Exhibit T3E

Explanatory Statement
pursuant to Section 412 of the Corporations Act 2001 (Cth)

For the Creditors' Scheme of Arrangement between:

Boart Longyear Limited

ACN 123 052 728

Boart Longyear Australia Pty Ltd

ACN 000 401 025

Boart Longyear Management Pty Ltd

ACN 123 283 545

Votraint No. 1609 Pty Limited

ACN 119 244 272

(together, defined as the "Companies")

and

The 7% Scheme Creditors

(as defined in the Scheme)

and

The Subordinate Claim Holders

(as defined in the Scheme)

In order for the Scheme to proceed, it must be approved by the Noteholders. Approval will be sought at the Scheme Meeting that will commence at 11:30am on 30 May 2017 at Level 11, 5 Martin Place, Sydney in New South Wales, Australia. Further details of the Scheme Meeting and on how to vote at the Scheme Meeting, as well as information about the proposed Scheme, are set out in this Explanatory Statement.

THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION.

You are encouraged to read it in its entirety, take professional advice, and consult with your professional advisers when making any decisions in connection with the Scheme, including deciding whether or not to vote in favour of it.

 

Legal adviser to the Companies

THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN “TRANSACTION SECURITIES” (AS DEFINED HEREIN). NONE OF THE SECURITIES REFERRED TO IN THIS DOCUMENT MAY BE SOLD, ISSUED OR TRANSFERRED IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW.

THE TRANSACTION SECURITIES PROPOSED TO BE ISSUED PURSUANT TO THE SCHEME WILL NOT BE REGISTERED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”) UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR THE SECURITIES LAW OF ANY STATE OR OTHER JURISDICTION UNLESS EXPRESSLY SPECIFIED HEREIN, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON CERTAIN EXEMPTIONS FROM REGISTRATION UNDER THE U.S. SECURITIES ACT. CONSEQUENTLY, NEITHER THESE SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED, SOLD ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE U.S. OR TO U.S. PERSONS (AS DEFINED IN THE U.S. SECURITIES ACT) UNLESS AN EXEMPTION FROM THE REGISTRATION REQUIREMENT OF THE U.S. SECURITIES ACT IS AVAILABLE. THE SCHEME NOTES AND THE SCHEME WARRANTS WILL BE ISSUED IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(A)(10) OF THE U.S. SECURITIES ACT. THE APPROVAL OF THE SUPREME COURT OF NEW SOUTH WALES OR SUCH OTHER COURT OF COMPETENT JURISDICTION PROVIDES THE BASIS FOR THE SCHEME NOTES AND THE SCHEME WARRANTS TO BE ISSUED WITHOUT REGISTRATION UNDER THE U.S. SECURITIES ACT, IN RELIANCE ON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT PROVIDED BY SECTION 3(A)(10). THE SHARES OBTAINABLE UPON CASHLESS EXERCISE OF THE SCHEME WARRANTS WILL BE ISSUED IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(A)(9) OF THE U.S. SECURITIES ACT. THE SHARES OBTAINABLE UPON CASH EXERCISE OF THE WARRANTS WILL ONLY BE ISSUED (i) IN THE UNITED STATES, TO INSTITUTIONAL “ACCREDITED INVESTORS” (AS DEFINED IN CLAUSES (1), (2), (3), (7) OR (8) OF CLAUSE (A) OF RULE 501 OF REGULATION D UNDER THE U.S. SECURITIES ACT) AND IN RELIANCE ON RULE 506(C) OF REGULATION D UNDER THE U.S. SECURITIES ACT AND (ii) OUTSIDE OF THE UNITED STATES IN AN “OFFSHORE TRANSACTION” WITHIN THE MEANING OF REGULATION S UNDER THE U.S. SECURITIES ACT.

Further important information is set out under the heading "IMPORTANT INFORMATION" in the enclosed Explanatory Statement.

If you have assigned, sold, or otherwise transferred, or assign, sell or otherwise transfer, your interests as a Noteholder or do so before the date of the Scheme Meeting you are requested to forward a copy of this document to the person or persons to whom you have assigned, sold or otherwise transferred, or assign, sell or otherwise transfer, your interests as a Noteholder. If you are in any doubt as to the action you should take, you should consult your professional adviser without delay.

NOTICE OF MEETING

(1) BOART LONGYEAR LIMITED ACN 123 052 728

(2) BOART LONGYEAR AUSTRALIA PTY LTD ACN 000 401 025

(3) BOART LONGYEAR MANAGEMENT PTY LIMITED ACN 123 283 545; and

(4) VOTRAINT NO. 1609 PTY LIMITED ACN 119 244 272

NOTICE OF MEETING OF CREDITORS TO CONSIDER AND, IF THOUGHT FIT, AGREE TO A SCHEME OF ARRANGEMENT

Capitalised terms in this Notice of Meeting that are not otherwise defined have the same meaning as is given to those terms in the enclosed Explanatory Statement.

To: the Noteholders in respect of Boart Longyear Management Pty Limited ACN 123 283 545, Boart Longyear Australia Pty Ltd ACN 000 401 025, Boart Longyear Limited ACN 123 052 728 and Votraint No. 1609 Pty Limited ACN 119 244 272.

Pursuant to section 411(1) of the Corporations Act 2001 (Cth), the Supreme Court of New South Wales has ordered that a meeting of the Noteholders be convened to consider and, if thought fit, agree to (with or without modification) the proposed Scheme between the Noteholders, the Subordinate Claim Holders and the Companies.

1. Notice

NOTICE IS HEREBY GIVEN that a meeting of the Noteholders will be held at Ashurst, Level 11, 5 Martin Place, Sydney in New South Wales, Australia on 30 May 2017 at 11:30am (the "Scheme Meeting").

The purpose of the Scheme Meeting is for the Noteholders to consider and, if thought fit:

RESOLVE THAT pursuant to and in accordance with section 411 of the Corporations Act 2001 (Cth), the scheme of arrangement proposed between the Companies, the Noteholders and the Subordinate Claim Holders, as contained and described in the Explanatory Statement, is agreed to (with or without alterations or conditions as approved by the Court, provided that such alterations or conditions do not change the substance of the Scheme, including the Steps, in any material respect) (the "Resolution").

For further information the Noteholders should refer to the Explanatory Statement accompanying this Notice of Meeting, which is required by section 412 of the Corporations Act 2001 (Cth) in relation to the Scheme.

2. Agenda

The agenda for the Scheme Meeting will be as follows:

(a) the Chairperson will address those present at the Scheme Meeting, and provide an explanation of the background to and purpose of the Scheme Meeting;

(b) there will be a general presentation in relation to the proposed Scheme and attendees will be given a reasonable opportunity to ask questions in relation to the Scheme;

(c) the procedure for voting on the Scheme will be explained; and

(d) the Resolution to agree to the Scheme will be put to the Noteholders present in person or by proxy, attorney or corporate representative at the Scheme Meeting for discussion and vote.

3. Attendance and voting at the Scheme Meeting

To be eligible to vote at the Scheme Meeting, you must be a Noteholder as at 4 May 2017 and must have lodged a completed Proxy Form with your Registered Participant in sufficient time to allow your Registered Participant to (a) complete a Voting Proof of Debt Form on your behalf and (b) lodge the Proxy Form and Voting Proof of Debt Form with the Information Agent by no later than 4.00 pm on 25 May 2017 (New York City Time).

The Chairperson will then adjudicate upon your Claim as set out in the Voting Proof of Debt Form based on the information contained in or provided with the Voting Proof of Debt Form, as well the information known to the Chairperson, for voting purposes only.

You may attend the meeting in person (or by corporate representative), appoint a proxy to attend in your place, or attend by attorney. Proxy Forms must be received by the Information Agent by 4.00 pm on 25 May 2017 (New York City Time). The Proxy Form and Voting Proof of Debt Form are set out at Annexures F and G (respectively) to the enclosed Explanatory Statement. If you wish to vote by attorney or corporate representative, your attorney or corporate representative should bring to the meeting evidence of his or her appointment including evidence of the authority under which the appointment was made.

NOTEHOLDERS ARE ENCOURAGED TO READ AND CAREFULLY CONSIDER THE EXPLANATORY STATEMENT ACCOMPANYING THIS NOTICE IN ITS ENTIRETY, TAKE PROFESSIONAL ADVICE AND CONSULT WITH THEIR PROFESSIONAL ADVISERS WHEN MAKING ANY DECISION IN CONNECTION WITH THE SCHEME, INCLUDING DECIDING WHETHER OR NOT TO VOTE IN FAVOUR OF THE SCHEME.

Dated 10 May 2017

CONTENTS

CLAUSE			PAGE
1.	IMPORTANT INFORMATION		3
	1.1	Orders to convene the Scheme Meeting	3
	1.2	Prescribed information	3
	1.3	Responsibility statement	4
	1.4	Not financial product or other advice	5
	1.5	Forward-looking statements	5
	1.6	ASIC	5
	1.7	Date of this Explanatory Statement	6
	1.8	Defined terms and interpretation	6
	1.9	Noteholders outside Australia	6
	1.10	Foreign jurisdiction disclaimers	6
	1.11	Privacy	11
	1.12	Documents available for inspection	12
	1.13	Questions	12
2.	KEY DATES and STEPS		13
3.	Overview of explanatory statement and scheme		15
	3.1	Why you are receiving this Explanatory Statement	15
	3.2	Summary of the Scheme procedure	15
	3.3	Why is the Scheme being proposed?	16
	3.4	Objects and purpose of the Scheme	16
	3.5	Support for the Scheme	18
	3.6	Debt	18
	3.7	Transaction Costs	19
	3.8	Noteholders and amounts owed to them	19
	3.9	Noteholders should obtain advice	19
	3.10	Overview of rights of creditors pre and post Recapitalisation Transactions	20
4.	background to the scheme		24
	4.1	Financial arrangements with the 7% Scheme Creditors	24
	4.2	Alternatives considered	25
	4.3	Restructuring Support Agreement	25
	4.4	Exclusivity and break fee provisions	25
5.	the recapitalisation transactions		29
	5.1	Second-Out ABL	29
	5.2	Secured Creditor Scheme	29
	5.3	The Scheme	30
	5.4	Other Recapitalisation Transactions	32
	5.5	Capital Structure following Recapitalisation Transactions	36
	5.6	Governance Matters	37
	5.7	Re-domiciliation	37
6.	the Scheme explained		39
	6.1	Overview of the outcome of the Scheme	39
	6.2	Steps prior to the Scheme becoming effective	39
	6.3	Standstill	42
	6.4	Steps to implement the Scheme	42
	6.5	Proposed terms of the Fourth Supplemental Indenture	45
	6.6	Other terms of the Scheme	45
	6.7	Outcome for the 7% Scheme Creditors	46
	6.8	Outcome for the Companies	46

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	6.9	Outcome for the Obligors	48
	6.10	Summary of Australian shareholder rights and protections	48
	6.11	Who will be bound by the Scheme?	49
	6.12	Execution risks	49
	6.13	Modification of the Scheme	50
	6.14	The Scheme Administrators	51
	6.15	Challenging the Scheme Administrators generally	51
7.	The KORDAMENTHA Report		52
	7.1	Scope of the KordaMentha Report	52
	7.2	Expected dividends / Implied Value to creditors	53
	7.3	KordaMentha's conclusions on asset value and solvency	54
	7.4	Conclusions as to most likely outcome if Scheme not implemented	54
	7.5	KPMG Report and valuation methodology	54
8.	Reasons NOTEHOLDERS may Consider Voting for the Scheme		56
9.	Reasons NOTEHOLDERS may CONSIDER votING against the scheme		58
10.	additional information		62
	10.1	Ongoing analysis of business operations	62
	10.2	Material interests of Directors	62
	10.3	Material interests of Scheme Administrators	63
	10.4	Rights and liabilities of Scheme Shares	64
	10.5	Certified copy of Financial Statements	65
	10.6	Report as to affairs of Companies – ASIC Form 507	65
	10.7	The Noteholders	65
11.	the Scheme Meeting and voting procedures		66
	11.1	Time and place	66
	11.2	Chairperson	66
	11.3	Agenda for the Scheme Meeting	66
	11.4	Classes of 7% Scheme Creditors	66
	11.5	Eligibility and entitlement to vote	66
	11.6	How to vote at the Scheme Meeting	67
	11.7	Adjudication of Voting Proof of Debt Forms	67
	11.8	Modification of Scheme at Scheme Meeting	68
	11.9	Lodgement of documents and further queries	68
12.	Interpretation and Glossary		69
	12.1	Interpretation	69
	12.2	Glossary of terms	70

Annexure

A	Scheme of Arrangement
B	KordaMentha Report
C	Certified Copies of Financial Statements
D	Report as to Affairs (ASIC Form 507)
E	Scheme Administrators’ Scale of Charges
F	Proxy Form
G	Voting Proof of Debt Form
H	Known 7% Scheme Creditors, known Guaranteed Creditors and known Internal Creditors
I	Form of Representation Letter
J	Extract from ASX Announcement dated 3 April 2017

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1. IMPORTANT INFORMATION

NOTEHOLDERS SHOULD READ THIS EXPLANATORY STATEMENT IN ITS ENTIRETY BEFORE MAKING A DECISION WHETHER OR NOT TO VOTE IN FAVOUR OF THE SCHEME

1.1 Orders to convene the Scheme Meeting

On 10 May 2017, the Court made orders under section 411(1) of the Corporations Act directing that a meeting of the Noteholders be convened to vote upon the proposed Scheme. This Explanatory Statement has been provided to the Noteholders in connection with the Scheme Meeting for the purpose of considering and, if thought fit, agreeing to the proposed Scheme between the Companies, the Noteholders and the Subordinate Claim Holders.

The Scheme Meeting will commence at:

11:30am on, 30 May 2017

at

Ashurst, Level 11, 5 Martin Place, Sydney NSW 2000, Australia

Further information on the Scheme Meeting and the procedure for voting is set out in Section 11 of this Explanatory Statement.

IMPORTANT NOTICE ASSOCIATED WITH COURT ORDER UNDER SECTION 411(1) OF THE CORPORATIONS ACT 2001 (CTH)

The fact that under section 411(1) of the Corporations Act 2001 (Cth) the Court has ordered that a meeting be convened and has approved the Explanatory Statement required to accompany the notice of the meeting does not mean that the Court:

(a)       has formed any view as to the merits of the proposed Scheme or as to how Noteholders should vote (on this matter Noteholders must reach their own decision); or

(b)       has prepared, or is responsible for the content of, the Explanatory Statement.

The Court's order under section 411(1) is not an endorsement of, or any other expression of opinion on, the Scheme.

1.2 Prescribed information

Under section 412(1) of the Corporations Act and regulation 5.1.01 of the Corporations Regulations this Explanatory Statement must contain certain information to assist the Noteholders in deciding whether or not to vote in favour of the proposed Scheme. The table below indicates where in this Explanatory Statement that information can be found.

Prescribed information	Section of this Explanatory Statement
An explanation of the effect of the proposed Scheme	Section 6

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Prescribed information	Section of this Explanatory Statement
The criteria and the date for determining the participants in the Scheme, the persons entitled to vote at the Scheme Meeting, and the persons who will be bound by the Scheme.	Sections 6.11 and 11
The expected dividend that would be paid to the Noteholders if the Companies were wound up within 6 months of the Court's order on the date of the First Court Hearing	Section 7
The Implied Value of the interests of the 7% Scheme Creditors if the Scheme were put into effect as proposed	Section 7
The material interests of the Directors of the Companies (including the effect of the Scheme on those interests)	Section 10.2
Certified copies of all financial statements to be lodged by the  Companies with ASIC	Annexure C
Reports on the affairs of the  Companies	Annexure D
The scale of charges that the Scheme Administrators propose to charge to implement the Scheme	Annexure E
A list of the names of all known 7% Scheme Creditors and the debts owed to those 7% Scheme Creditors	Annexure H

1.3 Responsibility statement

The Companies have provided and are responsible for all information in this Explanatory Statement (other than the KordaMentha Information). The Companies and their Directors, officers, employees, and advisers expressly disclaim and do not assume any responsibility for the accuracy or completeness of the KordaMentha Information.

This Explanatory Statement has been prepared solely for use by the Noteholders for the purpose of evaluating whether or not to vote in favour of the Scheme. No other person apart from the Companies and KordaMentha (only in respect of the KordaMentha Information) has been authorised to make any representation or warranty, express or implied, as to its accuracy or completeness. Nothing contained in this Explanatory Statement is, or should be relied on as, a representation, assurance or guarantee as to the benefits of the Scheme over any alternative for the Noteholders.

KordaMentha has prepared the KordaMentha Report in relation to the Companies and the proposed Scheme based, in part, on information provided by the Companies. Except to the extent that the Companies are responsible for the information they have provided to KordaMentha for the purpose of the KordaMentha Report (and the Companies take

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responsibility for that information) KordaMentha takes responsibility for the KordaMentha Information.

The KordaMentha Information consists of the information in Section 7 of this Explanatory Statement, the KordaMentha Report in Annexure B and certain other information or statements in this Explanatory Statement that have been identified as being sourced from, or attributed to, KordaMentha.

No person has been authorised to give any information or to make any representation in connection with the Scheme other than the representations contained in this Explanatory Statement.

1.4 Not financial product or other advice

This Explanatory Statement is not financial product advice. It has been prepared without reference to your particular investment objectives, financial situation, tax situation, needs or specific circumstances. You should not construe any statements made in this Explanatory Statement as investment, tax or legal advice. Your decision whether to vote for or against the proposed Scheme will depend on an assessment of your own individual circumstances. As the financial, legal and taxation consequences of the Scheme may be different for each Noteholder, it is recommended that you seek your own professional financial, legal and taxation advice before making your decision.

