Allmine Group Limited

Page 1 Copyright © 2012 RM Research Please refer to important disclosures located at end of this report.

1HFY12 Results Announced: Allmine Group Limted (ASX:AZG) recently released

their 1H 2012 financial results. Allmine reported significant revenue, EBITDA and

NPAT growth (2H on 2H). Revenue grew 275% to A$63.4 million, EBITDA increased

by 297% to A$7.9 million with NPAT increasing 627% to A$5.2m.

Favorable Outlook for 2HFY12 and Beyond: Allmine has commenced the 2H 2012

in a sound position with considerable operating momentum. Arccon‟s significant project

pipeline totals approximately A$3 billion in projects under MOU with NFC, A$30 million

of general engineering works and A$50 million of works-in-progress via its fully owned

construction company, Construction Industries Australia Ltd (CIA). Allmine was

awarded in excess of A$150 million in contracted works during 1H 2012 and as at the

December quarter, was trading 45% ahead of forecast.

Increased Employee Numbers a Good Gauge: We believe a good gauge on works-

in-progress and expected works-in-progress is the increase in number of employees as

a company will only employ more staff in response to work secured. During the 1H

2012, engineering and engineering support staff increased from 10 to 70, CIA

workforce increased from approximately 100 to 350 with CIA currently in the process of

recruiting an additional ~100 employees to fulfill project requirements and 100

employed in the maintenance division.

Operating Cash Flow Strengthening: After recording net operating cash flow of

negative A$4.2 million in the September 2012 quarterly report, operating cash flow is

starting to head in the right direction. This figure was followed by positive operating

cash flow of A$1.9 million in the December 2012 quarter and A$2.1 million in the March

2012 quarter.

Price Catalysts

Our 49 cents determined through a relative P/E approach. Investor re-rating relative to

peer group as earnings growth is delivered.

Action and Recommendation

With a 12-month target price of 49 cents, this represents a return of 188% and as such

we therefore have a BUY recommendation on Allmine. Following the acquisition of

Arccon, we believe Allmine has entered a period of strong growth which should

translate into significant share price appreciation.

Earnings Forecast

Year Ending 2011A 2012F 2013F 2014F

Sales (A$m) 30.0 136.9 190.0 220.4

EBITDA (A$m) 5.0 21.9 30.4 35.3

NPAT (A$m) 3.6 14.0 21.1 24.5

EPS (cps) 1.4 5.1 7.6 8.9

EPS growth (%) 13.7 272.2 50.4 16.1

PER (x) 13.0 3.3 2.2 1.9

EV/EBITDA 10.9 2.5 1.8 1.6

ROE (%) 8.7 26.0 32.7 27.3 Source: RM Research Estimates

Capital Structure

Sector Mining Services

Share Price (A$) 0.17

Fully Paid Ordinary Shares (m) 276.2

Escrowed Shares (m) 3.6

Opt (ex A$0.20, exp 31/12/2012) (m) 40.4

Opt (ex A$0.25, exp 24/02/2014) (m) 2.5

Opt (ex A$0.30, exp 24/02/2014) (m) 2.5

Market Capitalisation (Undil) (A$m) 46.9

Approx Cash (A$m) 2.5

Directors & Management

John Darling Chairman/Non Exec Director

Scott Walkem CEO/Director

Robert Wilde MD/Executive Director

Kit Foo Chye Non Executive Director

Andrew Howard Non Executive Director

Major Shareholders

Ellerston Gems Fund A/C 10.82%

Wilde Family A/C 9.10%

McCowan Family A/C 5.09%

National Nominees Ltd 4.64%

Keng Chuen Tham 3.88%

Analyst

Vince Vallelonga

+61 8 9488 0800

Share Price Performance

Allmine Group Limited Growth Cycle in Full Flight

1 May 2012

ASX Code AZG Buy

12 Month Price Target – 49 cents


1 May 2012

COMPANY OVERVIEW

The Allmine Group was formed in 2007 and listed on ASX on 24 February 2011 issuing 50.0

million shares at A$0.20 per share to raise A$10.0 million. At the time of listing, Allmine had a

portfolio of five well-established mining services businesses that have been merged to form a

fully integrated maintenance business. In addition, Allmine operated an after-market

earthmoving parts (consumables) business, Wildkat, enabling Allmine to fulfil its “one stop shop”

ambition.

Since listing, the Allmine Group has transformed itself into a mining service company that

operates three divisions:

i. Engineering, Procurement and Construction via its wholly owned subsidiary Arccon

(WA) Pty Ltd;

ii. Construction services via its wholly owned subsidiary Construction Industries

Australia Limited; and

iii. Fixed and Mobile Plant maintenance and associated consumable sales via

Allmine Maintenance.

The Allmine Group provides a “life of mine” service proposition to mine owners, mine operators

and their subcontractors. The Group‟s principal focus is on mineral resource companies.

The Allmine Group undertakes EPC and EPCM projects across the globe, and its maintenance

division operates service centres across Perth, Leinster, Karratha and Darwin. In addition to the

service centres, the Allmine Group provides on-site labour hire and field service operations and

sales of after-market earthmoving components across Australia and Fiji.

