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MDM Engineering Group Limited
Merger with Sedgman and HY Financial Results
Listen Design Deliver
Deliver Listen Design Listen Del
Listen Design Deliver
Deliver Listen Design Deliver
Design Deliver Listen
Strictly Private and Confidential
Listen Design Deliver Listen Tharisa, South Africa, August 2012
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Disclaimer
The content of this promotion has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000. Reliance on this promotion for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested.
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2 2 Listen with Care. Design for Purpose. Deliver beyond Expectation.
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Listen with Care. Design for Purpose. Deliver beyond Expectation
Recommended Merger with Sedgman
HY Results
Appendix: Overview of MDM
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Transaction Overview
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Listen with Care. Design for Purpose. Deliver beyond Expectation
• MDM and Sedgman Limited (Sedgman) have agreed to merge via a recommended takeover offer under which
Sedgman will acquire all of the shares in MDM (the Offer, or the Transaction)
• Established in 1979 and listed on the ASX in 2006, Sedgman is a leading provider of mineral processing and
associated infrastructure solutions to the global resources industry
• Offer Price of £1.81 cash per MDM share1,2 represents
− MDM equity value (undiluted) consideration of £67.9 million (US$109 million)
− 23% premium to one-month VWAP
− cash consideration provides immediate liquidity for MDM Shareholders
− certainty of value for MDM Shareholders
• In addition, MDM shareholders will receive an interim dividend of US 8.0 cents per share payable in January 2013
• The Offer Price may be adjusted subject to an agreed level of cash and working capital at completion. Details of
the adjustment will be disclosed in the Notice of Meeting to be despatched to MDM Shareholders
Note 1: certain Key Shareholders of MDM will be offered a combination of cash (70%) and shares in Sedgman (30%) equivalent to the Offer Price
Note 2: Sedgman will make a separate offer for MDM’s employee options
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Transaction Process
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Listen with Care. Design for Purpose. Deliver beyond Expectation
• MDM and Sedgman have entered into a Merger Implementation Agreement (MIA) to progress the Offer
• The Board of MDM unanimously recommends that MDM shareholders vote in favour of the Offer
• Shareholders representing approximately 25% of the issued ordinary shares of MDM have executed voting and
escrow deeds, and a further 40% of MDM shareholders intend to enter into such agreements, pursuant to which
these shareholders undertake vote in favour of the Offer
• The Offer is conditional upon:
− MDM shareholder approval – 75% of votes cast (Meeting of Shareholders to be held on or around 18
December 2012);
− satisfaction of certain Conditions Precedent contained in the MIA; and
− South African regulatory approvals, including approval by the relevant competition authorities
• Transaction expected to close in March 2013
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Transaction Rationale
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Listen with Care. Design for Purpose. Deliver beyond Expectation
• The Offer Price represents an attractive premium to recent trading prices of MDM:
– 8.7% premium to MDM’s closing price on 27 November 2012
– 23.0% premium to the one-month VWAP
– 21.6% premium to the three-month VWAP
• 100% cash consideration provides immediate liquidity and certainty of value
• Crystallises positive near term outlook for MDM
• Risk mitigation: the merged Sedgman-MDM business will have an enhanced balance sheet with improved
access to funding facilities, thereby providing the capacity required to execute larger and increasingly
complex EPC execution projects
• The Board of MDM unanimously recommends that MDM shareholders vote in favour of the Offer
• Shareholders representing approximately 25% of the issued ordinary shares of MDM have executed
voting and escrow deeds, and a further 40% of MDM shareholders intend to enter into such agreements,
pursuant to which these shareholders undertake vote in favour of the Offer
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Timetable
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MDM announcement of the Offer on AIM Wednesday, 28 November 2012
Sedgman announcement of the Offer on ASX Wednesday, 28 November 2012
MDM Meeting of Shareholders to approve the Offer On or around, Tuesday, 18 December 2012
Expected receipt of South African regulatory approvals February 2013
Expected Transaction close March 2013
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Overview of Sedgman
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Listen with Care. Design for Purpose. Deliver beyond Expectation
• Established in 1979, Sedgman is a leading provider of mineral processing and associated infrastructure solutions to
the global resources industry
• Listed on the ASX with ticker “SDM”; market capitalisation ~A$190m1
• Sedgman business units:
– Projects: engineering design, EPC, EPCM in the global coal and metalliferous markets