1.5 Forward-looking statements

Certain statements in this Explanatory Statement relate to the future. The forward-looking statements in this Explanatory Statement are not based solely on historical facts, but rather reflect the current expectations of the Companies as at the date of this Explanatory Statement. These statements generally may be identified by the use of forward-looking words or phrases such as "believe", "aim", "expect", "anticipate", "intend", "foresee", "likely", "should", "plan", "may", "estimate", "potential", or other similar words and phrases. Similarly, statements that describe the Companies' objectives, plans, goals or expectations are or may be forward looking statements.

Forward-looking statements are based on numerous assumptions regarding present and future circumstances. As such, forward-looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause the actual result, performance or achievement to be materially different from the future result, performance or achievement expressed or implied by those statements.

Given this, Noteholders are cautioned not to place undue reliance on any forward-looking statements made by the Companies in this document or elsewhere.

Other than as required by law, none of the Companies, their Directors, or any other person gives any representation, assurance or guarantee that the occurrence of any event, outcome, performance or achievement expressed or implied in any forward-looking statement in this Explanatory Statement will actually occur. The Companies have no intention of updating or revising any forward-looking statements, regardless of whether new information, future events or any other factors affect the information contained in this Explanatory Statement, except as required by law.

1.6 ASIC

A copy of this Explanatory Statement has been given to ASIC pursuant to section 412(7) of the Corporations Act. Neither ASIC nor any of its officers takes any responsibility for the contents of this Explanatory Statement.

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1.7 Date of this Explanatory Statement

The date of this Explanatory Statement is 10 May 2017.

1.8 Defined terms and interpretation

Capitalised words used in this Explanatory Statement have the meanings set out Section 12.2, unless the context otherwise requires or a term has been defined elsewhere in the text of the Explanatory Statement. Some of the attachments to this Explanatory Statement contain their own defined terms and should be read accordingly.

Section 12.1 contains general guidelines for interpreting this Explanatory Statement.

1.9 Noteholders outside Australia

This Explanatory Statement has been prepared to reflect the applicable disclosure requirements of Australia, which may be different from the requirements applicable in other jurisdictions. The financial information included in this document is based on financial statements that have been prepared in accordance with accounting principles and practices generally accepted in Australia, which may differ from generally accepted accounting principles and practices in other jurisdictions.

The implications of the Scheme for Noteholders who are resident in, have a registered address in or are citizens of and/or are taxable in jurisdictions other than Australia may be affected by the laws of the relevant jurisdiction. Such overseas Noteholders should inform themselves about and observe any applicable legal requirements. Any person outside Australia who is resident in, or who has a registered address in, or is a citizen of and/or is taxable in, an overseas jurisdiction and who is to receive or subscribe for any Transaction Securities should consult its professional advisers and satisfy itself as to the full observance of the laws of the relevant jurisdiction in connection with the Scheme, including obtaining any requisite governmental or other consents, observing any other requisite formalities and paying any issue, transfer or other taxes due in such jurisdiction.

1.10 Foreign jurisdiction disclaimers

THIS EXPLANATORY STATEMENT AND THE SCHEME DO NOT CONSTITUTE AN OFFER OF SECURITIES IN ANY JURISDICTION IN WHICH IT WOULD BE UNLAWFUL. THIS EXPLANATORY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE TRANSACTION SECURITIES. NONE OF THE SECURITIES REFERRED TO IN THIS EXPLANATORY STATEMENT MAY BE SOLD, ISSUED OR TRANSFERRED IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW.

This Explanatory Statement may not be distributed to any person in any country outside Australia except in respect of those jurisdictions described below and in the manner contemplated below.

(a) United States

The Transaction Securities proposed to be issued pursuant to the Scheme will not be registered with the U.S. Securities and Exchange Commission (the SEC) under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act) or the securities laws of any state or other jurisdiction unless expressly specified herein, and are being issued in reliance on certain exemptions from registration under the U.S. Securities Act. Consequently, neither these securities nor any interest or participation therein may be offered, sold, assigned, transferred, pledged, encumbered or otherwise disposed of in the U.S. or to U.S. Persons (as defined in

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the U.S. Securities Act) unless an exemption from the registration requirement of the U.S. Securities Act is available.

(i) Scheme Notes and Scheme Warrants

The Scheme Notes and Scheme Warrants will be issued and delivered in reliance upon exemptions from the registration requirements of the U.S. Securities Act, including that provided by section 3(a)(10) of the U.S. Securities Act (Section 3(a)(10)). In order to qualify for the exemption from the registration requirements of the U.S. Securities Act provided by Section 3(a)(10), there must be a hearing on the fairness of the Scheme’s terms and conditions to the holders, which all the holders are entitled to attend in person or through representatives to oppose the sanctioning of the Scheme by the Court, and with respect to which notification will be given to all the holders. For the purpose of qualifying for the exemption from the registration requirements of the U.S. Securities Act provided by Section 3(a)(10), the Companies intend to rely on the Court’s hearing to sanction the Scheme.

In addition, any 7% Scheme Creditor who is an Affiliate of the Companies at the time of or within 90 days prior to any resale of the Scheme Notes or the Scheme Warrants will be subject to certain U.S. transfer restrictions relating to such securities. Scheme Notes or Scheme Warrants may not be sold without registration under the U.S. Securities Act, except pursuant to an available exemption from the registration requirements of the U.S. Securities Act or in a transaction not subject to such requirements (including a transaction that satisfies the applicable requirements for resale outside of the United States pursuant to Regulation S). Persons who may be deemed to be Affiliates of the Companies include individuals who, or entities that, control directly or indirectly, or are controlled by or are under common control with the Companies and may include certain officers and directors of the Companies and the principal shareholders of the Companies. Noteholders will be required to make their own determination of their Affiliate status and should consult their own legal advisers prior to any sale of the Scheme Notes or the Scheme Warrants.

(ii) Warrant Shares

In connection with the issue of the Warrant Shares upon the cash exercise of the relevant Scheme Warrants, the relevant holder of the Scheme Warrants will be required to confirm, by delivering a duly executed Representation Letter to the Companies (with their Notice of Exercise), that the relevant holder is a person eligible to receive securities under the U.S. Securities Act and agree in writing to certain representations and covenants, amongst other things. If the confirmations required by the Representation Letter cannot be or are not given, the relevant holder will only be able to exercise their Scheme Warrants as a cashless exercise. Accordingly:

(A) all 7% Scheme Creditors will be required to deliver a duly executed Representation Letter (with their Notice of Exercise) as a condition to cash exercise of their Scheme Warrants and the issue of resulting Warrant Shares; and

(B) subsequent holders of 7% Scheme Warrants (that is, those who are not Scheme Creditors) will also be required to deliver a duly executed Representation Letter (with their Notice of Exercise) on the cash exercise of Scheme Warrants,

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(together, the 7% Scheme Creditors and subsequent holders of Scheme Warrants described above are the Applicable Warrant Holders).

The Warrant Shares will be issued and delivered in reliance upon exemptions from the registration requirements of the U.S. Securities Act. The Warrant Shares to be issued upon cashless exercise will be issued in reliance upon the exemption from registration provided by Section 3(a)(9) of the U.S. Securities Act. The Warrant Shares to be issued upon cash exercise will be issued in the United States solely to persons where such person is an institutional “accredited investor” (Accredited Investor) within the meaning of clauses (1), (2), (3), (7) or (8) of clause (a) of Rule 501 of Regulation D under the U.S. Securities Act (Regulation D) in reliance on Rule 506(c) of Regulation D. Outside the United States, the Warrant Shares to be issued upon cash exercise will be issued only in offshore transactions in reliance on Regulation S.

Upon Issuance, the Warrant Shares to be issued upon cash exercise will be “restricted securities” (as defined by Rule 144(a)(3) under the U.S. Securities Act) and may not be offered, sold, pledged or otherwise transferred prior to the date that is one year after the later of (x) the date of original issue and (y) the last date on which either BLY or any affiliate of the BLY was the owner of such shares (or any predecessor thereto) except (i) in an offshore transaction complying with Regulation S under the U.S. Securities Act, (ii) in the United States, to an Accredited Investor, (iii) pursuant to an exemption from registration under the Securities Act provided by Rule 144 (if applicable) or (iv) pursuant to an effective registration statement under the U.S. Securities Act, and in each of cases (i) through (iv) in accordance with any applicable securities laws of any state of the United States and any other jurisdiction. If at any time an offer, sale or transfer of Warrant Shares is made other than in the ordinary course on ASX where the seller has no reason to know the sale has been prearranged with a person in the United States or a U.S. Person, the holder will and each subsequent holder is required to, notify any purchaser of the Warrant Shares of the resale restrictions set forth in this paragraph.

Subject to the outcome of the re-domiciliation discussions which are ongoing, the Directors of the Companies understand that none of the Transaction Securities will be listed on a U.S. securities exchange, with any securities regulatory authority of any State or other jurisdiction of the United States or with any inter dealer quotation system in the United States. The Companies do not intend to take action to facilitate a market in any of the Transaction Securities in the United States. Consequently, the Companies believe that it is unlikely that an active trading market in the United States will develop for any such securities.

Neither the SEC nor any U.S. federal, state or other securities commission or regulatory authority has registered, approved or disapproved any of the Transaction Securities or passed upon the accuracy or adequacy of this Explanatory Statement. Any representation to the contrary is a criminal offence in the United States.

7% Scheme Creditors should consult their own legal, financial and tax advisers with respect to the legal, financial and tax consequences of the Scheme in their particular circumstances.

The issuance of the Transaction Securities to the 7% Scheme Creditors (as explained in detail in this Explanatory Statement) relates to the issuance of

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notes and warrants in an Australian company and is proposed to be made by and pursuant to a scheme of arrangement under Australian company law. Accordingly, the Scheme is subject to the disclosure requirements, rules and practices applicable to Australian schemes of arrangement and the information in this Explanatory Statement is not the same as that which would have been disclosed if the Explanatory Statement had been prepared for the purposes of complying with the registration requirement of the U.S. Securities Act or in accordance with the laws or regulations of any other jurisdiction. Financial information regarding the Companies referred to in this Explanatory Statement has been or will have been prepared in accordance with Australian accounting standards that may not be comparable to the accounting standards applicable to financial statements of U.S. companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the United States.

It may be difficult for 7% Scheme Creditors in the United States to enforce their rights and claims arising out of U.S. federal securities laws against officers and directors of the Companies who are residents of countries other than the United States, and it may not be possible to sue the Companies in a non U.S. court for violations of U.S. securities laws.

(b) Canada

No prospectus has been filed with any securities commission or similar authority in Canada in connection with the issuance of the Transaction Securities. In addition, no securities commission or similar authority in Canada has reviewed or in any way passed upon this document or the merits of the securities described herein, and any representation to the contrary is an offence under applicable Canadian securities laws.

The issuance of Transaction Securities pursuant to the Scheme will be exempt from the prospectus requirements under applicable Canadian securities legislation. As a consequence of this exemption, certain protections, rights and remedies provided by Canadian securities legislation, including statutory rights of rescission or damages, will not be available in respect of such Transaction Securities to be issued in connection with the Scheme.

The Transaction Securities will be subject to restrictions on resale in Canada. BLY is not presently a “reporting issuer” as such term is defined under applicable Canadian securities legislation in any province or territory of Canada. Canadian investors are advised that subject to the outcome of re-domiciliation discussions which are ongoing, the Transaction Securities are not and will not be listed on any stock exchange in Canada and that no public market presently exists or is expected to exist for the Transaction Securities in Canada following implementation of the Scheme. Canadian investors are further advised that BLY is not required to file, and currently does not intend to file, a prospectus or similar document with any securities regulatory authority in Canada qualifying the resale of the Transaction Securities to the public in any province or territory of Canada. Accordingly, the Transaction Securities may be subject to an indefinite hold period under applicable Canadian securities laws unless resales are made in accordance with applicable prospectus requirements or pursuant to an available exemption from such prospectus requirements. Canadian investors are advised to seek legal advice prior to any contemplated resale of any of the Transaction Securities.

It may be difficult for Scheme Creditors in Canada to enforce their rights and claims arising out of Canadian provincial or territorial securities laws against

9

officers and directors of BLY who are residents of countries other than Canada, and it may not be possible to sue BLY in a non-Canadian court for violations of Canadian securities laws.

(c) Cayman Islands

No offer or invitation to subscribe for Scheme Shares or Warrants may be made to the public in the Cayman Islands.

(d) Italy

The offering of Scheme Shares and Warrants in the Republic of Italy has not been authorised by the Italian Securities and Exchange Commission (Commissione Nazionale per le Società e la Borsa (CONSOB)) pursuant to the Italian securities legislation and, accordingly, no offering material relating to the securities may be distributed in Italy and the securities may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998, as amended (Decree No. 58), other than:

(i) to qualified investors (Qualified Investors), as defined in Article 100 of Decree No. 58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999, as amended (Regulation No. 1197l); and

(ii) in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971.

Any offer, sale or delivery of the securities or distribution of any offer document relating to the Scheme Shares or the Warrants in Italy under the paragraphs above must be:

(iii) made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 (as amended) and any other applicable laws; and

(iv) in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws.

Any subsequent distribution of the Scheme Shares or Warrants in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the Regulation No. 11971, unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring the securities for any damages suffered by the investors.

(e) Netherlands

The information in this document has been prepared on the basis that any offer of Scheme Shares and Warrants will be made pursuant to an exemption under the Directive 2003/71/EC (Prospectus Directive), as amended and implemented in the Netherlands, from the requirement to publish a prospectus for offers of securities.

An offer to the public of Scheme Shares or Warrants has not been made, and may not be made, in the Netherlands except pursuant to one of the following exemptions under the Prospectus Directive as implemented in the Netherlands:

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(i) to any legal entity that is authorised or regulated to operate in the financial markets or whose main business is to invest in financial instruments;

(ii) to any legal entity that satisfies two of the following three criteria: (i) balance sheet total of at least €20,000,000; (ii) annual net turnover of at least €40,000,000 and (iii) own funds of at least €2,000,000 (as shown on its last annual unconsolidated or consolidated financial statements);

(iii) to any person or entity who has requested to be treated as a professional client in accordance with the EU Markets in Financial Instruments Directive (Directive 2004/39/EC, "MiFID"); or

(iv) to any person or entity who is recognised as an eligible counterparty in accordance with Article 24 of the MiFID.

(f) Switzerland

The Scheme Shares and Warrants may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (SIX) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the securities may be publicly distributed or otherwise made publicly available in Switzerland. The Scheme Shares and Warrants may only be offered to regulated financial intermediaries such as banks, securities dealers, insurance institutions and fund management companies as well as institutional investors with professional treasury operations.

Neither this document nor any other offering or marketing material relating to the Scheme Shares and the Warrants have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the issuance of Scheme Shares and Warrants will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA).

This document is personal to the recipient only and not for general circulation in Switzerland.

1.11 Privacy

The Chairperson, the Information Agent, the Scheme Administrators and Companies may collect, use and disclose personal information in the process of implementing the Scheme. This information may include the names, contact details, bank account details or other details of Noteholders and the names of persons appointed by Noteholders to act as proxy, corporate representative or attorney at the Scheme Meeting. The primary purpose of collecting this information is to assist the Chairperson, the Information Agent, the Scheme Administrators and the Companies in the conduct of the Scheme Meeting and to enable the Scheme to be implemented by the Scheme Administrators.

If this personal information is not collected, the Chairperson, the Information Agent, the Scheme Administrators and the Companies may be hindered in, or prevented from, conducting the Scheme Meeting and implementing the Scheme.

Personal information may be disclosed to the Court, the Chairperson, the Information Agent, the Scheme Administrators, the Companies, third party service providers, professional advisers, ASIC, FIRB, ASX and other regulatory authorities and, in addition, where disclosure is required by law or where you have consented to the disclosure.

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Noteholders have the right to access personal information that has been collected about them. Noteholders should contact the Companies in the first instance about exercising that right.

If you have questions regarding privacy, contact the Companies at the address below:

Boart Longyear Limited

26 Butler Boulevard

Burbridge Business Park

Adelaide Airport

South Australia 5950
AUSTRALIA

It is the responsibility of Noteholders who appoint a named person to act as their proxy or attorney at the relevant Scheme Meeting to inform their proxy or attorney of the matters outlined above.

1.12 Documents available for inspection

Documents referred to in this Explanatory Statement that are not reproduced in the Annexures to this Explanatory Statement or have not otherwise been provided to Noteholders will be made available for inspection by Noteholders upon request.

To request access, contact the Companies' at the address below:

Boart Longyear Limited

26 Butler Boulevard

Burbridge Business Park

Adelaide Airport

South Australia 5950
AUSTRALIA

To the extent that documents referred to in this Explanatory Statement are confidential to the Companies, other members of the Group or third parties, or if the Companies cannot legally disclose such documents, the Companies reserve the right:

(a) not to make such documents available for inspection; or

(b) to make only masked copies of, or extracts from, such documents available for inspection.

1.13 Questions

If you have any questions in relation to the Scheme, the lodgement of Proxy Forms or Voting Proof of Debt Forms, you are encouraged to contact the Scheme Administrators at:

Attention: Boart Longyear Ballot Processing

c/o Prime Clerk LLC
830 Third Avenue

3rd Floor
New York

NY 10022
United States

Email: boartballotprocessing@primeclerk.com

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2. KEY DATES and STEPS

Event	Date
Voting Entitlement Record Date	4 May 2017
Deadline for receipt of Voting Proof of Debt Forms and Proxy Forms	4.00 pm 25 May 2017 (New York City Time)
Scheme Meeting of all Noteholders	30 May 2017
Second Court Date	4 July 2017
Lodgement of Second Court Orders with ASIC (Effective Date)	No later than 10:00am on the Business Day after the day on which the Court makes the Second Court Orders
Calculation Date	The second Business Day after the Effective Date
Implementation Date (including implementation of Steps 4 to 8 under the Scheme)	Five Business Days after the Effective Date, unless otherwise advised by the Scheme Administrators

NOTE

All dates and times referred to in this Explanatory Statement and the documents attached to it are to times in Sydney, Australia except where otherwise stated. The dates set out in the above table are indicative only and may be subject to change. The Companies reserve the right to vary the times and dates set out above, subject to the Corporations Act and the approval of any variations by the Court or ASIC where required.

