling Optimisation Solution and would strengthen our competitive position in this market segment. IMDEX is the only company to provide such integrated and connected solutions. These are unable to be replicated by competitors due to patent protection.

IMDEX Mining Solutions

The IMDEX Mining project combines our expertise in leading downhole equipment and sensors to acquire real-time data, with Orica’s proven success with blasting and technology development. Together, we aim to transform the way the industry undertakes the drill and blast process, utilising digital and automated technologies to create safer and more productive blast outcomes for clients. The project is also being supported by multi-national mining company Anglo American, Canada’s largest diversified resource company Teck and the CRC-ORE, which aims to ‘optimise resource extraction’ for the minerals industry.

The mining industry does not currently possess the capability to characterise the rock mass in detail, in near real-time and accurately design, load, time and fire for targeted blast outcomes based on rock variation. Consequently, blasting outcomes are variable and carry cost and productivity impacts down the mining value chain.

In July this year, we were proud to be a recipient of funding from METS Ignited, which will accelerate this collaboration project, which we believe has the potential to revolutionise drill and blast activities in both open pit and underground operations across all commodities.

Investment in this important project will enable us to generate more sustainable future earnings.


Throughout FY18 we further refined our internal structure to support our transition towards One IMDEX – that is, one provider offering integrated solutions throughout the mining value chain. This offering is currently unique to our market and provides us with a significant competitive advantage.

Digital Transformation Program

During the year we continued to progress our digital transformation program, which is being undertaken to enhance our systems and processes and enrich our client experience.

As part of this focus we established the role of Chief Information and Transformation Officer and welcomed Mathew Regan to our team. Mat will support our One IMDEX progression and is responsible for the efficient delivery of our digital transformation program.


Despite the recent softening of commodity prices, the outlook for IMDEX remains positive.

Rig utilisation rates were approximately 45% - 50% at the close of the financial year, drilling contractors are achieving some increases to their metre rates and exploration expenditure is approximately half of the 2012 peak. These factors suggest we are still in the earlier stages of the minerals industry cycle. We expect this cycle will continue with a steady increase in activity underpinned by the need to replace diminishing reserves.

I am confident IMDEX is in a strong position to leverage improving market conditions and the unique competitive position our global presence, leading technologies and integrated product offering provide.

My Thanks to a Great Team

I would like to thank our senior leadership team and all IMDEX employees for their hard work and expertise throughout the year – it is a pleasure and a privilege working with talented and innovative people. I would also like to thank our Board members for their counsel and dedication to the long-term growth of our company and the safety and well-being of our team.

Together, we have all created some solid foundations to deliver industry changing projects, future growth and a great place to work and a company dedicated to increasing returns for shareholders.

Kind regards

Bernie Ridgeway
IMDEX Managing Director