RESULT SUMMARY

1HFY11 1HFY12 % Chg

Revenue (A$m) 16.9 63.4 274.97

EBITDA (A$m) 2.0 7.9 297.00

EBITDA Margin (%) 11.8 12.5 5.88

EBIT (A$m) 1.6 7.4 362.50

NPAT (A$m) 0.7 5.2 627.27

NPAT Margin (%) 4.2 8.2 93.95

EPS (cps) 0.8 2.0 150.00

Allmine Group recently released their 1H 2012 financial results delivering significant

revenue, EBITDA and NPAT growth compared to the previous corresponding period.

Revenue grew 275% to A$63.4m, EBITDA increased by 278% to A$7.8 million with NPAT

increasing 627% to A$5.2 million.

A unique “Life of Mine”

service proposition for

mine owners, mine

operators and their

subcontractors

FIGURE 1: Allmine

Operational Overview

(source: Allmine April

2012 Investor

Presentation).

TABLE 1: Allmine Half

Yearly Results

Comparison (source:

Allmine FY 2012 Interim

Financial Report).


1 May 2012

There was a slight increase in the EBITDA margin however a significant increase in the

NPAT margin.

Half-on-half there was clearly significant growth in all areas however the acquisition of Arcoon

on 30 June 2011 distorts the comparison given as at 31 December 2010 Allmine was

operating solely as the Maintenance Division. In real terms, post the acquisition of Arccon,

the company is tracking at least 45% higher across all of the key forecast financial metrics for

the six months ended 31 December 2011. Both the Engineering and Maintenance Divisions

are trading well ahead of budget.

Net assets increased by A$13.1 million from 30 June 2011 to 31 December 2012.

Allmine’s balance sheet remains fairly strong with net debt of A$8.0m and net debt to equity

of only 15%.

There was no interim dividend declared by Allmine and the Company indicated they are

unlikely to declare a dividend this financial year. As with any company in a significant growth

phase, Allmine’s primary focus is on building its balance sheet to enable it to deliver into its

existing contracted and anticipated contract works and to finance the associated growth.

Milestones Achieved During the Reporting Period

During the 1H 2012, Allmine achieved a number of significant milestones including:

Integration of the Arccon acquisition in conjunction with its 50% ownership of Construction

Industries Australia (CIA) to establish the Engineering Division of the Group.

The acquisition of the remaining shareholding (50%) of CIA.

Establishment of a A$15 million bonding facility to facilitate bonding for the programmed EPC

and general construction contracts.

Secured approval for a A$16 million global refinance of the Group‟s general Working Capital

facilities for bonding and general Working Capital.

The awarding of in excess of A$150 million in contracted works.

An MOU was signed by NFC and Arccon with Ironbark Zinc Ltd for the design and

construction of a zinc concentrator in Greenland, with an estimated value of between A$300

to 400 million.

The awarding of two EPCM gold projects for a total value of approximately A$100 million to

Arccon.

Increased Employee Numbers a Good Gauge

We believe a good gauge on works-in-progress and expected works-in-progress is the increase in

number of employees as contractors generally increase staff levels. in response to work secured.

During 1H 2012, engineering and engineering support staff increased from 10 to 70, CIA

workforce increased from 100 to 350 with CIA currently in the process of recruiting an additional

~100 employees to fulfill project requirements and 100 employed in the maintenance division.

RM Research believes that the significant increase of employees at Allmine suggests that the

size of the order book has increased significantly which bodes well for the future. The significant

increase in employee numbers also suggests a significant project pipeline which should result in

increased revenue levels approaching the end of FY 2012 and going into FY 2013. If

accompanied with a continued solid margin, this will result in strong earnings growth.

Pre-

Reporting Period

Post-Reporting

Period Difference

% Change

Engineering Division 10 70 50 600%

Construction Division 100 350 250 250%

Maintenance Division 100 100 0 0%

Total 210 520 310 148%

Allmine achieved

significant growth

during 1H 2012

Allmine achieved a

number of milestones

during the reporting

period

Increased Employee

Numbers is a good gauge

TABLE 2: Allmine

Employee Numbers

Comparison (source: RM

Research internal

modelling).


1 May 2012

Operating Cash Flow Heading In Right Direction

One issue hanging over Allmine that seems to be showing signs of improvement is operating

cash flow. After recording an operating cash flow of negative A$4.2 million in the September 2012

quarterly report, operating cash flow is starting to head in the right direction. This figure was

followed by positive operating cash flow of A$1.9 million in the December 2012 quarter and A$2.1

million in the March 2012 quarter for year to date operating cash flow of A$3.3 million.

As with any business, positive cash flow is vital for its going concern. Although it is still early days

for the company, the last two quarters shows that the company‟s cash flow is showing signs of

strengthening. Should alleviate market concerns about the need to raise additional capital.