Noteholders are encouraged to take the following steps in advance of the Scheme Meeting:

(a) Read this Explanatory Statement in full

The Companies encourage you to take professional advice, and to consult with your professional advisers, when making any decisions in connection with the Scheme.

(b) Consider FIRB requirements

If you are a foreign person, including a foreign corporate entity, for the purposes of the FATA, consider whether you need to provide a notification to the Treasurer of the Commonwealth of Australia in respect of the acquisition of Scheme Shares and Scheme Warrants on implementation of the Scheme. If you require such approval, and do not obtain it in advance of the Implementation Date, you may be exposed to penalties and an order requiring you to dispose of your Scheme Shares and Scheme Warrants and it is a condition of the Scheme that you obtain such approval to the extent that it is required.

7% Scheme Creditors should seek their own independent legal advice in respect to FATA requirements.

See Section 6.2(a) of the Explanatory Statement for further information about FATA requirements in connection with the Scheme.

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(c) Consider attending and voting at the Scheme Meeting

See Section 11 for detailed information in relation to the Scheme Meeting.

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3. Overview of explanatory statement and scheme

3.1 Why you are receiving this Explanatory Statement

This Explanatory Statement contains information about the proposed Scheme and is required by section 412(1) of the Corporations Act to be issued together with each Notice of Meeting issued to a Noteholder.

You have been sent this Explanatory Statement because, according to the records of the Companies as at the First Court Date, you are a Noteholder.

Receipt of this Explanatory Statement does not amount to confirmation that you have a valid claim against or are owed any amount by the Companies.

If you are a Noteholder as at the Voting Entitlement Record Date (irrespective of whether or not you were a Noteholder as at the date of this Explanatory Statement), you will be eligible to vote at the Scheme Meeting provided that the Information Agent receives a completed Voting Proof of Debt Form and Proxy Form from your Registered Participant by no later than 4.00 pm, 25 May 2017 (New York City Time).

Any Noteholder who wishes to attend and vote at the Scheme Meeting in person will still need to properly complete, sign and return the Voting Proof of Debt Form and Proxy Form to their Registered Participant (with itself nominated as proxy) in sufficient time to enable the Registered Participant to complete and certify the Voting Proof of Debt Form and the Proxy Form and forward the same to the Information Agent by no later than 4.00 pm on 25 May 2017 (New York City Time).

Additionally, if you wish to vote by attorney or corporate representative, such attorney or corporate representative should bring to the Scheme Meeting evidence of his or her appointment including authority under which the appointment was made.

The Voting Proof of Debt Form is set out in Annexure G and the Proxy Form is set out in Annexure F of this Explanatory Statement.

Further details of the Scheme Meeting, including the procedure for voting, can be found in Section 11 of this Explanatory Statement.

3.2 Summary of the Scheme procedure

The proposed scheme is a creditors' scheme of arrangement. A creditors' scheme of arrangement is a compromise or arrangement between a company or companies and its creditors (or any class of them) effected in accordance with Part 5.1 of the Corporations Act.

The resolution to agree to the Scheme at the Scheme Meeting must be passed by a majority in number (more than 50%) of the Noteholders who are present and voting at the Scheme Meeting (either in person or by proxy, corporate representative or attorney) being a majority whose Admitted Claims together amount to at least 75% of the Debt owing to the Noteholders present and voting at the Scheme Meeting (either in person or by proxy, corporate representative or attorney) (Requisite Majority).

If the Scheme is agreed to by the Requisite Majority, in order to become effective, the Scheme must then be approved by the Court on the Second Court Date. The Court may grant its approval subject to such alterations or conditions as it thinks fit. However, the Scheme will not take any effect if any alterations the Court makes or the conditions the Court imposes change the substance of the Scheme in any material respect.

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If the Scheme is approved by the Court, and the Second Court Orders are lodged with ASIC, then the Scheme will become effective. Once all the conditions precedent (detailed in Section 6.2 below) set out in the Scheme are satisfied, the Steps to effect the Scheme will be undertaken.

Once the Scheme becomes effective, it will be binding upon the Companies, the Subordinate Claim Holders and all 7% Scheme Creditors, including those 7% Scheme Creditors that did not vote in favour of the Scheme, or those that did not attend, or vote at, the Scheme Meeting.

It will also be binding upon the Trustee, the Released Obligor Individuals, the Obligors and the Scheme Administrators, as a result of them each having signed a Deed Poll.

If, in the opinion of the Scheme Administrators, it is not possible to give effect to the Scheme, each of the Companies, the Obligors, Released Obligor Individuals, the Trustee and the 7% Scheme Creditors are required to do all things reasonably necessary to put each other party in the position it would have been in if none of the Steps under the Scheme had occurred.

3.3 Why is the Scheme being proposed?

In August 2016, in conjunction with the release of its half-year financial results for the year ended 30 June 2016, BLY announced that it had engaged Houlihan Lokey to evaluate its capital structure options in order to ensure long term sustainability and BLY's ability to participate in the recovery of the mining market.

The Group's capital structure exposes it to a variety of market, operational and liquidity risks. To address these risks, the Group sought to identify options available to it to make its capital structure more sustainable, including by addressing the debt maturities due to occur in October 2018, the Group's high levels of debt relative to current market conditions and the Group's underlying financial performance.

3.4 Objects and purpose of the Scheme

The Scheme forms part of a comprehensive recapitalisation of the Group, comprising the Recapitalisation Transactions. The Recapitalisation Transactions will primarily be implemented by this Scheme and the Secured Creditor Scheme, which are interdependent. The purpose of the Recapitalisation Transactions is to provide the Group with a more sustainable capital structure.

The Recapitalisation Transactions will achieve this by:

(a) reducing the Group's debt and its interest costs;

(b) providing additional liquidity to the Group;

(c) extending the maturity of the Group's debt;

(d) adjusting the rate of interest payable on certain of the Group's debt obligations (described in more detail in Section 5), the manner in which interest is paid and the timing of those payments.

Each of the Recapitalisation Transactions, with the exception of the Share Purchase Plan, are inter-conditional such that if either or both of the BLY Schemes or any one or more Shareholder Resolutions is not approved by the requisite majority of creditors or Shareholders (as applicable) or any other relevant condition is not satisfied, the other Recapitalisation Transactions will not proceed.

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In summary, the Recapitalisation Transactions comprise:

(a) This Scheme

The principal objects and purposes of the Scheme itself are to reduce the Debt owing by the Companies to the 7% Scheme Creditors. The Scheme, if implemented, will effect the following:

(i) the principal debt plus accrued interest owed by the Companies to the 7% Scheme Creditors will be reduced from US$293,940,000 as at 1 April 2017 to US$88,000,000, plus accrued but unpaid interest to be calculated by applying an interest rate of 1.50% to the principal amount of US$88,000,000 for the period from 1 January 2017 to the Implementation Date;

(ii) the issue of such number of Scheme Shares to the 7% Scheme Creditors equivalent to approximately 42% of the ordinary equity of BLY post implementation of the Recapitalisation Transactions before the issue of the Scheme Warrants and the Warrants Issue ; and

(iii) the issue of Scheme Warrants equivalent to approximately 74% of the Companies' outstanding Warrants on issue immediately following the Implementation Date under both BLY Schemes;

(iv) amendments to the terms upon which the remaining Debt (being in the amount of US$88,000,000) shall be owed to the 7% Scheme Creditors by the Companies, including a reduction of the interest rate to 1.5%, payable in kind, amendments to financial covenants and an extension of the maturity date (as set out in more detail in Section 6.5);

(v) mutual releases by the 7% Scheme Creditors and the Obligors of one another in respect any Claims arising out of any failure to comply with obligations under the Finance Documents prior to the Implementation Date;

(vi) mutual releases by the 7% Scheme Creditors and the past and present directors and officers of the Obligors, who sign a deed poll, in respect of any Claims relating to events that occurred between 28 March 2011 and the Implementation Date (although the Companies are not aware of any potential Claims that may be available against any of those people);

(vii) mutual released by the 7% Scheme Creditors of one another in respect of Claims arising out of a failure to comply with the Finance Documents prior to the Implementation Date;

(viii) the compromise of Subordinate Claims, being claims for a debt owed to a person in that person's capacity as a Shareholder or arising from buying, holding, selling or otherwise dealing in Shares such that:

(A) any right a person has to bring a Subordinate Claim against BLY is limited to the amount actually recovered by BLY from any policy of insurance that responds to the Subordinate Claim, less any expenses incurred by BLY or the insurer in connection with the Subordinate Claim; and

(B) BLY is released from an obligation to pay any amount to the Subordinate Claim Holder in excess of the limit outlined in (A) above.

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The Scheme, of itself, will have no effect on unsecured trade creditors of the Companies or on the secured or unsecured creditors of the Companies, other than the 7% Scheme Creditors and the Subordinate Claim Holders. Except to the extent set out above (and in more detail below) in relation to the directors and officers of the Companies, it will also have no effect on employees of the Companies who, subject to ordinary course changes in employment arrangements, will continue their employment.

(b) Secured Creditor Scheme

The Secured Creditor Scheme is proposed to effect the following key Recapitalisation Transactions:

(i) the Initial Term Loan Amendments (Section 5.2(a));

(ii) the 10% Secured Note Amendments (Section 5.2(b));

(iii) mutual releases in respect of certain Claims by:

(A) the Secured Scheme Creditors and the Obligors of one another;

(B) the Secured Scheme Creditors and the directors / officers of the Companies who execute Deeds Poll of one another; and

(C) Secured Scheme Creditors of one another,

(c) Other Recapitalisation Transactions

The other Recapitalisation Transactions involve:

(i) the unwinding of the DDTL (Section 5.4(a));

(ii) the New ABL Revolver (Section 5.4(a));

(iii) the CPS Conversion (Section 5.4(b));

(iv) the Subscription Deed and the Subsequent Term Loan Amendments (Section 5.4(c));

(v) the Warrants Issue (Section 5.4(d)); and

(vi) the Share Purchase Plan (Section 5.4(e)).

Section 6 of this Explanatory Statement contains detailed information on the terms of the Scheme. The Scheme itself is set out at Annexure A.

3.5 Support for the Scheme

Noteholders with over 75% of the Debt have signed the Restructuring Support Agreement and agreed to support the Scheme.

Further details regarding the Restructuring Support Agreement are set out in Section 4.3 of this Explanatory Statement and a summary of its terms appears in Annexure J.

3.6 Debt

As at 1 April 2017 the Companies owe a total amount of US$293,940,000 to 7% Scheme Creditors under the Finance Documents, consisting of a principal amount of

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US$284,000,000 and accrued interest in the amount of US$9,940,000 under the terms of the Indenture.

3.7 Transaction Costs

The Costs associated with the Scheme, including legal and adviser Costs of the Companies and certain of the Noteholders, fees payable under the Indenture, fees payable in respect of the proposed amendments to the Indenture contemplated by the Scheme and the Scheme Administrators' Costs are estimated to be between US$30,000,000 and US$35,000,000 (inclusive of GST). Some of these Costs have already been paid by the Companies.

3.8 Noteholders and amounts owed to them

A list which provides the names of all known Noteholders as at March/April 2017 and the debts owed to those Noteholders is set out in Annexure H to this Explanatory Statement.

3.9 Noteholders should obtain advice

The Companies are not in a position to make an assessment of the prospects of success of any individual Noteholder's Claims, the quantum of recovery which may be available to individual Noteholders if the Scheme does not proceed or the future value of any Scheme Shares and Scheme Warrants if the Scheme proceeds. These are matters for each Noteholder to consider.

As the legal, financial and taxation consequences of the Scheme may be different for each Noteholder, Noteholders should seek professional legal, financial and taxation advice in relation to the Scheme.

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3.10 Overview of rights of creditors pre and post Recapitalisation Transactions

	Rights pre Recapitalisation Transactions	Rights post Recapitalisation Transactions
Part 1 – Unsecured Creditor Scheme
	Indenture
Principal	US$196,000,000	US$88,000,000 plus accreted / accrued interest from 1 January 2017 to the Implementation Date calculated by applying a rate of 1.5% to a principal amount of US$88,000,000.
Maturity date	1 April 2021	31 December 2022
Change of control trigger	Yes	Waived for Recapitalisation Transactions but otherwise retained
Secured / unsecured claim	·      Principal and interest are unsecured. ·      Claims for principal and interest under the 10% Secured Notes Indenture and claims for principal and a certain amount of interest under the Term Loan A and Term Loan B are secured. ·      Claims for the remaining amount of interest under the Term Loan A and the Term Loan B rank equally with claims under the Indenture.	·      Principal and interest remain unsecured. ·      Claims pursuant to Indenture are subordinated to claims for principal and interest under the Term Loan A, Term Loan B and 10% Secured Notes Indenture.
Interest rate and manner of payment	7% paid in cash	1.5% paid in kind

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	Rights pre Recapitalisation Transactions	Rights post Recapitalisation Transactions
	Other
Shares	Not applicable	Ordinary shares in BLY issued to Noteholders such that they hold 42% of the ordinary shares in BLY post implementation of the BLY Schemes, prior to the issue of Scheme Warrants.
Warrants	Not applicable	Scheme Warrants (comprising A Warrants and B Warrants) issued to Noteholders such that they hold approximately 74% of all Warrants on issue immediately following the Implementation Date under both BLY Schemes.  The Exercise Price is expected to be between US$0.006 - US$0.008 for A Warrants and between US$0.010  - US$0.012 for B Warrants, subject to final debt and cash figures on the Implementation Date.
Part 2 – Subscription Deed
Issue of shares to Centerbridge	Centerbridge currently holds approximately 48.9% of all ordinary shares and 100% of preference shares in BLY	In exchange for reduction of the interest rate from 12% to 10% to 8% under Term Loan A and Term Loan B, Centerbridge will be issued with further ordinary shares, such that it holds 56% of ordinary shares in BLY. Its preference shares will be converted to ordinary shares.
Part 3 – Director Nomination Agreements
Directors (Centerbridge)	4 Centerbridge nominees on the board	Once only right to nominate 5 Centerbridge nominees to the board
Directors (Ares and Ascribe)	No nomination rights	Once only right to nominate 1 Ares, 1 Ascribe and 1 Joint nominee to the board

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	Rights pre Recapitalisation Transactions			Rights post Recapitalisation Transactions
Part 4 – Secured Creditor Scheme
	Term Loan A	Term Loan B	10% Secured Notes Indenture	Term Loan A	Term Loan B	10% Secured Notes Indenture
Maturity date1	4 January 2021	4 January 20212	1 October 2018	31 December 2022	31 December 2022	31 December 2022
Change of control trigger	Yes	Yes	Yes	Waived for Recapitalisation Transactions but otherwise retained, and definition made less restrictive to conform to definition in 10% Secured Notes Indenture	Waived for Recapitalisation Transactions but otherwise retained, and definition made less restrictive to conform to definition in 10% Secured Notes Indenture	Waived for Recapitalisation Transactions but otherwise retained
Call schedule	Call date January 2021 and early repayment make whole compensation	Call date January 2021 and early repayment make whole compensation	Call date October 2018 and early repayment make whole compensation	Can be repaid early from 1 January 2019 without any make whole payment	Can be repaid early from 1 January 2019 without any make whole payment	No change

¹ Under the Recapitalisation Transactions, the 4 January 2017 DDTL amendments are reversed such that the maturity dates for TLA and TLB are extended from 22 October 2020 and 1 October 2018, respectively.

² Prior to the 4 January 2017 DDTL amendment, the maturity date for the TLB was 1 October 2018, coinciding with the maturity date for the 10% Notes.

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	Rights pre Recapitalisation Transactions			Rights post Recapitalisation Transactions
Secured / unsecured claim	Principal is secured but accruing interest is secured to the extent permitted under the debt cap.	Principal is secured but accruing interest is secured to the extent permitted under the debt cap.	Principal and interest are secured	Accrued and accruing unsecured interest is given priority over unsecured note holders	Accrued and accruing unsecured interest is given priority over unsecured note holders	No change
Interest rate and manner of payment	12% payment in kind (PIK) or 10% cash pay at BLY Issuer's option	12% PIK or 10% cash pay at BLY Issuer's option	10% cash pay	10% PIK until December 2018, then 8% PIK	10% PIK until December 2018, then 8% PIK	12% PIK at BLY Issuer’s option until December 2018, then 10% cash pay
Interest payment dates	March, June, September and December	March, June, September and December	April and October each year	No change	No change	June and December each year
Security	Second priority in respect of working capital assets and non-working capital assets3	Third priority in respect of working capital assets and first priority in respect of non-working capital assets4	Third priority in respect of working capital assets and first priority in respect of non-working capital assets	No change	No change	No change
IP Subsidiary Guarantee	Guarantee by BLY IP Inc.	Guarantee by BLY IP Inc.		No change	No change	Subordinated unsecured guarantee by BLY IP Inc.

³ PIK and make whole are unsecured to the extent exceeding the debt cap.

⁴ PIK and make whole are unsecured to the extent exceeding the debt cap.