– Operations: operation of coal handling and processing plants (CHPP)
– 50/50 JV with Thiess (subsidiary of Leighton Holdings, a 33% shareholder in Sedgman) for design and construction
of CHPP projects in excess of $40m in value
• In FY2012, Sedgman recorded revenue of A$650.8m, EBITA (underlying) of A$64.0m, NPAT (underlying) of A$43.7m
• Sedgman has a strong balance sheet with net cash of A$65 million and unused debt facilities of approximately $148m2
• Merger with MDM is consistent with Sedgman’s strategy to increase its presence in Africa and exposure to precious
and base metals projects
Note 1: 217.6m ordinary shares on issue, last close of A$0.88 per share
Note 2: at 30 June 2012
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Listen with Care. Design for Purpose. Deliver beyond Expectation
Recommended Merger with Sedgman
HY Results
Appendix: Overview of MDM
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HY Results Summary
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HY13 HY12 Change
Revenue US$m 78.9 19.8 298%
Gross Profit US$m 13.2 7.5 76%
EBITDA US$m 8.0 3.2 150%
Profit Before Tax US$m 8.1 3.3 145%
Earnings Per Share cps 15.94 6.51 145%
Interim Dividend cps 8.0 2.5 220%
Cash and equivalents US$m 20.1 11.9 69%
Note 1: For the 6 months ending 30 September respectively
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Historic Financial Data
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HY Results Commentary
• Record HY revenue of US$78.9 million
• Maintained healthy GP Margin of 16.8%
• EBITDA of US$8.0 million, up 150%
• Second half FY13 will see improved conversion to cash
– Project completion bonuses earned in 1H FY13 will be received early in the second half
• Efficient delivery of execution projects – on time, within budget
– Tharisa 3.6 mtpa chrome and PGM concentrator plant commissioned in Sep 2012; EPC fixed price contract valued in
excess of US$130 million
• Continue to see strong demand for gold and base metals projects
– Continuous demand for project tenders and feasibility studies
– MDM’s exposure to gold projects backed by high quality mining companies has insulated MDM from the downturn
experienced by some competitors
• Multiple execution projects in progress, with a number of Pre-Feasibility and Bankable Feasibility Studies currently being
undertaken creating the next execution project pipeline
• Current and future order book circa US$800-900 million
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Project Visual Update
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Tarkwa, Ghana, commissioning, January 2012 Tarkwa, Ghana, commissioning, January 2012
Camrose, DRC, DMS 1 plant, March 2012 Camrose, DRC, DMS 1 plant , May 2012
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Project Visual Update
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Kalagadi, South Africa, August 2012 Kalagadi, South Africa, August 2012
Tharisa, South Africa, August 2012 Tharisa, South Africa, August 2012
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Recommended Merger with Sedgman
HY Results
Appendix: Overview of MDM
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About MDM Engineering
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o Mineral Process Engineering & Project Management company
o Providing engineering & project services to the mining and resources industry
o Market leader in EPCM & EPC contracting
o Significant project record in Africa completed by core team – over 55 projects
o Strong track record of converting feasibility studies to execution contracts
o Strong and committed management team with a high level of ownership
o Experienced and high quality team with a long standing track record
o Growth forecasts supported by contracted and committed projects
o Geared for organic and strategic growth (projects & regions)
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History of MDM
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o MDM has a long standing reputation for excellence in
process, design, project management, construction
and commissioning of minerals projects in Africa
– Recognised leader in the delivery of fit for purpose
metallurgical plants, particularly in the precious
metals sector
– Completed 66 bankable feasibility studies and
constructed over 55 metallurgical plants
o MDM was formed when the assets of its predecessor
MDM (Pty) Ltd. which was founded in 1989, were
acquired out of liquidation in February 2006
o New management team led by George Bennett and
Martin Smith has provided the commercial acumen
and client relationships to deliver sustained profitability
o On May 12, 2008 MDM was listed on the London
Stock Exchange AIM Market
o Post-listing, MDM’s execution capabilities have
continued to grow. MDM is now delivering multiple
execution projects in excess of $150m for Tier 1 clients
2011 2010 2009 2008 2007 2006 2012
MDM is established by George Bennett
IPO on the AIM market of the
London Stock Exchange
Martin Smith appointed CEO
MDM reaches $36 million in revenue
and $11 million in EBITDA
Awarded $150 million Tharisa Project
Awarded Ezulwini Gold and Uranium Projects
($87 and $59 million)
FY12 revenue $89m with EBITDA $7m
Awarded $60 million Banro Project
HY 13 revenue $79m with EBITDA $8m, Merger with Sedgman
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Volume Share Price
Corporate Structure
