Mastermyne Group Limited

Managing Through the

Downturn – A Contractors

Perspective

Company Overview

Mastermyne Underground Mastermyne Engineering Mastermyne Services

• Underground Roadway

Development

• Drift Construction

• Installation of conveyors

• Longwall relocation and

maintenance

• Supply and installation of

ventilation control devices

• Installation of secondary

support

• In Seam Directional Drilling

• Equipment Fleet

• Design and engineering

QDS underground

equipment

• Manufacturing and

distribution of mining

products and consumables

(Mesh, Salt, Brattice,

Victaulic Pipe,

consumables)

• Manufacturing and

fabrication of underground

ventilation control devices

(doors, vehicle doors,

overcast etc)

• Surface electrical and

mechanical services

• Permanent Mine

Infrastructure Projects

• Construction & Upgrade

Projects (switch rooms,

surface & overland

conveyors)

• Asset management (water,

gas, electrical, piping)

MyneSight

• Cleanskin Training

• Miners

• Trades

• Deputy’s Training

• Training land Inductions

• Consultancy Services

• E Learning

• Additional Services

• Drug Testing

• Training Equipment

Hire

• Relief Training

Personnel

Mackay business, founded in 1996 by Andrew Watts

and Darren Hamblin

Operations with 850 workforce servicing mine sites in

QLD’s Bowen Basin, the Southern NSW Illawarra

district and the Northern NSW Hunter area

Exclusively focused on the Australian

underground coal industry

Track record of growth - invested significantly

in systems and people to manage the growth

Publicly Listed Entity: MYE

What Happened Before the Downturn

2009

Acquired Highlands

Mining

1996

Mastermyne

founded

1998

First longwall

installation contract

2003

Awarded Longwall

Magazine ’ s longwall

contractor of the year

2006

Acquired 50% of Capricorn

Mining Queensland

2007

Acquired remaining 50%

of Capricorn Mining

Queensland

2007

Acquired DRE

Electrical

2009

Acquired Infin - Tech 2004

Revenue $25m

Staff 200

1996 1998 2003 2006 2007 2008 2009 2004 2005

2005

Tony Caruso

appointed CEO

2007

Revenue $50m

Staff 330

2008

Acquired PYD Mining

Services

2010

2010

Acquired MTR

Mining

Services

2005

Champ Ventures

and management

buy in

2009

BHP Billiton “ Illawarra

Coal Contractor

Recognition Award ”

2009

Revenue $90m

Staff 386

2010

Revenue $98m

Staff 490

2011

2010

ASX Listing

2013

Acquired 4 Sight

Training

Solutions

2012 2013

2012 Revenue $272m Staff 1088

What Happened Before the Downturn

• Cost creep over a period of time. Volume driven.

• Shortfall in an experienced workforce.

• Increase in fleet hire and growth in the contract market

• EA’s negotiated locked in increases to wages.

• Project Management structures increased.

• Market went to quarterly contracts.

What happened in the downturn

Industry Perspective:

• 35% reduction in revenue

• Parity + with the exchange rates

• Capital Expenditure focussed

• Focus on unit costs

• Productivity not production

Contract Market:

• Est 30 to 40% reduction in market ($400M)

• Capital Projects cancelled or deferred.

• Contracts terminated or renegotiated

• Small companies were competitive

What happened in the downturn

What happened in the downturn

Internal Perspective:

• Reduction with On Costs

• Restructure Projects

• Increased competiveness from all

companies

The Market after the Downturn

Competition from internal costing

Clients have removed duplicate costs

Fixed Price work to reduce exposure to risk

Removing Project Teams and transfer to labour hire

Increase in tendering however smaller scopes

Reduction in Capital Projects

Our Response

Downsize Overhead Cost structure

Reviewed Roles

Requirements of System

Project Support

Business Development

Our Response

Reallocated responsibilities

Support Functions minimised

Site responsibilities increased.

Greater use of functional support

Up and Cross Skilling workforce (Greater scope less people)

Our Response

Major change in contract type from cost + performance margin to fixed price - understanding risk - Verifying assumptions - Risk reward margin

Our Response

How we manage reduces the cost of the scope of work.

- Supervision.

- Management Operating System.

- Engagement.

- Flexibility with our agreements.

Our Response Jetstar Model - Labour Hire structure. - Minimal supervision. - Site management? Challenge is to keep the Mastermyne connection Systems Symbols Behaviours

The Future

Understand the value added dimension.

Focus on Excellence

Maintain flexibility to market changes.

Build our business

Discussion