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4. background to the scheme

4.1 Financial arrangements with the 7% Scheme Creditors

The Companies' financial arrangements with the 7% Scheme Creditors proposed to be affected by the Scheme comprise the Indenture.

In August 2016, in conjunction with the release of its half-year financial results for the year ended 30 June 2016, BLY announced that it had engaged Houlihan Lokey to evaluate capital structure options (the Capital Structure Review) in order to ensure long term sustainability and BLY's ability to participate in the recovery of the mining market.

On 5 January 2017, BLY announced that it had entered into a US$20,000,000 credit facility with CBP (a TLA Purchaser, TLB Purchaser and holder under the 10% Secured Notes Indenture). This facility was established to provide additional financial resources to support ongoing restructuring discussions with the Companies' lenders as well as to provide additional working capital in the first quarter of 2017, when the Group’s working capital needs are typically at their seasonal peak due to the start-up of drilling projects globally.

The material terms of the DDTL facility are, as follows:

(a) (commitment) a commitment of US$20,000,000 in aggregate principal amount;

(b) (collateral) the DDTL is secured by US$50,000,000 of collateral in the form of certain of BLY’s drilling rigs in the United States, Canada and Australia and the intellectual property held by BLY IP Inc.;

(c) (maturity date) if not revoked earlier by BLY, the facility maturity date is 31 December 2020;

(d) (interest rate) the rate of interest payable in kind is 12% per annum or 10% payable in cash at BLY’s option, in each case payable quarterly in arrears; and

(e) (other terms and conditions) the DDTL includes other customary terms and conditions, including customary covenants and events of default that are substantially the same as those in Term Loan A and Term Loan B.

In conjunction with the execution of the DDTL, the Companies and CBP also modified certain terms of the Term Loan A and Term Loan B as follows. If the Recapitalisation Transactions are implemented, the amendments to the Term Loan A and the Term Loan B described below will be reversed.

(a) (maturity dates) were amended from 1 October 2020 and 1 October 2018, respectively, to 4 January 2021;

(b) (interest rates) were amended from 12% per annum payable in kind to either 12% payable in kind or 10% payable in cash at BLY's option;

(c) (make-whole obligations) the period for the make-whole obligations under Term Loan A and Term Loan B was extended to 4 January 2021; and

(d) (tangible assets) BLY agreed to at all times maintain at least 90% of all its US, Canada and Australia tangible assets, including the collateral for the DDTL, as collateral supporting Term Loan A and Term Loan B.

On 6 April 2017, following announcement of the Recapitalisation Transactions, S&P Global (S&P) undertook a further review of BLY's credit ratings and took the following actions:

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(a) the corporate credit rating was lowered to “CC”;

(b) the rating outlook lowered to “Credit Watch Negative”;

(c) the ratings on notes issued under the 10% Secured Notes Indenture and 7% Notes lowered to “CCC-” and “C”, respectively; and

(d) the recovery ratings on notes issued under the 10% Secured Notes Indenture and 7% Notes remain unchanged at “2” and “5”, respectively.

Given the proximity to the Companies' most recent capital raising in 2015, current equity capital market fluctuations and prevailing market conditions, the Directors do not consider that a further capital raising exercise at this stage will raise enough funds to address the Companies' current requirements.

4.2 Alternatives considered

The Companies consider that the Recapitalisation Transactions, which include the Scheme, will achieve the primary objectives of the Capital Structure Review, namely creating a more sustainable capital structure and increasing financial flexibility to allow the Companies to better manage through a difficult operating environment.

The Companies are not considering, nor are they aware of any superior alternate proposals for either obtaining the necessary financing or reducing the existing debt and/or cash interest requirements of the Companies. During the course of preliminary negotiations, the Companies explored a range of potential options. The Companies' existing debt quantum and terms, as well as the respective rights of their existing creditors with respect to the Companies' assets, ultimately precluded additional loan options other than those already disclosed. The Companies consider that the only currently executable alternative to the Scheme is insolvency filings, which would provide a significantly inferior outcome for the Noteholders, Shareholders of BLY and the Companies' other creditors and stakeholders.

4.3 Restructuring Support Agreement

On 2 April 2017, the Companies, the Obligors and certain of the Noteholders (who hold, in aggregate, more than 75% of the Debt) entered into the Restructuring Support Agreement, which requires each of those parties to support, facilitate, implement and consummate the restructuring contemplated by the Restructuring Support Agreement.

The terms of the Restructuring Support Agreement are summarised in the table extracted from an ASX announcement released by BLY on 3 April 2017 entitled "Boart Longyear Reaches Recapitalisation Agreement with Key Stakeholders to Reduce Debt, Extend Maturities and Improve Liquidity", at Annexure J.

4.4 Exclusivity and break fee provisions

BLY is required to comply with certain exclusivity obligations under the Restructuring Support Agreement, for the duration of an exclusivity period (commencing at the time of the execution of the RSA by all parties to it, and ending on the earlier of the completion of the Recapitalisation Transactions, the termination of the RSA, or 31 December 2017), including:

(a) No shop restriction – BLY must not solicit, invite, encourage or initiate any enquiries, proposals, negotiations or discussions (or communicate any intention to do any of these things) with a view to obtaining any expression of interest, offer or proposal from any other person in relation to a Competing Proposal or potential Competing Proposal;

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(b) No talk restriction – Subject to a fiduciary carve-out (summarised below), BLY must not:

(i) enter into, continue or participate in any negotiations or discussions with any person regarding a Competing Proposal or which may reasonably be expected to lead to a Competing Proposal;

(ii) provide any non-public information regarding BLY's businesses or operations to a person for the purposes of enabling or assisting that person to make a Competing Proposal; or

(iii) accept, enter into or offer to accept or enter into any agreement, arrangement or understanding in relation to an offer or proposal from any other person in relation to a Competing Proposal.

(c) Notification – BLY must notify the creditors who are parties to the RSA (the Supporting Creditors) if it is approached about a potential Competing Proposal, or provides or proposes to provide any material non-public information to a third party to enable that party to make a Competing Proposal.

The fiduciary carve-out allows the BLY Board to consider certain Competing Proposals received after entering into the Restructuring Support Agreement and before Shareholders approve the Recapitalisation Transactions at the Shareholder Meeting, if:

(i) such action is in response to a bona fide Competing Proposal that was not solicited or encouraged in contravention of the "no shop" or "no talk" restriction;

(ii) the BLY Board, acting in good faith, determines that the Competing Proposal is a Superior Proposal or that such action which the BLY Board proposes to take may reasonably be expected to lead to a Competing Proposal that is a Superior Proposal; and

(iii) the BLY Board, acting in good faith, determines after receiving written legal advice from BLY's external legal advisors (and, if appropriate, BLY's financial advisors) that failing to take such action in response to such Competing Proposal would reasonably be expected to constitute a breach of the BLY Board's fiduciary or statutory duties under applicable law.

(d) Matching right

The Restructuring Support Agreement requires that, if BLY determines that a Competing Proposal is a Superior Proposal, BLY will provide the Supporting Creditors with details of the Competing Proposal that is a Superior Proposal.

The Supporting Creditors will have the right until the expiration of five Business Days of receiving the information to make one or more offers to BLY in writing to amend the terms of the Restructuring Support Agreement or propose any other transaction (a Counterproposal).

If the Supporting Creditors make a Counterproposal, then the BLY Board must review the Counterproposal in good faith to determine whether it is more favourable to BLY than the Superior Proposal.

If the BLY Board determines that the Counterproposal is more favourable to BLY, Shareholders and unsecured creditors of BLY than the Superior Proposal, and is capable of being implemented in a reasonable time, then:

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(i) if the Supporting Creditors contemplate an amendment to the Restructuring Support Agreement, the parties will enter into an amending deed reflecting the Counterproposal;

(ii) if the Counterproposal contemplates any other transaction, BLY will make an announcement recommending the Counterproposal, in the absence of a Superior Proposal and, if required, subject to the conclusions of an independent expert, and the parties will pursue implementation of the Counterproposal in good faith with their best endeavours; and

(iii) BLY will effect a change of recommendation of the BLY Board in relation to the transaction and will not authorise or enter into any letter of intention, memorandum of understanding, recapitalisation agreement or other agreement, arrangement or understanding relating to (or consummate) such former Superior Proposal.

The requirements of paragraph (ii), above, will not preclude the BLY Board from receiving and considering any further Competing Proposal (including from the same person which provided the former Superior Proposal). Any further Competing Proposal will require the BLY Board to comply with the requirements in paragraph (iii), above.

Any modification of any Superior Proposal will constitute a new Superior Proposal and require the BLY Board to again comply with paragraph (ii), above.

(e) Reimbursement of advisory expenses and break fee

A break fee totalling AUD$1,000,000 (exclusive of GST) is payable by BLY to Supporting Creditors if:

(i) during the exclusivity period, a Superior Proposal is publicly announced by a third party and that third party or an associate acquires a relevant interest in 20% or more of BLY's shares within 6 months of such an announcement;

(ii) prior to the date the Recapitalisation Transactions are completed, any director of BLY (other than Conor Tochilin or Jeffrey Long, who will recuse themselves with respect to any vote regarding the Recapitalisation Transactions):

(A) withdraws or adversely modifies his/her recommendation in favour of the transaction or recommends a Superior Proposal;

(B) does not recommend that the Shareholders approve the Shareholder Resolutions in the Notice of Meeting; or

(C) makes a public statement with the effect that the Shareholder Resolutions are no longer recommended,

other than as a result of KPMG Financial Advisory Services (Australia) Pty Ltd (being the independent expert engaged to prepare an independent expert's report indicating whether, in its view the Recapitalisation Transactions are fair and reasonable to Shareholders other than the Supporting Creditors) determining that the Recapitalisation Resolutions are "not fair" and "not reasonable" for Shareholders who are not the Supporting Creditors; or

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(iii) the Supporting Creditors terminate the Restructuring Support Agreement if (amongst other reasons) BLY materially breaches the Restructuring Support Agreement.

In addition, BLY has also agreed to pay in cash and in full, in accordance with their respective engagement letters, all invoiced fees and out of pocket expenses incurred by the Supporting Creditors (and their respective counsel and financial advisers).

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5. the recapitalisation transactions

5.1 Second-Out ABL

At the same time as they announced that they had entered into the Restructuring Support Agreement, the Companies announced on 3 April 2017 that they had entered into an additional US$15,000,000 facility with lenders affiliated with CBP, Ares and Ascribe (Second-Out ABL Facility). The Second-Out ABL Facility has been established to provide short-term financial support to the Companies until the Recapitalisation Transactions can be completed. It was fully drawn-down by the Companies on 20 April 2017.

If the Recapitalisation Transactions are implemented, the Second-Out ABL, together with the DDTL, will be repaid in full through the New ABL Revolver (described in Section 5.4(a) below) and the rig transfers and amendments to the Term Loan A and Term Loan B associated with the DDTL will be reversed.

5.2 Secured Creditor Scheme

(a) Initial Term Loan Amendments

Term Loan A and Term Loan B were entered into by the Companies as part of the CBP led Restructuring and most recently amended on 4 January 2017 and 2 April 2017 in conjunction with the Companies entering into the DDTL (as described in Section 4) and the Second Out ABL. If the Recapitalisation Transactions are implemented, these amendments to the Term Loan A and Term Loan B will be unwound and replaced by the Term Loan Amendments.

The amendment to the call schedule allows the Companies to repay the Term Loan A and Term Loan B after December 2018 without having to repay the make whole amount. The amended covenants will allow the Companies to obtain the New ABL Revolver, re-domicile BLY and the BLY Issuer and consummate other transactions contemplated by the Scheme.

The Initial Term Loan Amendments involve:

(i) (maturity) an extension of the maturity date to 31 December 2022;

(ii) (Change of control) waiver of rights arising from any Change of Control Event arising as a result of the implementation of the Scheme and the consummation of the transactions contemplated thereby;

(iii) (call schedule) non-call protection prior to December 2018, callable at par thereafter without penalty;

(iv) (covenants) amendments to the covenants to be generally consistent with the 10% Secured Notes Indenture and will enable the New ABL Revolver to share the collateral package for Term Loan A;

(v) (secured debt cap) a secured debt cap of not less than $420 million plus additional amounts to permit (a) accrued interest and principal amounts in respect of the debt owing under the 10% Secured Notes Indenture, (b) the incurrence of an additional $40 million of New ABL Revolver capacity and (c) a potential additional $40 million of additional secured debt capacity; and

(vi) (IP subsidiary) BLY IP Inc., an intellectual property subsidiary which guarantees the Term Loan A and Term Loan B, providing a subordinated

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unsecured guarantee in respect of the debt issued under the 10% Secured Notes Indenture.

(b) 10% Secured Note Amendments

The 10% Secured Note Amendments involve:

(i) (interest rate) the current interest rate of 10% per annum, payable in cash, being payable at BLY's option either at an increased rate of 12% payable in kind or at a rate of 10% in cash up to and including the December 2018 interest payment date, then payable in cash at 10% thereafter - if the Scheme is implemented, the interest rate of 12.00% will apply retroactively to the balance outstanding in respect of the 10% Secured Notes Indenture at 31 December 2016;

(ii) (maturity) an extension of the maturity date to 31 December 2022;

(iii) (Change of Control) waiver of rights arising from any Change of Control Event arising as a result of the implementation of the Scheme and the consummation of the transactions contemplated thereby;

(iv) (covenants) covenants improved such that no significant restricted payment baskets or permitted investment baskets exist which would allow any collateral to exit the system;

(v) (secured debt cap) a secured debt cap of not less than US$420 million plus additional amounts to permit (a) accrued interest and principal amounts in respect of the debt owing under the 10% Secured Notes Indenture, (b) the incurrence of an additional $40 million of New ABL Revolver capacity and (c) a potential additional US$40 million of additional secured debt capacity; and

(vi) (new guarantee) BLY IP Inc., an intellectual property subsidiary which guarantees the Term Loan A and Term Loan B, providing a subordinated unsecured guarantee; and

(vii) (interest payment dates) amended to 30 June and 31 December annually from 1 April and 1 October.

5.3 The Scheme

The Scheme involves:

(a) the release of an amount of approximately US$205,940,000 comprised of principal plus accrued/accreted interest (as at 1 April 2017) owed to the Noteholders pursuant to the Indenture;

(b) the issue to Noteholders of 42% of the ordinary equity of BLY post implementation of the Recapitalisation Transactions before the issue of the Scheme Warrants and the Warrants Issue; and

(c) the remaining US$88,000,000 principal debt owed to the Noteholders pursuant to the Indenture (plus accrued / accreted interest to the Implementation Date, calculated by applying an interest rate of 1.5% to the US$88,000,000 principal amount from 1 January 2017 to the Implementation Date) being reinstated with an interest rate of 1.5% payable in kind (the Subordinated Notes).

The other terms of the Subordinated Notes are summarised below:

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Maturity	31 December 2022
Ranking	Subordinated to unsecured interest accrued on the Term Loan A and Term Loan B
Secured debt cap	A secured debt cap of not less than US$420,000,000 plus additional amounts to permit (a) accrued interest and principal amounts in respect of the debt owing under the 10% Secured Notes Indenture, (b) the incurrence of an additional US$40 million of New ABL Revolver capacity and (c) a potential additional US$40 million of additional secured debt capacity
Covenants	Consistent terms with existing Indenture

In addition to receiving ordinary equity of BLY, Noteholders will also receive the Scheme Warrants (being 1,303,200,947 A Warrants and 668,308,178 B Scheme Warrants, equivalent to approximately 74% of the Companies' Warrants on issue immediately following the Implementation Date under both BLY Schemes) and certain of the Noteholders will also be entitled to certain director appointment rights (as set out in Section 5.6), if the Recapitalisation Transactions are implemented.

The Exercise Price for the A Warrants is calculated in accordance with the following formula:

EP = TEV – ND

N

Where:

EP is the Exercise Price (which is in US dollars)

TEV is $750 million

ND is net debt of the Group on the Implementation Date

N is the number of Shares on the Implementation Date after the issue of Scheme Shares under this Scheme and the Subscription Deed

The Exercise Price is expected to be in the range of $0.006 – $0.008 per A Warrant⁵, subject to final debt and cash figures on the Implementation Date.

The Exercise Price for the B Warrants is calculated in accordance with the following formula:

EP = TEV – ND

N

Where:

EP is the Exercise Price (which is in US dollars)

TEV is $850 million

⁵ Assumes cash at the Implementation Date of between $25-$50 million

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ND is net debt of the Group on the Implementation Date

N is the number of Shares on the Implementation Date after the issue of Scheme Shares under this Scheme and the Subscription Deed

The Exercise Price is expected to be in the range of $0.010 – $0.012 per B Warrant⁶, subject to final debt and cash figures on the Implementation Date.

The Scheme Warrants have substantially the same terms as the Existing Shareholder Warrants described in Section 5.4(d), except for the Exercise Price. Additionally, the Scheme Warrants may be exercised without payment of cash in certain circumstances. To the extent BLY is not admitted to the official list of ASX or is otherwise prohibited from adjusting the terms of the Scheme Warrants as a result of a dividend or distribution, the Scheme Warrants will prohibit BLY from effecting such a dividend or distribution, unless such distribution is consented to in writing by holders of the Scheme Warrants holding more than 50% of the total number of Scheme Warrants outstanding on the record date for the payment of such dividend or distribution.

Ares has notified the Companies that 25% of the A Warrants (or up to 139,879,578 A Warrants) which it is entitled to be issued under the Scheme are to be issued to Ascribe.

5.4 Other Recapitalisation Transactions

The other Recapitalisation Transactions will only be implemented if and when the BLY Schemes become effective.

