Page 1

1 May 2012

Allmine Group Limited

ASX Code  AZG Buy

Growth Cycle in Full Flight

12 Month Price Target – 49 cents

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

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 worksin-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. 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

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

+61 8 9488 0800

Share Price Performance

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

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


1 May 2012

COMPANY OVERVIEW A unique “Life of Mine” service proposition for mine owners, mine operators and their subcontractors

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.

FIGURE 1: Allmine Operational Overview (source: Allmine April 2012 Investor Presentation).

RESULT SUMMARY TABLE 1: Allmine Half Yearly Results Comparison (source: Allmine FY 2012 Interim Financial Report).

Revenue (A$m) EBITDA (A$m) EBITDA Margin (%) EBIT (A$m) NPAT (A$m) NPAT Margin (%) EPS (cps)

1HFY11

1HFY12

% Chg

16.9 2.0 11.8 1.6 0.7 4.2 0.8

63.4 7.9 12.5 7.4 5.2 8.2 2.0

274.97 297.00 5.88 362.50 627.27 93.95 150.00

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.

Page 2  Copyright © 2012 RM Research  Please refer to important disclosures located at end of this report.


1 May 2012

Allmine achieved significant growth during 1H 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:

Allmine achieved a number of milestones during the reporting period

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

Increased Employee Numbers is 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.

TABLE 2: Allmine Employee Numbers Comparison (source: RM Research internal modelling).

PreReporting Period

PostReporting Period

Difference

% Change

Engineering Division Construction Division Maintenance Division

10 100 100

70 350 100

50 250 0

600% 250% 0%

Total

210

520

310

148%

Page 3  Copyright © 2012 RM Research  Please refer to important disclosures located at end of this report.


1 May 2012

Operating Cash Flow Heading In Right Direction 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 Management team has been strengthened as a result of growing project pipeline

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 Solid Order Book and Project Pipeline

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. TABLE 3: Arccon/NFC Contracts under Alliance Agreement (source: Allmine April 2012 Investor Presentation).

Contract

Description 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.

Marengo Mining Limited

Poseidon Nickel Limited

Ironbark Zinc Limited

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. 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. 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.

Status

Contract Value

Under MOU Start ~Q2 2013

~A$2b

Under MOU Start ~Q4 2012

~A$90m

Under MOU Start ~Q1 2013

~A$300m A$400m

Page 4  Copyright © 2012 RM Research  Please refer to important disclosures located at end of this report.


1 May 2012

Contract

TABLE 4: Arccon/MCC Contracts – Sino Iron Project under Alliance Agreement (source: Allmine April 2012 Investor Presentation).

Description

Various Constructio-n Works

Various works packages – with ongoing awards monthly under the service agreement.

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

UGL FMG

Contract

TABLE 5: Arccon-Other Contracts (source: Allmine April 2012 Investor Presentation).

Description

In Progress

~A$70m

Commenced

TBD

Status

Contract Value

Commenced

A$45m

Commenced

A$50m

Commenced

TBD

Commenced

A$21m

Reimbursable contract.

Medusa Gold Project Philippines

Studies & Engineering

Contract Value

Design, procurement and some construction management assistance.

Golden Hills Gold Project Mongolia

Dugald River Project – Minmetals Res Ltd

Status

Design, procurement and construction management (EPCM). Reimbursable contract.

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

General design and engineering works.

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.

FIGURE 2: Allmine’s Project Portfolio (source: Allmine April 2012 Investor Presentation).

Page 5  Copyright © 2012 RM Research  Please refer to important disclosures located at end of this report.


1 May 2012

How MCC and NFC Add Value The MCC and NFC alliances offer significant advantages over rivals

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 Allmine is on track to experience significant growth in all financial metrics

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)

FIGURE 3: Sales Forecasts (source: RM Research estimates). FIGURE 4: EBITDA Forecasts (source: RM Research estimates).

EBITDA Forecast ($m)

$200 $180 $160 $140 $120

$35 $30 $25 $20

$100 $80 $60 $40 $20 $0

$15 $10 $5 $0

FY10A

FY11A

FY12F

FY13F

FY10A

FY11A

FY12F

FY13F

Page 6  Copyright © 2012 RM Research  Please refer to important disclosures located at end of this report.


1 May 2012

EPS Forecast (cents)

NPAT Forecast ($m)

FIGURE 5: Net Profit After Tax Forecasts (source: RM Research estimates). FIGURE 6: Earnings per Share Forecasts (source: RM Research estimates).

9

$25

8 $20

7 6

$15

5 4

$10

3 2

$5

1 0

$0 FY10A

FIGURE 7: Contracts Split (source: Allmine April 2012 Investor Presentation).

FY11A

FY12F

FY13F

FY10A

FY11A

FY12F

FY13F

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.

Page 7  Copyright © 2012 RM Research  Please refer to important disclosures located at end of this report.


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

TABLE 6: Peer Analysis (source: RM Research internal modelling).