Management Team Strengthened

Recently Allmine went through the process of restructuring and strengthening their management

team. The management team changes included:

Mike Franklin appointed as Group General Manager of Allmine’s Arccon Group of

Companies. Mike was formerly the CFO and Company Secretary of Arccon.

Andrew Bath replaces Mike Franklin as CFO of the Arccon Group of Companies. Andrew is a

member of the Institute of Chartered Accountants since 1998 and joins Arccon from Nutrition

Systems in Perth where he has held the position of CFO since January 2007.

Matthew Handcock appointed as Commercial Manager of the Arccon Group of Companies.

Matthew has over 26 years of legal experience in commercial law, risk management,

insurance, local government and property law gained while a partner and executive

committee member of Minter Ellison before he founded the boutique legal firm Mullins

Handcock in 2000, of which he was Managing Partner until 2008.

Rob Wilde, the Managing Director of the Arccon Group of Companies and Executive Director

of Allmine, has now been released from the day to day management of the company to

focus on origination and execution of major projects.

Order Book and Project Pipeline Remains Solid

Allmine has commenced the second half of the 2012 financial year in a sound position with

considerable operating momentum and project pipeline including:

A$3 billion in projects under MOU with NFC;

A$35 million of general engineering works with significant level of additional work tendered;

and

A$50 million of works-in-progress via its fully owned construction company, Construction

Industries Australia Ltd with pipeline work of at least an additional A$50 million for the

remainder of Fiscal 2012.

During 1H 2012, Allmine was awarded in excess of A$150 million in contracted works and as at

the December quarter, was trading 45% ahead of forecast.

Contract Description Status Contract

Value

Marengo Mining Limited

An MOU has been signed between NFC, Arccon and Marengo Mining for the financing, construction and development of the Yandera Copper-Molybdenum-Gold Project in Madang Province, Papua New Guinea.

Under MOU Start ~Q2 2013

~A$2b

The project will produce 300,000tpa of copper concentrate, 6,500 tonnes of molybdenum concentrate and 40,000oz of gold per annum for 20 years.

Poseidon Nickel Limited

An MOU has been signed between NFC, Poseidon Nickel and Arccon for the financing, construction and development of a 700,000tpa nickel sulphide concentrator and a 1.5mtpa gold tailings treatment plant for its Mt Windarra nickel project. Arccon will act as the local design and installation engineer.


~A$90m

Ironbark Zinc Limited

An MOU has been signed between NFC, Arccon and Ironbark for the financing, construction and development of Ironbark‟s 11b pound zinc and lead project known as Citronen in Greenland.


~A$300m - A$400m

Operating Cash Flow

heading in right

direction

Management team has

been strengthened as a

result of growing

project pipeline

Solid Order Book and

Project Pipeline

TABLE 3: Arccon/NFC

Contracts under Alliance

Agreement (source:

Allmine April 2012

Investor Presentation).


1 May 2012


Value

Various Constructio-n Works

Various works packages – with ongoing awards monthly under

the service agreement. In Progress ~A$70m

UGL FMG Civil, concrete, structural, mechanical and piping construction services.

Commenced TBD


Value

Golden Hills Gold Project Mongolia

Design, procurement and some construction management assistance.

Commenced A$45m Reimbursable contract.

Medusa Gold Project Philippines

Design, procurement and construction management (EPCM).

Commenced A$50m Reimbursable contract.

Dugald River Project – Minmetals Res Ltd

Front End engineering and design for this zinc-lead-silver resource located in north-western Queensland.

Commenced TBD

Studies & Engineering

General design and engineering works. Commenced A$21m

The combination of the above contracted works in conjunction with the alliance agreements with

MCC and NFC provides Allmine with a significant pipeline of work across the following 1-4 year

time horizon.

TABLE 4: Arccon/MCC

Contracts – Sino Iron

Project under Alliance

Agreement (source:

Allmine April 2012


TABLE 5: Arccon-Other

Contracts (source: Allmine

April 2012 Investor

Presentation).

FIGURE 2: Allmine’s

Project Portfolio (source:

Allmine April 2012



1 May 2012

How MCC and NFC Add Value

RM Research believes Allmine has build a strong pipeline of work as a result of its alliance

agreements with MCC and NFC, a distinct advantage over similar rivals.

MCC Mining (Western Australia) Pty Ltd is a subsidiary of China Metallurgical Group

Corporation (MCC) and the owner of 20% of the Cape Preston Sino Iron magnetite project in

Western Australia. MCC is the largest mine EPC contractor in the world and one of the largest

equipment manufacturers in China. Its subsidiary, China Metallurgical Corporation Ltd is listed

on the Shanghai and Hong Kong stock exchanges with a market capitalization of

approximately A$10 billion.

NFC is one of China‟s leading construction and engineering groups and is listed on the

Shenzhen stock exchange with a market capitalization of approximately A$3.5 billion.

MCC and NFC have:

Substantial capable, low cost engineering and construction labour resources to allocate to

global projects;

Significant balance sheets; and

The backing of major Chinese banks to fully fund variable key commodities projects.