(a) New ABL Revolver

The BLY Group will secure a new revolving ABL facility from a third party lender in the aggregate principal amount of US$75,000,000, subject to this amount being reduced dollar for dollar by the amount raised by BLY pursuant to the Share Purchase Plan (defined in Section 5.4(e) below) (New ABL Revolver). CBP, Ares and Ascribe have agreed to backstop the New ABL Revolver based on their relative percentage shareholding in BLY post implementation of the Recapitalisation Transactions (excluding any existing Shares held by Ascribe and excluding the Warrants) only if third party financing is not available on acceptable terms.

The New ABL Revolver will be used to replace the Existing ABL Revolver and repay the Second-Out ABL and DDTL if and when the BLY Schemes become effective. In accordance with the RSA, asset transfers associated with the DDTL will be reversed and the amendments to the Term Loan A and Term Loan B in connection with the DDTL will also be unwound. The New ABL Revolver will be backstopped by CBP, Ares and Ascribe based on their relative percentage shareholding in BLY post implementation of the Recapitalisation Transactions (excluding any existing Shares held by Ascribe and excluding the Warrants) only if third party financing is not available on acceptable terms.

The collateral under the New ABL Revolver will be the collateral package securing the Existing ABL Revolver plus any collateral or guarantees that secure or guarantee the Term Loan A that do not currently secure or guarantee the Existing ABL Revolver.

(b) CPS Conversion

Under the Recapitalisation Transactions, it is proposed that all the Convertible Preference Shares held by CCP II Dutch Acquisition – E2, B.V be converted into

⁶ Assumes cash at the Implementation Date of between $25-$50 million

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Shares (the CPS Conversion). The CPS Conversion will be implemented after the issuance of Shares under the Scheme as summarised below:

Step 1	Pursuant to the terms of the Scheme, Shares will be issued to the Noteholders.
Step 2	The CPS Conversion will occur.
Step 3	Pursuant to the terms of the Subscription Deed, Shares will be issued to CBP as consideration for the Subsequent Term Loan Amendments.

(c) Subscription Deed and Subsequent Term Loan Amendments

The TLA Purchasers and TLB Purchasers have entered or will enter into the Subscription Deed with BLY and the Subsequent Term Loan Amendments with the Companies and the Obligors. These agreements involve:

(i) (Subsequent Term Loan Amendments) the Term Loan A and the Term Loan B will be further amended such that the current interest rate of 12% per annum is reduced to 10% payable in kind until December 2018, then to 8% payable in kind thereafter – if the Subsequent Term Loan Amendments become effective, the interest rate of 10.00% will apply retroactively to the balance outstanding in respect of the Term Loan A and the Term Loan B at 31 December 2016 – the Subsequent Term Loan Amendments will only become effective if the Subscription Deed is executed, the BLY Schemes become effective and the Secured Creditor Scheme is implemented;

(ii) (Subscription Deed) in exchange for the reduction of the interest rates pursuant to the Subsequent Term Loan Amendments, BLY will issue to the TLA Purchasers and the TLB Purchasers 52.4% of the ordinary equity in BLY post implementation of the Recapitalisation Transactions such that CBP will hold a total of 56% of Shares immediately following completion of the Subscription Deed – the Subscription Deed will only become effective if BLY Schemes become effective and Shares will only be issued pursuant to it following the issue of Shares pursuant to the Scheme and the occurrence of CPS Conversion.

(d) Warrants Issue

Under the terms of the RSA, BLY will, subject to Shareholder approval, issue Existing Shareholder Warrants to existing Shareholders (other than the CBP Registered Holders) as at as at the Record Date (the Warrants Issue).

The Warrants Issue will be made by BLY pursuant to a prospectus which BLY proposes to lodge with ASIC (the Prospectus).

The terms of the Existing Shareholder Warrants will be set out in further detail in the Prospectus and are summarised below:

Entitlement Each Existing Shareholder Warrant confers on its holder the right to subscribe for one Share, subject to any adjustment (set out below).   An Existing Shareholder Warrant will not confer any rights to dividends or to participate in any new issues of Shares without

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	exercising the Existing Shareholder Warrant. Shares allotted and issued on the exercise of an Existing Shareholder Warrant upon allotment will rank pari passu in all respects (including as to dividends the entitlement to which is determined after allotment) with the then-issued Shares and are subject to the Constitution.
Exercise Price	The "Exercise Price" for the Existing Shareholder Warrants is the Australian dollar equivalent of the US dollar amount calculated in accordance with the following formula: EP = TEV – ND N Where: EP is the Exercise Price (which is in US dollars) TEV is $1 billion ND is net debt of the Group on the Implementation Date N is the number of Shares on the Implementation Date after the issue of Scheme Shares under this Scheme and the Subscription Deed The Exercise Price is expected to be in the range of A$0.021 – A$0.024 per Existing Shareholder Warrant7, subject to final debt and cash figures on the Implementation Date. The Exercise Price of the Existing Shareholder Warrants will be calculated in Australian dollars based on the prevailing exchange rate on the Implementation Date. The Exercise Price is payable in cash.
Method of Exercise	Each Existing Shareholder Warrant may be exercised at any time in the period after its issue to 5.00pm Sydney time on the date which is the 7th anniversary of the date of its issue (Exercise Period). Each Existing Shareholder Warrant may be exercised during the Exercise Period by delivering a duly completed exercise notice to BLY.
Adjustments	The terms of the Existing Shareholder Warrants will be adjusted in certain circumstances, including the following: ·     (pro-rata issues) the Exercise Price will be reduced in accordance with Listing Rule 6.22.2 in respect of pro rata issues (other than bonus issues); ·     (bonus issues) the number of Shares over which Existing Shareholder Warrants will be exercisable will be increased by the number of Shares the holder would have received if the Existing Shareholder Warrant had been exercised before the record date of the bonus issue; ·     (reorganisation of capital) the rights of the holder of the Existing Shareholder Warrant (and the Exercise Price) will be changed to the extent necessary to comply with the

⁷ Based on an exchange rate of 1.333 as of 19 April 2017 and assumes cash at the Implementation Date of between $25-$50 million.

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	Listing Rules applying to a reorganisation of capital; ·    (dividend) if during the Exercise Period BLY ceases to be admitted to the official list of ASX or is no longer prohibited from effectuating the adjustments, the number of Shares over which Existing Shareholder Warrants will be exercisable will be increased and the Exercise Price will be decreased for the payment of a dividend or other distribution; ·    (change in capital) on a change in capital, the rights of the holder of the Existing Shareholder Warrant will be changed to reflect what the holder would have received if the Existing Shareholder Warrant had been exercised prior to the record date for that change in capital.
Change of control	On a change of control transaction (which includes a sale of all or substantially all of the assets of BLY but excludes a public stock merger), BLY will cancel the Existing Shareholder Warrants and pay the holder the warrant value (determined in accordance with a Black-Scholes model) in cash. Where the change of control transaction is a public stock merger, BLY shall procure that the acquirer or successor entity shall assume the obligations of BLY and the warrant will become exercisable into the public stock except where the market capitalisation is less than $500 million where the Existing Shareholder Warrant will be cancelled and the holder will be paid the warrant value in cash unless it elects for the Existing Shareholder Warrant to remain on foot and become exercisable over the public stock.
Transfer	BLY will seek quotation of the Existing Shareholder Warrants on ASX.  For so long as the Existing Shareholder Warrants are quoted on ASX, they will be freely tradeable on ASX.

A total of up to 685,444,285 Existing Shareholder Warrants will be issued pursuant to the Warrants Issue.

The Exercise Price for the Existing Shareholder Warrants is calculated in accordance with the following formula:

EP = TEV – ND

N

Where:

EP is the Exercise Price (which is in US dollars)

TEV is $1 billion

ND is net debt of the Group on the Implementation Date

N is the number of Shares on the Implementation Date after the issue of Scheme Shares under this Scheme and the Subscription Deed

(e) Share Purchase Plan

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In addition, BLY proposes to offer Shareholders the opportunity to participate in a share purchase plan (the Share Purchase Plan or SPP).

Under the SPP, eligible Shareholders holding Shares as at the Record Date or the trading day prior to announcement of the Recapitalisation Transactions, will be entitled to apply for up to A$5,000 worth of Shares at a price of A$0.02 per Share, to raise up to a maximum amount of A$9 million. The amount raised by BLY under the SPP will reduce the amount by which CBP, Ares and Ascribe backstop the New ABL Revolver (as set out in Section 5.4(a)).

5.5 Capital Structure following Recapitalisation Transactions

Shares held following Recapitalisation Transactions

Immediately following the Recapitalisation Transactions, the Shares will be held as follows:

Entity	Equity post- Recapitalisation Transactions (approximate %)*			Equity post- Recapitalisation Transactions (figures in millions of shares)(approximate number)
CBP		56.0	%		13,866
Other existing Shareholders****		2.0	%		485
Ascribe**		19.2	%		4,746
Ares		18.0	%		4,465
Other 7% Noteholders***		4.8	%		1,199
Total		100	%		24,761

* Reflects shareholding percentages prior to dilution from warrants

** Includes Shares associated with Ascribe's pre-restructuring Share ownership

*** Assumes that no other Noteholders are existing Shareholders

**** Excludes Ascribe’s pre-restructuring Shares

Warrants held following Recapitalisation Transactions

Immediately following the Recapitalisation Transactions, the Warrants on issue in BLY will be the Scheme Warrants issued to the persons nominated to BLY by the 7% Scheme Creditors as at the time of issue, as well as the Existing Shareholder Warrants issued under the Warrants Issue to existing Shareholders (other than the CBP Registered Holders).

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Entity	Scheme Warrants (figures in millions of shares)(approximate number)		Existing Shareholder Warrants (figures in millions of shares)(approximate number)
CBP		-		-
Other existing Shareholders		-		671
Ascribe*		898		15
Ares		846		-
Other 7% Noteholders		227		-
Total		1,972		685

However, Ares has notified the Companies that 25% of the A Warrants (or up to 139,879,578 A Warrants) which it is entitled to be issued under the Scheme are to be issued to Ascribe.

* Includes warrants associated with Ascribe's pre-restructuring Share ownership

5.6 Governance Matters

In light of the significant equity interests being acquired by CBP, Ares and Ascribe under the Recapitalisation Transactions, the Companies have agreed to grant each certain once-only director appointment rights pursuant to the Director Nomination Agreements.

Under the Director Nomination Agreements:

(a) Ares will be entitled to nominate one person to stand for election to the board of BLY (BLY Board);

(b) Ascribe will be entitled to nominate one person to stand for election to the BLY Board;

(c) Ares and Ascribe will be entitled to jointly nominate one person to stand for election to the BLY Board; and

(d) CBP are entitled to nominate five persons to stand for election to the BLY Board, one of whom will serve as Chairman (and this would supersede and replace CBP's existing director appointment rights under the implementation agreement dated on or around 23 October 2014 entered into by the Companies, among others, in relation to the CBP led recapitalisation in 2015).

5.7 Re-domiciliation

BLY has agreed under the Restructuring Support Agreement to take all requisite steps to re-domicile its business to the United States (state of Delaware), the United Kingdom or Canada (or such other jurisdiction as to which CBP, Ares and Ascribe agree) as soon as possible after implementation of the Recapitalisation Transactions and in any case on or before 15 April 2018 (the Re-domiciliation), unless the Companies, CBP, Ares and Ascribe jointly determine in their reasonable discretion that the Re-domiciliation would not be in the best interests of BLY.

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In connection with the Re-domiciliation, BLY must procure that the corporate successor to BLY (the Successor) agree to include in its organisational documents, in each case to the maximum extent permissible by applicable law:

(a) that a vote by holders of 50% in amount of the then issued and outstanding common stock or shares of the Successor will be required to amend the organisational documents of such Successor, provided that a vote by holders of 75% in amount of the then issued and outstanding common stock or shares of such Successor will be required to amend such organisational documents if such amendment would adversely and disproportionally affect the rights, obligations or liabilities of any particular shareholder under such organisational documents relative to all shareholders generally;

(b) that, until 31 December 2018, a vote by holders of 75% in amount of the then issued and outstanding common stock or shares of such Successor will be required to approve any merger or amalgamation with, acquisition of, scheme of arrangement or other similar transaction effectuating a business combination involving the Successor, or the sale in one transaction or a series of related transactions involving all or substantially all of such Successor’s assets, in each case, whether or not the Successor continues or survives following such transaction, if the purchase price in such merger, amalgamation, acquisition, business combination or sale implies a TEV of less than US$750,000,000; provided that in the event such vote is sought and not obtained, then the Secured Debt Cap will be increased by up to US$40,000,000, solely for the purpose of, and solely to the extent of, the incurrence of additional secured debt by the Group to provide additional liquidity and the initial signatories to the RSA shall be entitled to participate as lenders of any such additional secured debt in the same proportions as in the New ABL Revolver;

(c) that holders of more than 5% (tested on an aggregate basis across affiliate holdings) of the then issued and outstanding common stock or shares of such Successor will be entitled to pre-emptive rights to participate pro rata in any issuance of share capital that is senior or preferred with respect to the common stock or shares of such Successor;

(d) not to change the number of such Successor’s directors so long as the Director Nomination Agreements are in effect;

(e) not to permit a redemption or repurchase of the common stock or shares of such Successor on a non-pro rata basis; and

(f) not to enter into a transaction with an affiliate of such Successor or CBP, unless (a) such transaction is entered into on an arms’ length basis, (b) all material terms and conditions of such transaction (including the facts relating to such affiliate’s interest in such transaction) are disclosed to such Successor’s board of directors prior to authorising and/or entering into such transaction, and (c) such transaction is approved by a majority of the members of such Successor’s board of directors that are disinterested with respect to such transaction.

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6. the Scheme explained

6.1 Overview of the outcome of the Scheme

The table below illustrates the anticipated outcome for the Companies and the 7% Scheme Creditors following implementation of the Scheme with respect to the debt owed to the 7% Scheme Creditors under the Indenture and the Shareholders of BLY:

Affected outcome	Before implementation of Scheme	Upon implementation of the Scheme (before the issue of Warrants)
Total Aggregate Amount owed to 7% Scheme Creditors	US$293,940,000*	US$88,000,000, plus accrued / unpaid interest calculated at 1.50% on US$88,000,000 from 1 January 2017 up to the Implementation Date
Shareholders of BLY	7% Scheme Creditors – approximately 1.1% Existing Shareholders (excluding the CBP Registered Holders and known 7% Scheme Creditors) – approximately 50%	7% Scheme Creditors – approximately 42% Existing Shareholders (excluding the CBP Registered Holders) – approximately 2%

*Debt as at 1 April 2017

6.2 Steps prior to the Scheme becoming effective

The implementation of the Scheme is subject to the prior satisfaction of various conditions precedent. The conditions precedent include those listed in clause 3 of the Scheme (see Annexure A).

A summary of the conditions precedent to the Scheme being implemented is set out below.

(a) Foreign Investment Approval

In the case of each 7% Scheme Creditor and each Secured Creditor who notified the Treasurer of the Commonwealth of Australia in accordance with FATA (Prescribed Creditor) that it proposes to acquire Transaction Securities under the Scheme or Shares under the Subscription Deed (the Action) and paid any applicable fee, one of the following occurs at or before 8.00 am on the Second Court Date,:

(i) the day that is 10 days after the end of the decision period mentioned in section 77 of FATA passes without an order prohibiting the Action having been made under section 67 or 68;

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(ii) if an interim order is made under section 68 of FATA, the end of the period specified in the order passes without an order prohibiting the Action under section 67 having been made; or

(iii) the Prescribed Creditor receives a no objection notice (within the meaning of FATA) in respect of the Action that notice being unconditional other than the Standard Tax Conditions or such other conditions which are acceptable to the Prescribed Creditor acting reasonably.

(b) Shareholder approval

The due passing of the Shareholder Resolutions at the Shareholder Meeting.

(c) ASX approval

ASX provides written approval of the terms of the Scheme Warrants to be issued pursuant to the Scheme or otherwise waives the requirement.

(d) ASX waiver

ASX provides a waiver of ASX Listing Rule 10.1 in respect of the amendments to the Term Loan A and Term Loan B to be implemented by the Secured Creditor Scheme.

(e) Holder approval

The Scheme is agreed to by the Requisite Majority of Noteholders.

(f) Director Nomination Agreements

Each of the Director Nomination Agreements have been executed by the parties to them.

(g) Deeds Poll and Undertaking

As at 8.00 am on the Second Court Date, the Scheme Administrator Deed Poll, the Obligors Deed Poll and the Undertaking continue in full force and effect and each of those Deeds Poll and the Undertaking still benefits the beneficiaries named in it.

(h) Independent expert

As at 8.00am on the Second Court Date, the independent expert appointed by BLY, has not concluded that the Transaction Resolutions are "not fair" and "not reasonable".

(i) New ABL Revolver

As at 8.00 am on the Second Court Date, the New ABL Revolver has been duly executed and delivered by all parties to it and all conditions precedent to the New ABL Revolver have been satisfied (other than conditions precedent relating to the Scheme and the Secured Creditor Scheme becoming effective pursuant to section 411(10) of the Corporations Act, the Subsequent Term Loan Amendments becoming effective and the Final Chapter 15 Order being entered).

(j) Amendments

As at 8.00 am on the Second Court Date, all conditions precedent to the Fourth Supplemental Indenture have been satisfied (other than the execution of that

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document and the conditions precedent relating to the Scheme and the Secured Creditor Scheme becoming effective pursuant to section 411(10) of the Corporations Act).

(k) Subscription Deed

As at 8.00 am on the Second Court Date, the Subscription Deed has been duly executed and delivered by all parties to it, remains in full force and effect, and all conditions precedent to the Subscription Deed have been satisfied (other than conditions precedent relating to this Scheme becoming effective and the Secured Creditor Scheme becoming effective pursuant to section 411(10) of the Corporations Act).