Allmine is currently trading at a significant discount to its peers and small industrials market

EV / EBITDA (x)

PE (x)

EPS

ROE

2011

2012

2011

2012

2011

2012

Growth

2011

2012

Growth

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 %

Ausenco

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.

Page 8  Copyright © 2012 RM Research  Please refer to important disclosures located at end of this report.


1 May 2012

FIGURE 8: Peer Group Relative Valuation (source: RM Research estimates).

MINING SERVICES INDUSTRY OUTLOOK Industry Outlook still strong

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.

FIGURE 9: ABS Mining Capex Forecasts (source ABS). FIGURE 10: ABS Mining Exploration Forecasts (source ABS).

ABS Exploration Capex

A B S M ining Capex $ 140 $ 120 $ 100 $ 80 $ 60 $ 40 $ 20 $0

110

$4

40

$3

30

50

$2

20

30

$1

10

90 70

10 -10 2008

2009

2010

A mo unt ($m)

2011

2012

2013

Gro wth (%)

$0

0 Year

2008

2009

Amount ($m)

2010

2011

Growth (%)

Page 9  Copyright © 2012 RM Research  Please refer to important disclosures located at end of this report.


1 May 2012

Outlook for Mining Projects Still Strong The list of Mining Projects is growing according to BREE

FIGURE 9: ABS Mining Capex Forecasts (source ABS).

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 Value of Advanced Projects

BREE Number of Advanced Projects $120 $100 $80 $60 $40 $20 $0

FIGURE 10: ABS Mining Exploration Forecasts (source ABS).

50

$250

80

30

$200 $150

60

-10

$100 $50

20

-30

$0

10

Year

2007

2008

2009

Amount ($m)

2010

2011

Growth (%)

40

0 Year

2007

2008

Amount ($m)

2009

2010

2011

Growth (%)

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

The mining services sector as a function of the resources sector does exhibit its risks

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.

Page 10  Copyright © 2012 RM Research  Please refer to important disclosures located at end of this report.


1 May 2012

DIRECTORS AND MANAGEMENT Scott Walkem Allmine Group has a world class management team with a proven track record on building substantial businesses

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.

Management team has been strengthened as a result of Arccon’s significant project pipeline

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. Page 11  Copyright © 2012 RM Research  Please refer to important disclosures located at end of this report.


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

RM Research believes Allmine has entered a period of significant growth

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.

Page 12  Copyright © 2012 RM Research  Please refer to important disclosures located at end of this report.


1 May 2012

Allmine Group Ltd Sector: Engineering and Contractors Recommendation: Buy

Price (A$): 0.17 Target Price ($): 0.49

Market Cap ($Am): Enterprise Value ($Am):

46.9 54.9

FINANCIAL SUMMARY Profit & Loss (A$m) Year Ending Sales Revenue EBITDA Depr. & Amort EBIT Net Interest Expense Pre-Tax Profit Tax Benefit (Expense) Net Profit Adjustments Reported Profit

Cash Flow (A$m) Year Ending Operating EBITDA Tax Paid Net Interest Expense Change in Wkg Capital Operating Cash Flow Acquisitions Property/Plant/Equipment Other Investing Cash Flow Equity Raised Debt Raised (Repaid) Financing Cash Flow Net Cash Flow Cash at Beginning of Period Cash at End of Period

Balance Sheet (A$m) Year Ending Cash Receivables Inventories Other Current Assets Property/Plant/Equipment Goodwill on Consolidation Other Non Current Assets Total Assets Payables Interest Bearing Liabilities Other Current Liabilities Interest Bearing Liabilities Other Non Current Liabilities Total Liabilities Net Assets Contributed Equity Reserves Retained Earnings Total Equity Source: RM Research Estimates

2010A $24.2 $3.8 -$0.7 $3.1 -$1.5 $1.5 $0.0 $1.6 $0.0 $1.6

2011A $30.0 $5.0 -$0.8 $4.2 -$1.4 $2.8 $0.8 $3.6 $0.0 $3.6

2012F $136.9 $21.9 -$1.3 $20.6 -$0.6 $20.0 -$6.0 $14.0 $0.0 $14.0

2013F $190.0 $30.4 -$1.3 $29.1 $1.0 $30.1 -$9.0 $21.1 $0.0 $21.1

2014F $220.4 $35.3 -$1.3 $34.0 $1.0 $35.0 -$10.5 $24.5 $0.0 $24.5

2010A $3.8 $0.0 -$1.5 $4.7 $7.0 $0.0 -$1.6 $0.0 -$1.6 $3.7 -$1.2 $2.5 $7.9 -$0.3 $7.6

2011A $5.0 $0.8 -$1.4 $6.4 $10.9 -$19.1 -$0.3 -$1.7 -$21.0 $28.5 -$10.4 $18.1 $7.9 $7.6 $15.5

2012F $21.9 -$6.0 -$0.6 -$3.1 $12.2 -$0.9 -$0.1 $0.0 -$1.0 $0.0 -$0.2 -$0.2 $11.0 $15.5 $26.5

2013F $30.4 -$9.0 $1.0 -$6.7 $15.6 $0.0 $0.2 $0.0 $0.2 $0.0 $0.0 $0.0 $15.8 $26.5 $42.3

2014F $35.3 -$10.5 $1.0 $0.8 $26.5 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $26.5 $42.3 $68.9