RM Research believes the blend of services provided by Allmine under its operating structure

holds the company in good stead to continually derive solid revenue figures without relying solely

on Arccon‟s variable revenue streams associated with the nature of EPC contracts. The solid and

consistent revenue generated from the construction and maintenance divisions provides a buffer to

the business performance that may be potentially impacted by delays in the commencement of

EPC contracts.

FINANCIAL PROJECTIONS

In the recent 31 March 2012 Operational Update, Allmine declared two projects that were due to

commence in the 2012 financial year have now been deferred to the 2013 financial year. As a

result, we have downgraded our original financial projections for the 2012 financial year as forecast

in our initiation report (Allmine Group Limited, RM Research, 21/11/2011). The company

indicated they have not lost the projects but rather the projects being deferred to the following

financial year. Despite our downgrades, RM Research is still forecasting significant growth in all

financial metrics as a result of the project contracts commenced and in progress as depicted in

Tables 4 and 5 above coupled with the contribution from the maintenance division which we

forecast to contribute A$37.6 million to group revenue. Our updated sales forecast is growth of

356.7% to A$136.9 million, 334.8% EBITDA growth to A$21.9 million and 288.2% NPAT growth to

of A$14.0 million.

Our forecast EPS growth of 272.2% in FY 2012 to 5.1 cents is significantly higher than the 33.9%

average growth that its domestic peer group is forecast to deliver (see Table 6 below). Our forecast

FY 2012 ROE of 26.0% offers compelling value.

Sales Forecast ($m)

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

FY10A FY11A FY12F FY13F

EBITDA Forecast ($m)

$0

$5

$10

$15

$20

$25

$30

$35


The MCC and NFC

alliances offer significant

advantages over rivals

Allmine is on track to

experience significant

growth in all financial

metrics

FIGURE 3: Sales

Forecasts (source: RM

Research estimates).

FIGURE 4: EBITDA

Forecasts (source: RM



1 May 2012

NPAT Forecast ($m)

$0

$5

$10

$15

$20

$25


EPS Forecast (cents)

0

1

2

3

4

5

6

7

8

9


Given the level of contracts

under MOU and expected to

commence in FY 2013 and

beyond if awarded (see Table

3), RM Research believes

Allmine is in a strong position

to not only meet but

significantly exceed our FY

2013 and beyond forecasts.

The level of contracts under

MOU which have yet to

commence, accounts for a

significant amount of

Allmine’s project pipeline figure of approximately A$3 billion (Figure 5). This outlines the

significant potential for FY 2013 and beyond.

FIGURE 5: Net Profit After

Tax Forecasts (source: RM


FIGURE 6: Earnings per

Share Forecasts (source:

RM Research estimates).

FIGURE 7: Contracts Split

(source: Allmine April

2012 Investor

Presentation).


1 May 2012

PEER COMPARISON AND ESTIMATE OF VALUE

We continue to rate Allmine as a BUY with a 12 month price target of 49 cents. As a result of

our downgraded financial forecasts, this is a reduction from our initial target price of 64 cents.

We determine the 12-month price target for Allmine using a relative PE approach. At our price

target of 49 cents, our expected 12-month return is approximately 188%.

Table 6 compares FY 2012 PE and EV/EBITDA of Allmine to domestic peers and the Small

Industrials Index. In determining our price target, we decided to leave the multiple used in our

initial report (Allmine Group Limited, RM Research, 21/11/2011) being 11.3x. We felt this to

be prudent as this is approximately a 20% discount to the average FY 2012 peer group PE of

13.1x calculated in Table 6 below. We believe this to be an adequate discount since Allmine is

in its infancy as a listed company and has yet to demonstrate it can deliver on its earning

guidance.

Company PE (x) EV / EBITDA

(x) EPS ROE

2011 2012 2011 2012 2011 2012 Growth 2011 2012 Growth

Ausenco 21 13.5 11.8 8.4 $0.21 $0.31 47.80% 12.60% 17.40% 38.10%

Austin Engineering 16.6 13.5 10 7.7 $0.30 $0.38 26.80% 20.70% 21.90% 5.80%

Bradken 18.6 11.2 7.6 7.1 $0.40 $0.72 78.70% 18.10% 20.60% 13.80%

Clough Engineering 17.6 15.5 16.7 9.8 $0.05 $0.08 76.80% 12.50% 19.00% 52.00%

Emeco Holdings 11.8 9.8 4.2 3.7 $0.09 $0.11 18.40% 9.30% 10.80% 16.10%

Forge Group Ltd 14.9 10.6 8.1 5.7 $0.43 $0.50 16.30% 31.20% 31.70% 1.60%

Monadelphous 22.5 16.5 10.4 9 $1.04 $1.21 16.20% 66.40% 61.50% -7.40%

UGL 13.7 15.1 7.5 6.9 $0.95 $1.07 12.70% 13.60% 12.10% -

11.00%

WorleyParsons 19.1 19.2 12.5 9.9 $1.48 $1.66 11.80% 19.80% 18.40% -7.10%

Average 17.3 13.9 9.9 7.5 $0.55 $0.67 33.90% 22.70% 23.70% 11.30%

ASX Small Industrials

13.3 13.1 7.7 7.3

Allmine Group Ltd 15.3 3.9 10.9 2 $0.01 $0.06 288.20% 8.70% 26.00% 197.70

%

Discount to Peer Average

77.4% 72.7%

Discount to Small Industrials

76.0% 72.1%

Allmine is currently trading at an FY 2012 PE of 3.9x and an FY 2012 EV/EBITDA of 2.0x.