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Top Shareholders Ownership
9-0 Trust 23.79%
Pipestone Capital 18.75%
Emirate Investments Limited 16.78%
Henderson Global Investors Ltd 9.33%
Alpine Nominees Limited 7.56%
Alchemy Holdings 5.90%
Board Position
Bill Nairn Non-Executive Chairman
Martin Smith CEO
George Bennett Executive Director
Dominique De La Roche Financial Director
Mark Summers Non-Executive Director
Capital Structure
Share price: £1.67 / US$2.91
Ordinary shares (m) 37.5
Market Cap (undiluted) £62.4m / US$100.3
Cash (30 Sep 12) £12.5m / US$20.1
Enterprise value £49.9m / US$80.2
Options (m) 3.8
Share Price Chart
Note 1: USDGBP exchange rate of 0.622
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Culture and Strategy
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o Culture built on rich history of executing projects in Africa
o Proud of our technical expertise in design and process engineering
– Every plant designed and built by MDM has achieved or exceeded nameplate
throughput
o Appreciation of African construction risk and country specific risk
o Target studies from scoping all the way through to BFS/DFS
o Strong focus on studies achieving project financing (c. 95% historic financing rate)
o Targeted strategy of converting studies into execution projects
– Strong source of execution work
– Detailed project knowledge ensures execution risk is mitigated
– Repeat work
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Client Profile
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o MDM’s traditional client base has consisted primarily of mid-cap miners with African projects which typically do not have
the in-house capabilities to develop these projects alone
o MDM has recently increased its exposure to large international players such as African Barrick Gold, Gold Fields Limited
and ENRC
o The following provides an overview of MDM’s largest customers:
Key Customers
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Geographic Reach
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Listen with care. Design for Purpose. Deliver beyond Expectation
o MDM has deep experience in managing mineral projects throughout Africa
Ghana
Congo
Tanzania
South Africa
Botswana
Zimbabwe
Mali
Senegal
Algeria
Burkina Faso
Kenya
Ivory Coast
Zambia
Mozambique
Morocco
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Sector Expertise Execution Projects
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o The following table provides a snapshot of selected execution contracts
Sector Client Project Country Value Description
Gold
Tarkwa TEP6 Ghana US$240m DFS, Front End Engineering Design and EPC for the expansion
of the Tarkwa Gold Mine to 12 Mtpa
Gold
Bulyhanhulu Tanzania US$160m BFS, FEED and EPC for the Bulyanhulu Gold Tailings
Retreament Project
Platinum/Chrome
Tharisa Project South Africa US$130m FEED and EPC contract for the expansion of Tharisa Minerals’
PGM & Chromite Project to 3.6 mtpa
Gold
Namoya Project DRC US$60m EPCM contract for the construction of the 2 Mtpa Namoya Gold
Plant
Manganese
Umtu Sinter Plant South Africa US$195m BFS, FEED and EPCM for the construction of the Umtu Sinter
Plant
Phosphate
D Bank South Africa US$62m EPCM contract for construction of the flotation plant for Foskor's
rock phosphate fertiliser operation
Copper
DMS 1 and DMS 2 DRC US$35m
FEED and EPCM for the construction of two 1 Mtpa copper
DMS plants
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Sector Expertise Feasibility Studies
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o The following table provides an overview of selected feasibility studies that MDM is currently performing or recently
completed
o MDM has a strong track record of converting studies to execution projects
Sector Client Project Country Value Description
Manganese Kongoni DRC US$500m
BFS for ENRC’s Kongoni project located within the Kalahari
manganese field for the mining crushing and screening as well as
the associated infrastructure
Gold Tailings Project South Africa US$400m
Scoping study and PFS for Gold One’s and Gold Field’s Joint
Venture project to reclaim and retreat historical tailings material
and current tailings to recover residual gold, uranium and sulphur at
a number of sites in South Africa
Uranium Uranium Tailings South Africa US$300m BFS review for the reclamation and reprocessing of the
Randfontein tailings deposits
Gold Bulyanhulu Tanzania US$180m
BFS for a 2.4mtpa CIL gold plant to treat reclaimed tailings and
current flotation rougher tailings for African Barrick Gold’s
Bulyanhulu Gold Mine in Tanzania
Copper
DMS 1 and DMS 2
DRC
US$35m
FEED for the construction of two 1 Mtpa copper DMS plants
Copper
Kalukundi
DRC
US$225m
BFS and FEED for Africo Resource’s Kalukundi Copper Project
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Commitment to Safety
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o Our site safety record – Focus on Zero Harm!
o FY2012
Project Man-hours LTI LTIFR
TOTAL 13,013,997 11 0.17*
Period Man-hours LTIs LTIFR
April 2011 – March 2012 2,597,888** 1 0.08
* A LTIFR of 0.5 or less conforms to ISO / International norms (calculated for 200,000 man-hours base)
** A million Lost Time Injury (LTI) free man-hours achieved at Tharisa Minerals in March 2012
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Thank You
The MDM team
MDM staff
induction artwork
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