(l) Subsequent Term Loan Amendments

As at 8.00 am on the Second Court Date, the Subsequent Term Loan Amendments have been duly executed and delivered by all parties to them, and all conditions precedent to the Subsequent Term Loan Amendments have been satisfied (other than the conditions precedent relating to the Scheme and the Secured Creditor Scheme becoming effective pursuant to section 411(10) of the Corporations Act and being implemented).

(m) Regulatory Approvals

As at 8.00 am on the Second Court Date, any approvals or consents, which are not otherwise described in clause 3.1 in the BLY Schemes but which are required by law or by any Government Agency to have been obtained in order to implement this Scheme or the 7% Creditor Scheme, have been obtained on an unconditional basis and remain in full force and effect.

(n) Warranties

As at 8.00 am on the Second Court Date, the Warranties are true and correct in all material respects.

(o) Restructuring Support Agreement

The Restructuring Support Agreement has not been terminated in accordance with its terms.

(p) Court approval

The Court approves the Scheme in accordance with section 411(4)(b) of the Corporations Act, including with any alterations made or required by the Court under section 411(6) of the Corporations Act (which alterations do not change the substance of the Scheme, including the Steps, in any material respect, or impose unduly onerous obligations on the parties, acting reasonably).

(q) Other conditions

Any other conditions made or required by the Court under section 411(6) of the Corporations Act in relation to the Scheme (which conditions do not change the substance of the Scheme, including the Steps, in any material respect, or impose unduly onerous obligations on the parties, acting reasonably) have been satisfied.

Section 411(6) of the Corporations Act allows the Court to approve the Scheme with various alterations and variations.

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(r) Secured Creditor Scheme

The Secured Creditor Scheme becomes effective pursuant to section 411(10) of the Corporations Act.

(s) Effective

The Second Court Orders coming into effect.

Section 411(10) provides that the Court order approving the Scheme does not have any effect until an official copy of the order is lodged with ASIC, and upon being so lodged, the order takes effect, or is taken to have taken effect, on and from the date of lodgement or such earlier date as the Court determines and specifies in order to approve the Scheme.

6.3 Standstill

During the period on and from the Effective Date up to the completion of Step 8 (Compromise of Subordinate Claims) under the Scheme (the Standstill Period), no 7% Scheme Creditor or the Trustee may, except for the purpose of enforcing the terms of the Scheme, or any Deed Poll or as otherwise expressly provided by the Scheme, dispose of, transfer or exercise certain of its rights under the Finance Documents. The terms of the standstill are in clause 8.1 of the Scheme. Its purpose is to ensure that the Scheme can be implemented in an orderly manner, in accordance with its terms.

If the Scheme is not implemented by the Sunset Date, being 31 December 2017, the Scheme will automatically terminate and the standstill shall cease to apply in relation to any 7% Scheme Creditor.

6.4 Steps to implement the Scheme

The Scheme provides for the restructuring of the Debt owed by the Companies to the Noteholders to take place in the sequence set out below. These Steps are set out in full in clause 7.5 of the Scheme. This document only summarises key parts of the Steps and does not include every part of each Step. Noteholders should review the complete Steps in the Scheme carefully.

If in the opinion of the Scheme Administrators, as a result of an event failing to occur, or take effect, it is not possible to put the Scheme into effect, the 7% Scheme Creditors, the Obligors, those directors and officers who have executed deeds poll and the Trustee are to place each other in the positions they would have been in had any Steps already taken not been so taken.

Date	Source document	Step
Effective Date (the date all of the conditions precedent in Section 6.2 are satisfied)	Scheme	Scheme Administrators execute the 7% Scheme Creditor Deed Poll as attorney for the 7% Scheme Creditors.
		7% Scheme Creditors give the Trustee: ·      all instructions and consents it requires in relation to the execution of the Fourth Supplemental Indenture; and

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Date	Source document	Step
		·      directions to do all things required to be done by it to give effect to the Scheme. The Scheme Administrators notify the Trustee of the giving of these instructions.
		Trustee executes the Trustee Deed Poll and consents to the Scheme and undertakes to perform actions attributed to it under the Scheme.
		Trustee (on behalf of itself and 7% Scheme Creditors) and the Obligors execute the Fourth Supplemental Indenture and deliver it to Scheme Administrator to be held in escrow.
		Scheme Administrators notify the Companies of: ·     the Effective Date; and ·     the Implementation Date.
		Trustee provides to Scheme Administrator: ·     details for each 7% Scheme Creditor; and ·     as at the Implementation Date: ·      the amount owed to each 7% Scheme Creditor by the Companies; ·      the total amount owed to the 7% Scheme Creditors by the Companies.
Calculation Date (second Business Day after the Effective Date)	Scheme	Scheme Administrator calculates: ·      the Debt Contribution Amount for each 7% Scheme Creditor; ·      the Total Debt Contribution Amount; ·      the number of Scheme Shares and Scheme Warrants to be issued to the 7% Scheme Creditors; and ·      the number of Scheme Shares and Scheme Warrants to be issued to each 7% Scheme Creditor.
		Scheme Administrator notifies the Trustee and the Companies of the calculations referred to above.

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Date	Source document	Step
Implementation Date (5 Business Days after the Effective Date or as extended by the Scheme Administrator)	Scheme	BLY issues Scheme Shares to the 7% Scheme Creditors (approximately 42% of the ordinary equity of BLY post implementation of the Recapitalisation Transactions, before the issue of the Scheme Warrants).
	Restructuring Support Agreement	The Convertible Preference Shares are converted.
	Subscription Deed	Shares are issued to the TLA Purchasers and TLB Purchasers.
	Scheme	BLY issues the Scheme Warrants to the 7% Scheme Creditors (or their nominees).
	Scheme	·              Companies and 7% Scheme Creditors release one another from any claims arising out of failure to comply with Finance Documents in accordance with Scheme. ·             7% Scheme Creditors, on one hand, and directors / officers who have signed Released Obligor Individual Deeds Poll, on the other, release one another from Claims in accordance with Scheme.
		7% Scheme Creditors release Obligors from their obligations to pay the Total Debt Contribution Amount.
		Scheme Administrator releases the Fourth Supplemental Indenture from escrow.
	Subsequent Term Loan Amendments	The Subsequent Term Loan amendments become effective.
	Scheme	BLY is released from obligations to pay an amount in respect of a Subordinate Claim in excess of the proceeds of applicable insurance actually recovered, net of any expenses incurred by BLY.

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6.5 Proposed terms of the Fourth Supplemental Indenture

A copy of the Fourth Supplemental Indenture to be implemented by the Scheme is at Schedule 3 to the Scheme.

In summary, if the Scheme is implemented, the Fourth Supplemental Indenture will have the following effect:

(a) (principal debt) the principal debt plus accrued interest owed by the Companies to the 7% Scheme Creditors will be reduced from approximately US$293,940,000 to US$88,000,000 plus accrued / unpaid interest to be calculated by applying an interest rate of 1.50% to the principal amount of US$88,000,000 for the period from 1 January 2017 to the Implementation Date;

(b) (maturity) the maturity date of the Indenture will be extended to 31 December 2022;

(c) (interest rate) the rate of interest payable by the BLY Issuer will be reduced from a rate of 7.0% per annum to a rate of 1.50% per annum and will be capitalised. Capitalised interest will be subordinated to unsecured interest accrued on the Term Loan A and Term Loan B;

(d) (covenants) the existing permitted secured debt cap will be increased to an amount equal to US$420 million plus further amounts to permit accrued interest and principal amounts in respect of notes issued under the 10% Secured Notes Indenture, the incurrence of an additional $40 million of New ABL Revolver capacity and a potential additional US$40 million of additional secured debt capacity. Covenants will be amended such that the domicile of BLY and the BLY Issuer is not limited to Australia or the United States and will otherwise be consistent with the terms of the Indenture;

(e) (interest claims) future and existing interest claims under the Term Loan A, Term Loan B and the 10% Secured Notes Indenture will be senior to all claims under the Indenture.

6.6 Other terms of the Scheme

If the Scheme is implemented, in addition to the amendments described above:

(a) the 7% Scheme Creditors and the Obligors will release one another in respect of any Claim they have against one another arising out of any failure to comply with obligations under the Finance Documents prior to the Implementation Date;

(b) the 7% Scheme Creditors and the past and present directors and officers of the Obligors, who sign a deed poll, will release one another from all Claims relating to any fact, matter, circumstance or event that arose or occurred in respect of, or in connection with, any Obligor between 28 March 2011 and the Implementation Date (although the Companies are not aware of any potential Claims that may be available against any of those people);

(c) the 7% Scheme Creditors release each other person that is a 7% Scheme Creditor from all Claims relating to any fact, matter, circumstance or event that arose or occurred as a result of any person's failure to comply with any Finance Document between 28 March 2011 and the Implementation Date;

(d) the 7% Scheme Creditors of one another in respect of certain Claims arising out of a failure to comply with the RSA prior to the Implementation Date; and

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(e) the 7% Scheme Creditors will waive any rights which arose out of or in connection with a Change of Control Event.

6.7 Outcome for the 7% Scheme Creditors

If the Scheme is implemented, the 7% Scheme Creditors will:

(a) receive Scheme Shares and Scheme Warrants in an amount calculated in accordance with the formula set out in the Scheme;

(b) to the extent of the Total Debt Contribution Amount (being approximately US$205,610,000 as at 1 April 2017), release each Obligor (including the Companies) from their obligation to pay the Total Debt Contribution Amount under the Finance Documents;

(c) be owed in aggregate the principal amount of US$88,000,000 by the Companies under an amended version of the Indenture, (these amendments are set out in Section 6.5);

(d) the 7% Scheme Creditors and the Obligors will release one another from any Claims which arose out of a failure to comply with the terms of the Finance Documents prior to the Implementation Date;

(e) the 7% Scheme Creditors and the directors / officers of BLY who have executed a deed poll will release one another from all Claims relating to any fact, matter, circumstance or event that arose or occurred in respect of, or in connection with, any Obligor between 28 March 2011 and the Implementation Date;

6.8 Outcome for the Companies

(a) If the BLY Schemes are implemented, the outcomes for the Companies are:

(i) under this Scheme:

(A) the Total Aggregate Amount owed by the Companies to the 7% Scheme Creditors will be reduced from US$293,940,000 as at 1 April 2017 to principal in the amount of US$88,000,000, plus accrued but unpaid interest to be calculated by applying an interest rate of 1.50% to the principal amount of US$88,000,000 for the period from 1 January 2017 to the Implementation Date;

(B) the terms on which the remaining debt is owed to the 7% Scheme Creditors under the Indenture will be amended (as set out in Section 6.5);

(C) BLY will issue Scheme Shares and Scheme Warrants to the 7% Scheme Creditors on implementation of Step 3 (New Share issue) and Step 4 (New Warrant issue) of the Scheme; and

(D) the rights of Subordinate Claim Holders to bring Subordinate Claims against BLY will be limited to any amount actually recovered by BLY under any Applicable Insurance Policy applicable to that Subordinate Claim, less expenses incurred in connection with that Subordinate Claim; and

(ii) under the Secured Creditor Scheme

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(A) the terms on which the remaining debt is owed to the Secured Scheme Creditors under the Finance Documents will be amended (as set out in Section 5.2); and

(b) In accordance with the terms of the Restructuring Support Agreement the Companies will perform the following steps:

(i) the BLY Issuer will enter into the New ABL Revolver;

(ii) the BLY Issuer will use the funds made available pursuant to the New ABL Revolver to repay:

(A) the DDTL;

(B) the Existing ABL Revolver; and

(C) the Second Out ABL;

(iii) the collateral arrangements and the amendments to the Term Loan A and the Term Loan B associated with the DDTL will be unwound;

(iv) existing Shareholders will be diluted and will hold (excluding CBP Registered Holders) in aggregate 2% of the reorganised equity (subject to warrant dilution);

(v) the Convertible Preference Shares held by CBP will be converted into Shares, after the Shares are issued pursuant to Step 3 (New Share issue) of the Scheme and before the Shares are issued to the TLA Purchasers and the TLB Purchasers pursuant to the Subscription Deed;

(vi) pursuant to the Subscription Deed BLY will issue shares to the TLA Purchasers and the TLB Purchasers, such that they hold 56% of all Shares on issue post completion of the Recapitalisation Transactions;

(vii) the Subsequent Term Loan Amendments will take effect, such that the interest rate payable to the TLA Purchasers pursuant to the Term Loan A and the interest rate payable to the TLB Purchasers pursuant to the Term Loan B is reduced to 10% payable in kind up until December 2018 and then to 8% payable in kind after that time;

(viii) BLY will issue Existing Shareholder Warrants to existing Shareholders (excluding CBP);

(ix) each of CBP, Ares and Ascribe will enter into separate director nomination agreements with BLY, pursuant to which:

(A) Ares will be entitled to nominate the Ares Nominee Director to stand for election to the BLY Board;

(B) Ascribe will be entitled to nominate the Ascribe Nominee Director to stand for election to the BLY Board;

(C) Ares and Ascribe will be entitled to jointly nominate the Ares / Ascribe Joint Nominee Director to stand for election to the BLY Board; and

(D) CBP will be entitled to nominate the CBP Nominee Directors to stand for election to the BLY Board;

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(x) BLY will procure that the appointments of the candidates nominated by Ares, Ascribe and CBP to stand for election to the BLY Board are voted on by Shareholders at the Shareholder Meeting;

(xi) BLY will apply for confirmation from ASX that BLY continues to have a structure and operations suitable for listing post implementation of the Scheme; and

(xii) the Companies will apply to the U.S. Bankruptcy Court for an order recognising the Court’s approval of the Scheme and the Secured Creditor Scheme.

6.9 Outcome for the Obligors

If the Scheme is implemented, the outcome of the Scheme for the Obligors (other than the Companies) is that to the extent of the Total Debt Contribution Amount (being the Total Aggregate Amount of US$293,940,000 as at 1 April 2017, less US$88,000,000 plus accrued / unpaid interest calculated at 1.50% on $US88,000,000 from 1 January 2017 to the Implementation Date) only, the Obligors will be released from their obligation to pay the Total Debt Contribution Amount under the Finance Documents.

Following implementation of the Scheme, the obligations of the Obligors under the Finance Documents will continue and, except to the extent amended, varied or released under the Scheme, will retain all of their rights, powers and obligations under the Finance Documents.

6.10 Summary of Australian shareholder rights and protections

The Corporations Act affords a number of rights to members, and includes a number of minority shareholder protections. These rights and protections include, but are not limited to, the following:

(a) Right to request a general meeting of members: Section 249D of the Corporations Act provides that the directors of a company must call and arrange to hold a general meeting of members on the valid request of members with at least 5% of the votes that may be cast at the general meeting.

(b) Right to requisition a general meeting of members: Section 249F of the Corporations Act provides that members with at least 5% of the votes that may be cast at a general meeting of the company may call, and arrange to hold, a general meeting.

(c) Right to propose resolutions at a general meeting of members: Section 249N of the Corporations Act provides that the following may give a company notice of a resolution that they propose to move at a general meeting:

(i) members with at least 5% of the votes that may be cast on the resolution; or

(ii) at least 100 members who are entitled to vote at the general meeting.

The notice must be in writing, set out the wording of the proposed resolution and be signed by the members proposing to move the resolution. The resolution must be considered at the next general meeting that occurs more than 2 months after the notice is given.

(d) Information access rights: The Corporations Act affords rights to shareholders to access certain information about the Companies. These include the right to

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inspect the Companies' registers of members and minute books for members' meetings.

(e) Ability to seek relief for "oppressive conduct": Part 2F.1 of the Corporations Act provides for a "statutory oppression" remedy for members, which provides the court with broad powers to grant relief to a member if the conduct of the company is either:

(i) contrary to the interests of the members as a whole; or

(ii) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member (or members) whether in that capacity or another capacity.

Examples of oppressive or unfair conduct can include:

(iii) an issue of shares by the directors to the disadvantage of a minority;

(iv) improper diversion of business or business opportunities; and

(v) denial of access to information.

The orders a court can make on the finding of oppressive or unfair conduct are broad, and may include:

(vi) that the company be wound up;

(vii) that the company's constitution be amended or repealed;

(viii) regulating the conduct of the company's affairs in the future; and

(ix) authorising a member to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company (e.g. by way of statutory derivative action).

The acquisition of Shares and other interests in BLY is regulated by Chapter 6 of the Corporations Act. For a brief discussion about relevant restrictions imposed by Chapter 6, see Section 9(f) of this Explanatory Statement.

Further, rights attaching to the Shares and the terms and conditions of the Warrants (see Section 10.4) provide certain other protections to Noteholders of those securities.

6.11 Who will be bound by the Scheme?

If the Scheme becomes effective, it will bind each 7% Scheme Creditor, each Subordinate Claim Holder and the Companies. By operation of the Deeds Poll, provided that they are executed, it will bind the Scheme Administrators, the Obligors, the Trustee and any person who is or was a director or officer of any Obligor between 28 March 2011 and the Implementation Date and who has signed a Released Obligor Individual Deed Poll.

If you are a Noteholder and you do not vote at the Scheme Meeting, or you vote against the Scheme, you will be bound by the Scheme, provided that the Scheme is agreed to by the Requisite Majority and is approved by the Court, and you remain a Noteholder as at the Effective Date.