These multiples represent a considerable discount to its peers and the Small Industrials Index

therefore offering significant upside providing Allmine can deliver on projected forecasts. At an

FY 2012 PE of 3.9x, this is a 77.4% discount to its peers and 76.0% discount to the Small

Industrials Market. At an FY 2012 EV/EBITDA multiple of 2.0x, this is a 72.7% discount to its

peers and a 72.1% discount to the Small Industrials Index. This illustrates the huge value

Allmine currently trades at compared to its peers. For example, Allmine currently trades at a

151% FY 2012 PE discount to its closest peer in terms of market cap being Emeco Holdings

(ASX:EHL).

It is only fair a company such as Allmine trades at a discount to its peers by virtue of the fact it

is in its infancy as a listed company and will do so until the company is able to deliver on its

earnings guidance. We believe the alliance agreements with NFC and MCC is what sets

Allmine apart from companies in the sector with similar market caps which allow it to trade at a

greater multiple to these companies. It has however reached the point where it may be difficult

finding value in the mining services industry given the multiples many companies currently trade

at which have risen significantly in recent times especially following a strong earnings reporting

period in the sector. RM Research still considers Allmine to be a company that has the

potential to offer significant value in the sector and following their full FY 2012 results may well

start to bridge the gap between itself and its peers.

TABLE 6: Peer Analysis

(source: RM Research

internal modelling).

Allmine is currently

trading at a significant

discount to its peers and

small industrials market


1 May 2012

MINING SERVICES INDUSTRY OUTLOOK

Despite continued concerns overseas which is negatively impacting stock markets and consumer

confidence levels, RM Research remains bullish on the sector given it derives its revenue from

the mining sector as we believe it will continue to flourish as a result of the continued need for

commodities especially from China. There is much talk and speculation about China slowing

down and possibly entering a period of negative growth which will have a significant impact on

mining companies. However we believe that the structural Chinese growth dynamic remains a

powerful driver of sustained high levels of commodity prices over the next few years resulting in

sustained and increasing levels of capital and exploration expenditure boding well for mining

services companies such as Allmine. ABS statistics support our forecasts where we are currently

witnessing unprecedented levels of capital and exploration in the mining sector.

During CY2011 over A$63.5bn in capital expenditure (capex) was invested in the resources

sector which saw the December 2011 quarter registering the all time peak of A$20.7 billion. There

appears to be no respite going forward with spending levels continuing to climb and the ABS

predicting mining capex in FY 2012 to increase by over 100% to A$94.6 billion, and a further 26%

in FY 2013 to A$119.7billion.

Mining exploration expenditure (excluding petroleum) is following a similar path as capex. The

December 2011 half was the biggest period registered with A$2 billion invested being 44.6%

higher than the corresponding period. Mining exploration expenditure grew 31.8% in FY 2011 to

A$2.9 billion with the ABS forecasting it to grow a further 24.1% in FY 2012 to A$3.6 billion.

ABS M ining Capex

$0

$20

$40

$60

$80

$100

$120

$140

2008 2009 2010 2011 2012 2013

-10

10

30

50

70

90

110

Amount ($m) Growth (%)

ABS Exploration Capex

$0

$1

$2

$3

$4

Year 2008 2009 2010 2011

0

10

20

30

40


FIGURE 8: Peer Group

Relative Valuation

(source: RM Research

estimates).

Industry Outlook still

strong

FIGURE 9: ABS Mining

Capex Forecasts (source

ABS).


Exploration Forecasts

(source ABS).


1 May 2012

Outlook for Mining Projects Still Strong

Another gauge of the sector in general is the number of advanced mining projects on the Bureau

of Resources and Energy Economics (BREE) list. At the end of October 2011, there were 102

projects worth A$231.8bn at an advanced stage of development on BREE‟s project list. In order to

register for this list, projects are either „committed‟ or „under construction‟. That is, projects have

received all government approvals and internal company approvals and the proponents have

publically announced their intention to proceed with the project. This figure represents an increase

of 34% from April 2011 and 74% from October 2010. Of the 102 projects, 22 were either newly

committed or entered the list during the previous six months. There also remains 302 projects

totalling A$224.3bn at a less advanced stage meaning they are either undergoing feasibility

studies, awaiting the outcome of government approval processes or have not yet been subject to a

final investment decision by the project proponents.