2010A $0.5 $5.8 $9.0 $0.0 $15.4 $4.7 $7.9 $1.6 $14.2 $29.5 $4.5 $9.3 $1.5 $15.2 $4.1 $0.1 $4.1 $19.4 $10.1 $11.5 $0.0 -$1.4 $10.1

2011A $3.9 $28.8 $11.2 $4.6 $48.5 $5.3 $24.7 $4.3 $34.4 $82.9 $23.2 $10.6 $6.4 $40.2 $1.3 $0.1 $1.4 $41.5 $41.3 $40.0 -$0.9 $2.3 $41.3

2012F $26.5 $13.7 $10.3 $0.0 $50.5 $3.9 $24.7 $0.0 $28.7 $79.2 $10.3 $6.7 $7.0 $24.0 $1.3 $0.1 $1.4 $25.3 $53.9 $40.0 -$2.4 $16.3 $53.9

2013F $42.3 $19.0 $2.3 $3.3 $66.9 $2.9 $24.7 $0.0 $27.6 $94.5 $14.3 $6.7 $7.7 $28.6 $1.3 $0.1 $1.4 $30.0 $64.5 $40.0 -$12.9 $37.4 $64.5

2014F $68.9 $22.0 $2.3 $3.3 $96.5 $1.6 $24.7 $0.0 $26.3 $122.8 $16.5 $6.7 $8.5 $31.7 $1.3 $0.1 $1.4 $33.1 $89.7 $40.0 -$12.2 $61.9 $89.7

Growth & Margins Year Ending Sales Growth (%) EBITDA Growth (%) EBIT Growth (%) Net Profit Growth (%) EBITDA Margin (%) EBIT Margin (%) Net Profit Margin (%)

2010A 26.99 161.2 115.6 1,230.1 15.7 12.6 6.4

2011A 23.9 32.6 38.5 131.8 16.8 14.1 12.1

2012F 356.7 334.8 388.5 288.2 16.0 15.1 10.2

2013F 38.8 38.8 41.2 50.4 16.0 15.3 11.1

2014F 16.0 16.0 16.7 16.1 16.0 15.4 11.1

Share Data Year Ending Issued Shares (m) Fully Diluted Shares (m) Basic EPS (A$) EPS Growth Fully Diluted EPS (A$) Fully Diluted EPS Growth

2010A 130.0 143.2 0.012 n/a 0.011 n/a

2011A 264.9 310.4 0.014 13.7 0.012 6.9

2012F 276.3 325.4 0.051 272.2 0.043 270.3

2013F 276.3 325.4 0.076 50.4 0.065 50.4

2014F 276.3 325.4 0.089 16.1 0.075 16.1

Liquidity & Leverage Ratios Year Ending Net Debt/(cash) ($m) Net Debt/Equity (%) Net Interest Cover (x) Current Ratio (x) Quick Ratio (x) Receivable Days Payable Days Inventory Days

2010A 12.87 126.9 2.0 1.0 0.4 87.8 67.1 136.2

2011A 8.00 19.4 3.0 1.2 0.8 350.9 282.5 136.6

2012F -34.46 -63.9 34.4 2.1 1.7 36.5 27.4 27.5

2013F -50.27 -78.0 n/a 2.3 2.1 36.5 27.4 4.4

2014F -76.81 -85.6 n/a 3.0 2.9 36.5 27.4 3.8

Profitability Ratios Year Ending Return on Assets (%) Return on Equity (%) Return on Invested Income (%)

2010A 5.3 15.4 12.8

2011A 4.4 8.7 10.5

2012F 17.7 26.0 48.8

2013F 22.3 32.7 89.6

2014F 20.0 27.3 110.1

Valuation Year Ending PER (Basic) (x) PER (Fully Diluted) (x) EV (A$m) EV/EBITDA (x) EV/EBIT (x) EV/Revenue (x)

2010A 30.1 35.5 n/a 14.5 18.0 2.3

2011A 13.0 15.3 55.0 10.9 13.0 1.8

2012F 3.3 3.9 39.0 2.5 2.7 0.4

2013F 2.2 2.6 39.0 1.8 1.9 0.3

2014F 1.9 2.3 39.0 1.6 1.6 0.2

Page 13  Copyright © 2012 RM Research  Please refer to important disclosures located at end of this report.


1 May 2012

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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.

Page 14  Copyright © 2012 RM Research  Please refer to important disclosures located at end of this report.

Allmine Group Limited  

Growth Cycle in Full Flight

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