6.12 Execution risks

The execution risks that could prevent the Scheme being implemented include:

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(a) the Shareholder Resolutions are not passed by the Shareholders at the Shareholder Meeting;

(b) the Requisite Majority do not agree to the Scheme;

(c) the Requisite Majority do not agree to the Secured Creditor Scheme;

(d) the Court does not approve the Scheme or it approves the Scheme with alterations or conditions that change the substance of the Scheme, including the Steps, in a material way;

(e) a person objecting to the Scheme appeals against the Court's orders approving the Scheme (and potentially seeks a stay of those orders pending resolution of that appeal) or applies for injunctive relief and the Court orders the stay or grants an injunction without requiring the person to give the usual undertaking as to damages;

(f) the conditions precedent to the Scheme are not satisfied including, but not limited to, the Secured Creditor Scheme not becoming effective pursuant to section 411(10) of the Corporations Act; or

(g) the Restructuring Support Agreement is terminated in accordance with its terms.

It is also fundamental to the operation of the Scheme that:

(a) the Trustee performs its obligations in connection with the Scheme. The Trustee has undertaken to sign and provide a deed poll on the Effective Date under which they agree to be bound by the Scheme;

(b) the Scheme Administrators perform their obligations in connection with the Scheme; and

(c) the 7% Scheme Creditors perform their obligations in connection with the Scheme. Under the Scheme, each 7% Scheme Creditor will irrevocably direct the Scheme Administrators to execute and deliver, as its attorney and agent, a 7% Scheme Creditor Deed Poll under which it agrees to complete certain actions.

6.13 Modification of the Scheme

(a) Modifications by the Noteholders

It is possible that a Noteholder may propose a modification to the terms of the Scheme at the Scheme Meeting (prior to passing of the Resolution to agree the Scheme) or apply to the Court for a modification of the terms of the Scheme.

Although it is permissible for a Noteholder to propose a modification and for a Scheme Meeting to consider a resolution to approve the modification proposed, Noteholders should be aware that the consequences of modifying the terms of the Scheme include:

(i) if the modification is materially adverse to the Companies or any particular 7% Scheme Creditor or class of them, it may give rise to a basis, which may not otherwise exist, for the Court to refuse to approve the modified Scheme. In such circumstances, the Scheme will not become effective (in either the modified or original form);

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(ii) the Companies may not consent to the modified Scheme and therefore the Companies may not be prepared to seek the Court's approval of the modified Scheme; and

(iii) depending on the nature and extent of the modifications and their impact upon the overall Scheme, the modifications could effectively invalidate any previously obtained consents and, if so, then the consequences may be that further consents would need to be obtained.

(b) Modifications by the Court

Under section 411(6) of the Corporations Act, the Court may approve the proposed Scheme at the Second Court Hearing subject to alterations or conditions as it thinks just.

The conditions precedent to the Scheme (outlined in Section 6.2 above) include that the Scheme will only come into effect if, among other things, the Court's alterations or conditions (if any) to the Scheme do not change the substance of the Scheme, including the Steps, in any material way.

6.14 The Scheme Administrators

If the Scheme is agreed to by the Noteholders and approved by the Court, the Scheme Administrators will be appointed in accordance with the terms of the Scheme Administrators Deed Poll. Scott Kershaw and Jenny Nettleton of KordaMentha have agreed to act as Scheme Administrators.

Under the terms of the Scheme Administrators Deed Poll, each Scheme Administrator:

(a) consents to the Scheme;

(b) agrees to be bound by the Scheme as if they were a party to the Scheme; and

(c) undertakes:

(i) to accept all appointments, authorisations and directions, to perform all obligations and undertake all actions attributed to him or her under the Scheme;

(ii) to do all things necessary and execute all further documents necessary to give full effect to the Scheme and all transactions contemplated by it; and

(iii) not to act inconsistently with any provision of the Scheme.

The Scheme Administrators' liability in the performance or exercise of their powers, obligations and duties under the Scheme is limited in accordance with the Scheme.

The remuneration of the Scheme Administrators, their partners and staff will be calculated on a time basis at the hourly rates set out in Annexure E to this Explanatory Statement. The Scheme Administrators' Costs of administering the Scheme are estimated to be up to AU$200,000.

6.15 Challenging the Scheme Administrators generally

A 7% Scheme Creditor who is aggrieved by any act, omission or decision of the Scheme Administrators may appeal to the Court under section 1321 of the Corporations Act. The Court may confirm, reverse or modify the act or decision, or remedy the omission, as the case may be, and make such orders and directions as the Court thinks fit.

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7. The KORDAMENTHA Report

7.1 Scope of the KordaMentha Report

Ashurst, on behalf of the Companies, has engaged KordaMentha to prepare a report addressing the following matters:

(a) the solvency of the Group following the implementation of the BLY Schemes. Ashurst requested that solvency be determined:

(i) following completion of the Scheme; and

(ii) with reference to section 95A of the Corporations Act.

(b) the value of the assets of the Group generally relative to the debts owing under the Finance Documents;

(c) the expected dividend that would be respectively available to the 7% Scheme Creditors, Secured Scheme Creditors and Subordinate Claim Holders if the BLY Schemes are not implemented and the Companies were to be wound up within 6 months of the hearing of the application for an order under section 411(1) and (1A) of the Act;

(d) the expected dividend that would be respectively paid to the 7% Scheme Creditors, Secured Scheme Creditors and Subordinate Claim Holders if the BLY Schemes are put into effect as proposed;

In relation to (d) Ashurst instructed KordaMentha that:

(i) the requirement to calculate the expected dividend that would be paid to 7% Scheme Creditors and Secured Scheme Creditors if the Scheme were to be put into effect as proposed is drawn from S 8201(b) in Part 2 of Schedule 8 of the Corporations Regulations;

(ii) if, in response to paragraph 7.1(a) above, KordaMentha concluded that the Companies would be solvent following the implementation of the BLY Schemes, the Companies would not be wound up following the implementation of the BLY Schemes and based on the terms of the BLY Schemes, despite the calculation required by the Corporations Regulations, no dividend would actually be paid to the Secured Scheme Creditors and 7% Scheme Creditors. In these circumstances, the instruction in paragraph 7.1(d) above still requires KordaMentha to calculate the dividend that would be paid to Secured Scheme Creditors and 7% Scheme Creditors if the BLY Schemes were implemented, which dividend must be calculated as if a winding up follows the implementation of the BLY Schemes even though it would not do so in KordaMentha's opinion; and

(iii) if KordaMentha concludes in response to paragraph 7.1(a) above that the Companies would be solvent following the implementation of the BLY Schemes, in order to reduce the risk that a reader of their report might be confused by the use of the term "expected dividend" in circumstances where the Companies are not being wound up, Ashurst requested that where KordaMentha addresses the calculation described in paragraph 7.1(d) above in their report they refer to implied value of the interests of the Secured Scheme Creditors and the 7% Scheme Creditors (Implied Value) instead of "expected dividend".

(e) the likely outcome for the Group if the BLY Schemes are not implemented:

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(i) having regard to the Companies' existing financial position, and projections; and

(ii) for the purposes of considering this matter only, assuming that there is no standstill in place in respect of the interest payments due to the 7% Scheme Creditors and the Secured Scheme Creditors on 1 April 2017.

7% Scheme Creditors should consider the entire KordaMentha Report, which is at Annexure B, before deciding how to vote.

7.2 Expected dividends / Implied Value to creditors

Subject to the assumptions made in the KordaMentha Report, KordaMentha is of the opinion that:

(a) If the BLY Schemes are not implemented and the Companies are wound up within six months of the First Court Date, then the expected dividends which would be paid to the Secured Scheme Creditors, 7% Scheme Creditors and holders of Subordinate Claims would be as follows.

Scheme Creditors	Return (cents in $)
TLA Purchasers	32.6
TLB Purchasers	35.4
10% Noteholders	22.1
Holders under the Indenture	Nil
Subordinate Claims	Nil

KordaMentha notes that if the Group was to be placed into an insolvency process, there are two primary ways in which the assets of the Group could be realised for the Secured Scheme Creditors and 7% Scheme Creditors:

(i) in an orderly and coordinated way, with the appointment of external controllers made only to a limited number of key entities in the Group, leaving much of the Group's operations outside of the formal insolvency process; or

(ii) in an uncontrolled manner, whereby most if not all Group entities fall into insolvency proceedings in their respective jurisdictions.

For the purposes of determining the expected dividend to Secured Scheme Creditors and 7% Scheme Creditors if the Companies are wound up, KordaMentha has assumed a controlled insolvency process could be achieved, by way of a limited insolvency.

KordaMentha notes that an uncontrolled insolvency process would result in lower realisations and hence a lower expected dividend to Secured Scheme Creditors than in a controlled insolvency scenario.

(b) If the BLY Schemes are put into effect as proposed, the Implied Value of the interests of the Secured Scheme Creditors, 7% Scheme Creditors and holders of Subordinate Claims after implementation of the BLY Schemes would be as follows.

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Scheme Creditors	Implied Value (cents in $)
TLA Purchasers	47.2
TLB Purchasers	64.3
10% Noteholders	61.0
Holders under the Indenture	Nil
Subordinate Claims	Nil

7.3 KordaMentha's conclusions on asset value and solvency

(a) Subject to the assumptions made in the KordaMentha Report, KordaMentha is of the opinion that the Group will be solvent after implementation of the BLY Schemes.

(b) In respect to its opinion set out in (a) above, KordaMentha notes that:

(i) as at the date of the KordaMentha Report, the Group has not paid accrued interest of approximately $19,700,000 owing pursuant to the 10% Secured Notes Indenture and the Indenture, which was due on 1 April 2017 (the Coupon Payment);

(ii) it is proposed under the terms of the BLY Schemes that the Coupon Payment be deferred in the case of the 10% Secured Notes Indenture portion and equitized in the case of the Indenture portion;

(iii) the Group has obtained agreement to their non-payment of the Coupon Payment from a majority of the 10% Noteholders in relation to the 10% Secured Notes Indenture and a majority of the Noteholders in relation to the Indenture as a term of the Restructuring Support Agreement;

(iv) the Group has advised that it is entitled to withhold payment of the Coupon Payment pending the determination of the BLY Schemes; and

(v) if the payment of interest is required in relation to some of the secured notes under the 10% Secured Notes Indenture or some of the unsecured notes under the Indenture, KordaMentha's solvency opinion expressed above at (a) is withdrawn.

(c) Subject to the assumptions made in the KordaMentha Report, KordaMentha is of the opinion that the enterprise value of the Group is $266,600,000, which is less than the Group's secured indebtedness.

7.4 Conclusions as to most likely outcome if Scheme not implemented

Subject to the assumptions made in the KordaMentha Report, KordaMentha is of the opinion that, if the BLY Schemes are not implemented, the Group would likely be placed into external administration.

7.5 KPMG Report and valuation methodology

BLY has engaged KPMG Financial Advisory Services (Australia) Pty Ltd (of which KPMG Corporate Finance is a division) to prepare an independent expert's report indicating

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whether, in KPMG Corporate Finance's view the Recapitalisation transaction is fair and reasonable to non-associated shareholders of BLY (the KPMG Report).

The KPMG Report includes an enterprise value of the Group which differs from the enterprise value of the Group included in the KordaMentha Report.

KPMG's enterprise valuation of $550.0 to $650.0 million adopts a through-the-cycle approach by looking at the historical 3 year ($21.1m), 5 year ($98.5m) and 7 year ($153.0m) average adjusted EBITDA and statutory EBITDA ending December 2016 and the 3 year ($24.0m), 5 year ($42.1m) and 7 year ($127.0m) average adjusted EBITDA and statutory EBITDA ending December 2017. Based on this analysis, KPMG selected a maintainable EBITDA range of $100.0 million to $130.0 million. An EBITDA multiple of 5.5 to 5.0 times EBITDA was then applied to derive an enterprise value for the Group utilising through-the-cycle multiples observed for comparable companies.

KordaMentha's enterprise valuation of $246.5 to $286.6 million is based on the Group’s current and near term forecast earnings. In determining this value, KordaMentha adopted the FY17 budgeted earnings (adjusted for restructuring costs) ($40.1 million) as being representative of the maintainable earnings of the business. An EBITDA multiple of 6.0 to 7.0 times EBITDA was then applied to derive an enterprise value for the Group.

While KordaMentha and KPMG have both adopted a capitalisation of earnings approach, the differences in enterprise value result from the different basis of earnings and capitalisation rates applied by each.

If creditors would like to view the KPMG Report, it is expected to be disclosed to ASX in due course and will be available at http://www.boartlongyear.com/company/investors/announcements/.

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8. Reasons NOTEHOLDERS may Consider Voting for the Scheme

The reasons why the Noteholders may consider voting in favour of the Scheme include:

(a) Debt for equity swap and potential for uplift in value from ownership of Transaction Securities when compared to insolvency process

If the Scheme is approved, the Noteholders will release the Obligors from their obligations to pay a portion of the Debt to the Noteholders and will receive Scheme Shares and Scheme Warrants from BLY.

As security holders, the Noteholders may have the opportunity to realise the value of their converted debt through any increase in the value of the Scheme Shares or Scheme Warrants on sale, transfer or exercise. The Noteholders may consider that the potential to recover value through sale, transfer or exercise of the Scheme Shares or Scheme Warrants is an advantage when compared to the likely crystallisation of loss that would occur for some or all Noteholders on an insolvency event.

Further, Noteholders may consider that a formal insolvency process is likely to be destructive to the realisable value of the Companies' business and assets, which may further diminish the recoverable value of the Debt owed to them.

(b) Avoidance of uncertainties associated with insolvency

The Scheme will provide a means by which the debt owed to the Noteholders under the Indenture will be restructured without the appointment of a voluntary administrator, liquidator or receiver and manager to the Companies or the Obligors.

The Scheme will minimise disruption to the business and the diminution of value that could occur as a consequence of such appointments. Any appointment of an administrator, liquidator or receiver and manager may result in certain counterparties being entitled to terminate contracts with the Companies. This would be detrimental to the ongoing businesses of the Companies, particularly with respect to the Companies' relationships with its key customers, and would affect the value that could be realised out of a sale of the assets of the Companies and the Group.

Given the global nature of the Companies, an insolvency proceeding in Australia could lead to a number of similar protections being sought in a number of other countries world-wide.

(c) Avoidance of insolvency expenses

The legal, administrative and funding costs associated with the administration, liquidation or receivership and management of the Companies would be avoided if the Scheme is approved and implemented. KordaMentha have estimated that the costs of an insolvency process involving the Companies and other Obligors would be approximately AU$30 million (consisting of realisation costs in relation to insolvency professionals, legal counsel, valuation firms, investment banks and other professional costs).

(d) Transaction certainty

Effecting a restructuring by way of the Scheme will provide greater transaction certainty for the Noteholders and the Companies (which will continue to operate

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the business) than could be achieved without the Scheme in circumstances in which the Noteholders do not unanimously consent to the proposed restructuring.

In the event that the Court makes orders approving the Scheme and those orders are lodged with ASIC (and subject to satisfaction of the conditions precedent), the steps that give effect to the restructure will have the force of law.

(e) Ability for Companies to continue to trade and raise additional funds

If the Scheme is implemented, the potential for the Companies to continue to trade and operate their businesses will be improved by a lower debt burden and enhanced liquidity through (i) a reduced cash interest burden and (ii) the New ABL Revolver. Over time, the Companies could generate an uplift in value for all of BLY's Shareholders and Warrant Holders (including the Noteholders in their capacity as Shareholders and Warrant Holders).

The decrease in overall debt (and corresponding effect on the Companies' balance sheets) may enable the Companies to explore further fund raising opportunities in the future for the purpose of business growth and expansion (subject to the terms of the Fourth Supplemental Indenture).

(f) Statutory protections for Shareholders in BLY

As BLY is a public company, its Shareholders will have certain statutory protections, details of which are set out in Section 6.10. Further, as the Scheme Shares are listed on ASX, those securities may be more readily sold or transferred by the Noteholders in the future when compared to both distressed debt and securities in an unlisted company.

(g) Limit on Subordinate Claims

If the Scheme is implemented, the rights of Subordinate Claim Holders to bring Subordinate Claims against BLY will be limited, reducing its potential exposure to the risks associated with such claims.

These potential advantages must be considered in light of the potential disadvantages of the Scheme, which are discussed in Section 9 below.

Noteholders are encouraged to obtain independent legal, financial and taxation advice in relation to their own individual circumstances.

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9. Reasons NOTEHOLDERS may CONSIDER votING against the scheme

The reasons why the 7% Scheme Creditors may consider voting against the Scheme include:

(a) Insolvency return

Noteholders may consider voting against the Scheme if they consider there is potential for a better return to them under a formal solvency process.

If the Scheme is not implemented, it is likely that an insolvency event will occur in relation to the Companies. In that circumstance, some Noteholders may consider that there would be a better return to them than the return available under the Scheme.

Noteholders should have regard to the opinions in the KordaMentha Report in this regard (summarised in Section 7).

(b) Release of substantial portion of debt owed to Noteholders

As a result of implementation of the Scheme, and subject to any limitations set out in the Scheme, the 7% Scheme Creditors will release the Companies and the Obligors from all Claims and obligations under the Finance Documents to the extent of the Total Debt Contribution Amount and, following that release, will have no further right to recover the Total Debt Contribution Amount as a debt from the Companies or any of the Obligors.

The Total Debt Contribution Amount as at 1 April 2017 is estimated to be US$205,610,000, representing approximately 70% of the total outstanding Debt.

The release of the Total Debt Contribution Amount under the Scheme, and the loss of rights to recover that amount as a debt from the Companies and the Obligors, should be considered in light of the conclusions set out in the KordaMentha Report, which estimate that Noteholders would recover nothing in the event the Companies were subject to a formal insolvency process.

(c) Benefits obtained by Centerbridge under the Recapitalisation Transactions

7% Scheme Creditors may consider voting against the Scheme if they form the view that the benefits conferred on Centerbridge by the Recapitalisation Transactions are disproportionate to those conferred on other creditors by those same transactions.