BREE Number of Advanced Projects

$0

$20

$40

$60

$80

$100

$120

Year 2007 2008 2009 2010 2011

-30

-10

10

30

50


BREE Value of Advanced Pro jects

$0

$50

$100

$150

$200

$250

Year 2007 2008 2009 2010 2011

0

20

40

60

80


RISK ANALYSIS

Some of the key risks to our valuation and investment thesis include, but are not limited to:

Cyclicality of the resource sector. Allmine’s financial performance is sensitive to the level

of demand within the mining industry. In times of recession and periods of weak economic

growth, the need for mining-related services and products has historically reduced.

Skilled labour shortage. The continued growth of Allmine is dependant on the availability of

skilled labour which is generally in short supply in Australia due to the current strength of the

resource and mining industry.

Key Management. Being a small-cap mining services company, Allmine is dependent on the

skills and experience of key staff for the execution of strategy and day-to-day running of the

business. A strong board and key management have been integral to Allmine’s success and

the loss of key management poses a risk to the business.

Acquisition risk. Allmine’s business plan includes identifying and completing the acquisition

of complementary businesses and merging them into its existing business. The pursuit of

growth through acquisition gives rise to various operational and financial risks.

Industry risks. Although Allmine operates across a range of industry sectors, its main

presence is within the mining and resources industries in Australia. General risks in relation to

these industries include the impact of changes in regulation, competition, global demand for

resources, climate change, political, environment and changes in technology.

Relationship with MCC and NFC. A breakdown in relationship between Arccon and MCC &

NFC will greatly diminish Allmine’s competitive advantage.

The list of Mining

Projects is growing

according to BREE


Capex Forecasts (source

ABS).


Exploration Forecasts

(source ABS).

The mining services

sector as a function of

the resources sector

does exhibit its risks


1 May 2012

DIRECTORS AND MANAGEMENT

Scott Walkem Chief Executive Officer / Director

Scott was the founding shareholder and is the current Managing Director of Allmine. Prior to

founding Allmine, Scott practised as an investment banker for 15 years in various corporate

advisory and structured finance roles across utilities and infrastructure, mining and resources and

private equity sectors. Scott was previously a Director of the Bank of Scotland International in its

Mergers and Acquisitions team. He holds an economics degree from the University of Tasmania.

Robert Wilde Origination and Execution of Major Projects

Robert has spent over 40 years in the construction and mining industry commencing as a site

engineer at Paraburdoo on a new iron ore mine in 1971 to Managing Director for over 15 years of

the Minproc Group, a successful mining process design and construction group. Over the past

eight years Robert, as Managing Director, has built up Arccon into a thriving mining services and

design-construct group. He has been involved in a number of major resource developments

including Hamersley Iron, Paraburdoo, Tom Price and Dampier expansions in the 1970s, Tiwest

mineral sands to pigment project and over 130 gold projects around the world with a combined

value of over A$2.5bn.

Graeme Key Chief Financial Officer

Graeme has extensive experience in the commercial field including a number of senior finance

and general management roles. He has a business degree with an accounting major from Monash

University. Graeme has many years of experience in finance, accounting, manufacturing, general

marketing, logistics and operations across a range of companies.

Alan Wigmore Group General Manager Maintenance Division

Alan has been with Allmine for 20 months previously holding the position of Regional Manager for

the North West region. He was previously employed by Coates Hire as the Service Manager for

WA and NT and has an Advanced Diploma in Business Management.

Michael Franklin Arccon General Manager

Michael has an economics degree from the University of Adelaide and has worked as a business

consultant for almost 20 years. He was a consultant to Arccon from February 2007 and in

September 2007 joined the company full time as Chief Financial Officer and Company Secretary.

In March 2011, Michael was also appointed the Financial Director and Company Secretary of

Arccon‟s associate company, CIA.

John McCowan Arccon Technical Director

John has over 45 years' experience in the design and delivery of major mineral processing plants

and infrastructure projects around the world. He has acted as the Technical Director of Minproc

Engineers for over 20 years completing 130 major gold projects over this period. John has been

Technical Director of Arccon since 2007 and has been responsible for the design of a number of

gold projects, a A$500m vanadium project and studies for copper, molybdenum and iron projects.

Matthew Handcock Arccon Commercial Manager

Matthew Handcock appointed as Commercial Manager of the Arccon Group of Companies.

Matthew has over 26 years of legal experience in commercial law, risk management, insurance,

local government and property law gained while a partner and executive committee member of

Minter Ellison before he founded the boutique legal firm Mullins Handcock in 2000, of which he

was managing partner until 2008.

Andrew Bath Arccon Chief Financial Officer

Andrew Bath replaces Mike Franklin as CFO of the Arccon Group of Companies. Andrew is a

member of the Institute of Chartered Accountants since 1998 and joins Arccon from Nutrition

Systems in Perth where he has held the position of CFO since January 2007.

Bernard Landro Manager - Estimating

Previously the Chief Estimator for Monadelphous.

Allmine Group has a

world class

management team with

a proven track record

on building substantial

businesses

Management team has

been strengthened as a

result of Arccon’s

significant project

pipeline


1 May 2012

Paul Kreppold General Manager - Mining Services

Previously the Chief Engineer for the FAST Joint Venture.

Paul McCallum General Manager - Structural Mechanical Piping

Previously the Contracts Coordinator for ATIVO.

CONCLUSION

The 1H 2012 results is Allmine’s first reporting period following the acquisition of Arccon and as

expected there was significant increase in all financial metrics. RM Research believes Allmine

has entered a period of significant growth which will lead to shareholder value being created.

Allmine is well placed given its strategic alliance with MCC and NFC resulting in it commencing

the second half of the 2012 financial year in a sound position with considerable operating

momentum and project pipeline.

Allmine has already witnessed a 42% increase in share price this calendar year since its low of

12c however we believe this is only the tip of the iceberg - perhaps the company needs a full year

trading following the acquisition of Arccon to realize its true potential.

RM Research rates the company as a BUY.

RM Research believes

Allmine has entered a

period of significant

growth


1 May 2012

Allmine Group Ltd

Sector: Engineering and Contractors Price (A$): 0.17 Market Cap ($Am): 46.9

Recommendation: Buy Target Price ($): 0.49 Enterprise Value ($Am): 54.9

FINANCIAL SUMMARY

Profit & Loss (A$m) Growth & Margins

Year Ending 2010A 2011A 2012F 2013F 2014F Year Ending 2010A 2011A 2012F 2013F 2014F

Sales Revenue $24.2 $30.0 $136.9 $190.0 $220.4 Sales Growth (%) 26.99 23.9 356.7 38.8 16.0

EBITDA $3.8 $5.0 $21.9 $30.4 $35.3 EBITDA Growth (%) 161.2 32.6 334.8 38.8 16.0

Depr. & Amort -$0.7 -$0.8 -$1.3 -$1.3 -$1.3 EBIT Growth (%) 115.6 38.5 388.5 41.2 16.7

EBIT $3.1 $4.2 $20.6 $29.1 $34.0 Net Profit Growth (%) 1,230.1 131.8 288.2 50.4 16.1

Net Interest Expense -$1.5 -$1.4 -$0.6 $1.0 $1.0 EBITDA Margin (%) 15.7 16.8 16.0 16.0 16.0

Pre-Tax Profit $1.5 $2.8 $20.0 $30.1 $35.0 EBIT Margin (%) 12.6 14.1 15.1 15.3 15.4

Tax Benefit (Expense) $0.0 $0.8 -$6.0 -$9.0 -$10.5 Net Profit Margin (%) 6.4 12.1 10.2 11.1 11.1

Net Profit $1.6 $3.6 $14.0 $21.1 $24.5

Adjustments $0.0 $0.0 $0.0 $0.0 $0.0

Reported Profit $1.6 $3.6 $14.0 $21.1 $24.5 Share Data

Year Ending 2010A 2011A 2012F 2013F 2014F

Issued Shares (m) 130.0 264.9 276.3 276.3 276.3

Cash Flow (A$m) Fully Diluted Shares (m) 143.2 310.4 325.4 325.4 325.4

Year Ending 2010A 2011A 2012F 2013F 2014F Basic EPS (A$) 0.012 0.014 0.051 0.076 0.089

Operating EBITDA $3.8 $5.0 $21.9 $30.4 $35.3 EPS Growth n/a 13.7 272.2 50.4 16.1

Tax Paid $0.0 $0.8 -$6.0 -$9.0 -$10.5 Fully Diluted EPS (A$) 0.011 0.012 0.043 0.065 0.075

Net Interest Expense -$1.5 -$1.4 -$0.6 $1.0 $1.0 Fully Diluted EPS Growth n/a 6.9 270.3 50.4 16.1

Change in Wkg Capital $4.7 $6.4 -$3.1 -$6.7 $0.8

Operating Cash Flow $7.0 $10.9 $12.2 $15.6 $26.5

Acquisitions $0.0 -$19.1 -$0.9 $0.0 $0.0 Liquidity & Leverage Ratios

Property/Plant/Equipment -$1.6 -$0.3 -$0.1 $0.2 $0.0 Year Ending 2010A 2011A 2012F 2013F 2014F

Other $0.0 -$1.7 $0.0 $0.0 $0.0 Net Debt/(cash) ($m) 12.87 8.00 -34.46 -50.27 -76.81

Investing Cash Flow -$1.6 -$21.0 -$1.0 $0.2 $0.0 Net Debt/Equity (%) 126.9 19.4 -63.9 -78.0 -85.6

Equity Raised $3.7 $28.5 $0.0 $0.0 $0.0 Net Interest Cover (x) 2.0 3.0 34.4 n/a n/a

Debt Raised (Repaid) -$1.2 -$10.4 -$0.2 $0.0 $0.0 Current Ratio (x) 1.0 1.2 2.1 2.3 3.0

Financing Cash Flow $2.5 $18.1 -$0.2 $0.0 $0.0 Quick Ratio (x) 0.4 0.8 1.7 2.1 2.9

Net Cash Flow $7.9 $7.9 $11.0 $15.8 $26.5 Receivable Days 87.8 350.9 36.5 36.5 36.5

Cash at Beginning of Period -$0.3 $7.6 $15.5 $26.5 $42.3 Payable Days 67.1 282.5 27.4 27.4 27.4

Cash at End of Period $7.6 $15.5 $26.5 $42.3 $68.9 Inventory Days 136.2 136.6 27.5 4.4 3.8

Balance Sheet (A$m) Profitability Ratios

Year Ending 2010A 2011A 2012F 2013F 2014F Year Ending 2010A 2011A 2012F 2013F 2014F

Cash $0.5 $3.9 $26.5 $42.3 $68.9 Return on Assets (%) 5.3 4.4 17.7 22.3 20.0

Receivables $5.8 $28.8 $13.7 $19.0 $22.0 Return on Equity (%) 15.4 8.7 26.0 32.7 27.3

Inventories $9.0 $11.2 $10.3 $2.3 $2.3 Return on Invested Income (%) 12.8 10.5 48.8 89.6 110.1

Other $0.0 $4.6 $0.0 $3.3 $3.3

Current Assets $15.4 $48.5 $50.5 $66.9 $96.5

Property/Plant/Equipment $4.7 $5.3 $3.9 $2.9 $1.6

Goodwill on Consolidation $7.9 $24.7 $24.7 $24.7 $24.7 Valuation

Other $1.6 $4.3 $0.0 $0.0 $0.0 Year Ending 2010A 2011A 2012F 2013F 2014F

Non Current Assets $14.2 $34.4 $28.7 $27.6 $26.3 PER (Basic) (x) 30.1 13.0 3.3 2.2 1.9

Total Assets $29.5 $82.9 $79.2 $94.5 $122.8 PER (Fully Diluted) (x) 35.5 15.3 3.9 2.6 2.3

Payables $4.5 $23.2 $10.3 $14.3 $16.5 EV (A$m) n/a 55.0 39.0 39.0 39.0

Interest Bearing Liabilities $9.3 $10.6 $6.7 $6.7 $6.7 EV/EBITDA (x) 14.5 10.9 2.5 1.8 1.6

Other $1.5 $6.4 $7.0 $7.7 $8.5 EV/EBIT (x) 18.0 13.0 2.7 1.9 1.6

Current Liabilities $15.2 $40.2 $24.0 $28.6 $31.7 EV/Revenue (x) 2.3 1.8 0.4 0.3 0.2

Interest Bearing Liabilities $4.1 $1.3 $1.3 $1.3 $1.3

Other $0.1 $0.1 $0.1 $0.1 $0.1

Non Current Liabilities $4.1 $1.4 $1.4 $1.4 $1.4

Total Liabilities $19.4 $41.5 $25.3 $30.0 $33.1

Net Assets $10.1 $41.3 $53.9 $64.5 $89.7

Contributed Equity $11.5 $40.0 $40.0 $40.0 $40.0

Reserves $0.0 -$0.9 -$2.4 -$12.9 -$12.2

Retained Earnings -$1.4 $2.3 $16.3 $37.4 $61.9

Total Equity $10.1 $41.3 $53.9 $64.5 $89.7

Source: RM Research Estimates


1 May 2012

Registered Office

Perth

L2, 6 Kings Park Road

West Perth WA 6005

Phone: +61 8 9488 0800

Fax: +61 8 9488 0899

PO Box 154 West Perth WA 6872

Email / Website

[email protected]

www. rmresearch.com.au

RM Research Recommendation Categories

Care has been taken to define the level of risk to return associated with a particular company. Our recommendation ranking system is as follows:

Buy Companies with „Buy‟ recommendations have been cash flow positive for some time and have a moderate to low risk profile. We expect these to outperform the broader market.

Speculative Buy We forecast strong earnings growth or value creation that may achieve a return well above that of the broader market. These companies also carry a higher than normal level of risk.

Hold A sound well managed company that may achieve market performance or less, perhaps due to an overvalued share price, broader sector issues, or internal challenges.

Sell Risk is high and upside low or very difficult to determine. We expect a strong underperformance relative to the market and see better opportunities elsewhere.

Disclaimer / Disclosure

This report was produced by RM Research Pty Ltd, which is a Corporate Authorised Representative of RM Capital Pty Ltd (AFSL 221938). RM Research received A$35,000 (plus GST) for the compilation and distribution of four research reports. RM Research has made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, RM Research does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities. The securities recommended by RM Research carry no guarantee with respect to return of capital or the market value of those securities. There are general risks associated with any investment in securities. Investors should be aware that these risks might result in loss of income and capital invested. Neither RM Research nor any of its associates guarantees the repayment of capital.

WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or

taking into account any particular investor‟s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.

DISCLOSURE: RM Research and/or its directors, associates, employees or representatives may not effect a transaction upon its or

their own account in the investments referred to in this report or any related investment until the expiry of 24 hours after the report has been published. Additionally, RM Research may have, within the previous twelve months, provided advice or financial services to the companies mentioned in this report. As at the date of this report, the directors, associates, employees, representatives or Authorised Representatives of RM Research and RM Capital may hold shares in Allmine Group Limited.

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Allmine Group Limited