If the Recapitalisation Transactions are implemented, Centerbridge will obtain the following benefits which 7% Scheme Creditors may consider significant:

The percentage of ordinary shares in BLY held by Centerbridge will increase to 56% as a result of a new issue of shares being made in consideration of Centerbridge agreeing to reduce its contractually agreed rate of PIK interest on the Term Loan A and Term Loan B from 12% to 10% (until December 2018) and then 8% thereafter. The increase to 56% described above will occur as follows:

(i) Centerbridge's existing shareholding of 48.9% will be diluted by the issue of shares to Noteholders when the Scheme is implemented;

(ii) Centerbridge will then convert the Convertible Preference Shares it currently holds to ordinary shares, which will result in Centerbridge holding 3.7% of the shares in BLY; and

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(iii) further shares will be issued to Centerbridge under the Subscription Deed such that Centerbridge holds 56% of the ordinary shares in BLY.

Centerbridge will be entitled to nominate 5 directors for appointment to the board of BLY. Currently, Centerbridge is entitled to nominate 4 directors for election to the board of BLY pursuant to an appointment agreement concluded as part of a restructuring transaction that took place in 2015.

With the exception of Ares and Ascribe, who will be entitled to nominate one director to be elected to the board of BLY each, along with an additional joint nominee, no other creditors will receive these benefits.

The effect of the Recapitalisation Transactions on Noteholders is set out in Part 1 of the table in Section 3.10. Other aspects of the Recapitalisation Transactions are set out in Parts 2 to 4 of the table in Section 3.10. When considering that table, 7% Scheme Creditors should bear in mind that Centerbridge holds 100% of the Term Loan A and the Term Loan B and a portion of the notes issued under the 10% Secured Notes Indenture.

Whilst Centerbridge, as the holder of the Term Loan A and the Term Loan B, is required to waive any rights which arise in its favour as a result of a change of control which occurs as a consequence of the implementation of the Recapitalisation Transactions, 7% Scheme Creditors may form the view that the concession being made by Centerbridge in this regard is less significant than that made by other creditors because Centerbridge will be the beneficiary of that change of control as it is the recipient of Shares, as described above.

7% Scheme Creditors may also consider that the concession made by Centerbridge in relation to the extension of maturity dates applicable to the Term Loan A, Term Loan B and 10% Secured Notes Indenture under the Scheme is less significant than that made by other Secured Creditors on the basis that the maturity dates under the Term Loan A and the Term Loan B are currently 4 January 2021, whilst the maturity date under the 10% Secured Notes Indenture is currently 1 October 2018.

(d) Shares and Warrants in the Companies

The Scheme, if implemented, will result in the 7% Scheme Creditors holding Shares and Warrants. The Claims of the 7% Scheme Creditors as Shareholders will rank behind the Claims of any secured or unsecured creditors of the BLY. As a Shareholder, any returns (in the form of dividends or capital returns) are dependent on the financial performance of BLY and the amount which the BLY Board determines should be distributed to Shareholders. As debt holders, the return to the Noteholders under the Indenture is in the form of interest, which is a contractual right which takes priority over the rights of Shareholders.

In addition, some of the 7% Scheme Creditors may be subject to prudential requirements which impose obligations and requirements in connection with holding Shares which would not apply to the holding of debt.

(e) BLY's business

There are risks associated with holding equity securities in BLY. No assurances can be given in respect of the future performance or prospects of BLY, the value of, or return on, Shares in BLY or the ability of any Shareholder to sell their Shares in the future.

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(f) Chapter 6 restrictions

BLY is an ASX listed public company with more than 50 members and, as such, is subject to Chapter 6 of the Corporations Act. Chapter 6 imposes certain restrictions on the acquisition of "relevant interests" in Shares. These include the following:

(i) a person cannot acquire a relevant interest in Shares if, because of that acquisition, that person’s (or another person's) voting power in BLY increases:

(A) from 20% or below to more than 20%; or

(B) from a starting point that is above 20% and below 90%,

other than in ways permitted by the Corporations Act (the Takeovers Prohibition); and

(ii) becoming associated with other Shareholders, in relation to matters such as voting Shares and determining appointments to the BLY Board, where the aggregated shareholdings of the associated Shareholders would breach the Takeovers Prohibition.

A "relevant interest" under the Corporations Act is a broad concept. Generally speaking, a person will have a relevant interest in securities where they are the holder of the securities, where they can exercise or control the voting rights attached to those securities or dispose of, or control the disposal of, those securities.

Importantly, in the context of the Takeovers Prohibition, a person's "voting power" in BLY is calculated by aggregating the number of Shares in which that person has a relevant interest with the number of Shares in which each person who is an “associate” of that person has a relevant interest. Generally speaking, two or more persons will be taken to be associates in relation to BLY if:

(i) they are body corporates belonging to the same corporate group;

(ii) they have entered into an agreement, arrangement or understanding for the purpose of controlling or influencing the composition of the BLY Board or the conduct of BLY's affairs; or

(iii) they are acting, or proposing to act, "in concert" in relation to BLY's affairs.

While the acquisition of the Scheme Shares by the 7% Scheme Creditors pursuant to the Scheme falls within an exception to the Takeovers Prohibition (see item 17 of section 611 of the Corporations Act), the restrictions and other legal considerations outlined above will apply in respect of any increases to the voting power of any such person following implementation of the Scheme – for example, pursuant to the exercise of a Warrant.

Furthermore, as a Shareholder, a 7% Scheme Creditor will be subject to certain ongoing notification requirements under the Corporations Act. For example, a 7% Scheme Creditor must make the notifications described below:

(i) in circumstances where they (together with their associates) have relevant interests in voting shares of BLY or interests representing 5% or more of the total votes of BLY (or if the person has made a takeover bid for voting shares or interests in BLY) (this is called a Substantial Holding), by

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lodging an ASIC Form 603 "Notice of Initial Substantial Shareholder" with BLY and ASX;

(ii) for each 1% (or more) change in their Substantial Holding, by lodging a Form 604 "Notice of Change of Interests of Substantial Shareholder" with BLY and ASX;

(iii) if they cease to have a Substantial Holding (that is, their relevant interest in voting shares of BLY or interests in the total votes of BLY, falls below 5%), by lodging a Form 605 "Notice of Ceasing to be a Substantial Shareholder" with BLY and ASX.

Generally speaking, these forms must be lodged within two Business Days after the 7% Scheme Creditor (or their associate, as the case may be) becomes aware of either the transaction effecting the change or the change in percentage holding itself.

7% Scheme Creditors should seek their own independent legal advice on the effect of Chapter 6 of the Corporations Act on the Companies.

(b) Release of directors and officers of the Companies and Obligors

The Scheme provides for the 7% Scheme Creditors to release the Obligors and any person who is or was a director or officer of any of the Obligors between 28 March 2011 and the Implementation Date and who signs a Released Obligor Individual Deed Poll from all Claims relating to any fact, matter, circumstance or event that arose or occurred in respect of, or in connection with, any Obligor between 28 March 2011 and the Implementation Date.

Noteholders may consider that they have a potential Claim against one or more of these individuals or Obligors, which would result in a recovery in favour of the 7% Scheme Creditors and may, accordingly, wish to vote against the Scheme and pursue that Claim, whether by placing the Companies or the Obligors or any of them into external administration or otherwise (although the Companies are not aware of any potential Claims that may be available against any of those people).

These potential disadvantages must be considered in light of the potential advantages of the Scheme, which are discussed in Section 8 above.

Noteholders are encouraged to obtain independent legal, financial and taxation advice in relation to their own individual circumstances. 7% Scheme Creditors are not obliged to follow the recommendation of the Companies and may decide to vote against the Scheme.

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10. additional information

10.1 Ongoing analysis of business operations

Noteholders should be aware that BLY, with the assistance of outside consultants, is currently conducting a detailed jurisdiction-by-jurisdiction analysis of the Group's business operations. The goal is to increase cash generation by exiting operations that are not cash flow positive and are not deemed to be sufficiently strategic for BLY to prioritise fixing. As part of this process, BLY may determine to pursue, and commence, the wind-up or liquidation of operations or entities in Mexico, Zambia, Sierra Leone, Liberia, Thailand, South Africa, Madagascar, Kazakhstan, Cambodia, Peru, Burkina Faso, Colombia, and the Netherlands. However, it is possible that further analysis may lead to a determination that other operating entities need to be closed as well. Accordingly, BLY makes no representation that the Group will continue to operate in the same number of locations as it does presently.

Noteholders should consider consulting their professional advisers before deciding whether to vote in favour of the Scheme.

10.2 Material interests of Directors

The current directors of the Companies are:

(a) In respect of BLY:

(i) Bret Clayton

(ii) William Peter Day

(iii) Jeffrey Long

(iv) Gretchen McClain

(v) Rex John McLennan

(vi) Jeffrey Robert Olsen

(vii) Deborah O'Toole

(viii) Marcus Randolph

(ix) Conor Tochilin

(b) In respect of BLY Australia:

(i) Fabrizio Rasetti

(ii) Matthew Robert Broomfield

(iii) Jeffrey Robert Olsen

(iv) Shannon Emrick

(c) In respect of the BLY Issuer:

(i) Matthew Robert Broomfield

(ii) Jeffrey Robert Olsen

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(iii) Fabrizio Rasetti

(d) In respect of Votraint:

(i) Fabrizio Rasetti

(ii) Matthew Robert Broomfield

(iii) Jeffrey Robert Olsen

(iv) Shannon Emrick

(together, the Directors).

Except as disclosed below or elsewhere in this Explanatory Statement, as at the date of this Explanatory Statement, no Director of either of the Companies has any interest, whether as a Director, member or creditor of the Companies or otherwise, that is material in relation to the Scheme, and the Scheme has no effect on the interests of any Director of the Companies that is different to the effect on the like interests of other persons.

The current ownership of Shares by each Director is disclosed and regularly updated on BLY’s ASX website. The Directors have received approximately half of their Director fees in Shares for approximately the past two years and, therefore, each of them currently holds Shares in BLY, with the exception of Conor Tochilin (who, as a CBP employee, does not receive fees and holds no Shares). Jeffrey Olsen (who is Managing Director) has not received any Shares for his Director fees, however holds Shares in BLY. The Directors' Shares will be subject to the same dilution and treated as any other individual Shareholder in the proposed restructuring.

The BLY Board has approved special, one-time fees ranging from US$30,000 to US$45,000 for the Directors (excluding Jeffrey Olsen and Conor Tochilin) for the additional work and efforts provided by the Directors to support the restructuring being pursued by the Companies. The special payment will be paid in May 2017. The special fee is not contingent on an outcome for the restructuring, but is based on the effort and exertions of the Directors to this point. Otherwise, the Directors are not entitled to receive any bonus, grant or other specific compensation as a consequence of the conclusion of the Recapitalisation Transactions or any related milestone in the process.

On implementation of the Scheme, and in accordance with the terms of the Restructuring Support Agreement, the number of Directors will be nine including the Chief Executive Officer. Ares and Ascribe will each be entitled to nominate one director each and one director jointly, and CBP will nominate five CBP Nominee Directors.

If the Scheme is implemented, each 7% Scheme Creditor will release certain people who were Directors or officers of any Obligor (being those Directors or officers who sign a Released Obligor Individual Deed Poll in the form of Schedule 7 to the Scheme) from all Claims relating to events that arose or occurred in respect of, or in connection with, any Obligor between 28 March 2011 and the Implementation Date.

10.3 Material interests of Scheme Administrators

The Scheme Administrators will be entitled to remuneration for their services as explained in Section 6.14. The hourly rates which will apply for the Scheme Administrators' services are set out at Annexure E.

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10.4 Rights and liabilities of Scheme Shares

The Scheme Shares proposed to be issued to Noteholders will be of the same class and will, once issued, rank equally in all respects with existing Shares (including equal voting rights and equal rights to dividends, profits and capital).

The rights and liabilities attaching to the Scheme Shares are identical in all material respects to the terms of the existing Shares.

The following is a summary of some of the key rights of the holders of Shares. This summary is not exhaustive nor does it constitute a definitive statement of the rights and liabilities of Shareholders under the Constitution. The Constitution is also available on the BLY's website (http://www.boartlongyear.com/company/corporate-profile/corporate-governance/constitution-of-boart-longyear-limited-2/)

(a) Voting

Subject to any rights or restrictions for the time being attached to any class or classes of Shares, every Shareholder present in person or by proxy at a general meeting of BLY has one vote on a show of hands and one vote per Share held on a poll.

(b) Meetings and notices

Each Shareholder is entitled to receive notice of and to attend and vote at general meetings of BLY and to receive all notices, accounts and other documents required to be sent to Shareholders under the Constitution, the Corporations Act or the ASX Listing Rules.

The quorum for a meeting of members is two Shareholders.

(c) Transfers

Subject to the Constitution, the Corporations Act, the ASX Settlement Rules and the ASX Listing Rules, a Shareholder may transfer all or any Shares by:

(i) a written transfer in the usual or common form or in any form the directors of BLY may prescribe or in a particular case accept, properly stamped (if necessary) and delivered to BLY;

(ii) a proper ASX Settlement and Transfer Corporation Pty Ltd transfer, which is to be in the form required or permitted by the Corporations Act or the ASX Settlement Rules; or

(iii) any other electronic system established or recognised by the ASX Listing Rules in which BLY participates in accordance with the rules of that system.

(d) Powers of directors

Subject to the Corporations Act and to any provision of the Constitution, the directors will manage, or cause the management of, the business of BLY. The directors may exercise, or cause to be exercised, all powers of BLY that are not, by the Corporations Act or by the Constitution, required to be exercised by BLY in general meeting.

(e) Shareholder liability

As the Scheme Shares being offered pursuant to the Scheme are fully paid shares in BLY, they are not subject to any calls for money by the Board.

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(f) Alteration of the Constitution

The Constitution can only be amended by a special resolution passed by at least 75% of the total number of votes cast by Shareholders voting in person, by proxy, by attorney or in the case of corporate Shareholders, by corporate representative.

10.5 Certified copy of Financial Statements

Certified copies of the financial statements in respect of the Companies to be lodged with ASIC as required by paragraph 8203(b) of Schedule 8 of the Corporations Regulations are set out at Annexure C to this Explanatory Statement.

10.6 Report as to affairs of Companies – ASIC Form 507

The report and information in respect of the Companies required by ASIC Form 507 and paragraph 8203(a) of Schedule 8 of the Corporations Regulations is set out at Annexure D to this Explanatory Statement.

10.7 The Noteholders

The relevant details of all known Noteholders as required by paragraphs 8201(c), (d), and (e) of Schedule 8 of the Corporations Regulations is set out at Annexure H to this Explanatory Statement.

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11. the Scheme Meeting and voting procedures

11.1 Time and place

The Scheme Meeting will be held to consider and, if thought fit, approve the Scheme at:

11:30am am on Tuesday, 30 May 2017

at

Ashurst, Level 11, 5 Martin Place, Sydney NSW 2000, Australia

11.2 Chairperson

It is intended that the Scheme Meeting will be chaired by Marcus Derwin, of FTI Consulting, or such other person as the Court may specify when making its orders under section 411(1) of the Corporations Act.

11.3 Agenda for the Scheme Meeting

The proposed agenda for the Scheme Meeting is as follows:

(a) the Chairperson will address those present at the Scheme Meeting, providing an explanation of the background to and purpose of the meeting;

(b) there will be a general presentation in relation to the proposed Scheme and attendees will be given a reasonable opportunity to ask questions in relation to the Scheme;

(c) the procedure for voting on the Scheme will be explained;

(d) the resolution to approve the Scheme will be put to the Noteholders present in person or by proxy, attorney or corporate representative at the Scheme Meeting for a vote.

11.4 Classes of 7% Scheme Creditors

In making its orders under section 411(1) of the Corporations Act to convene the Scheme Meeting, the Court did not order that the 7% Scheme Creditors be divided into separate classes. As such all 7% Scheme Creditors will all vote as one class.

11.5 Eligibility and entitlement to vote

Only Noteholders as at the Voting Entitlement Record Date are eligible to vote at the Scheme Meeting.

DTC (and its nominee) is included as a 7% Scheme Creditor to obtain the benefit of certain provisions of this Scheme and for technical reasons.  DTC (through its nominee, Cede & Co) is the registered holder of the 7% Notes. Accordingly, if the Scheme becomes Effective, DTC will be a 7% Scheme Creditor solely in that capacity, as it receives principal and interest on the 7% Notes.

To avoid double counting of interests in the 7% Notes at the Scheme Meeting, the voting procedure will be based on Cede & Co., in its capacity as nominee of DTC, in accordance with its usual procedures, appointing the Registered Participants as its proxies under the Omnibus Proxy in respect of the principal amount of the 7% Notes shown on its records maintained in book-entry form as being held by them as at the Voting Entitlement Record Date.

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Voting is not compulsory. However, Noteholders who do not vote at the Scheme Meeting will be bound by the Scheme, provided that the Scheme is agreed to by the Requisite Majority and approved by the Court.

Voting at the Scheme Meeting will be conducted by poll.

11.6 How to vote at the Scheme Meeting

A Noteholder who wishes to vote at the Scheme Meeting must ensure that they lodge a completed Proxy Form (set out in Annexure F to this Explanatory Statement) with their Registered Participant in sufficient time to allow their Registered Participant to (a) complete a Voting Proof of Debt Form (set out in Annexure G to this Explanatory Statement) on behalf of the Noteholder and (b) lodge the Proxy Form and Voting Proof of Debt Form (together, the Voting Forms) with the Information Agent by no later than 4.00 pm on 25 May 2017 (New York City Time) in order to establish the amount of the relevant Noteholder's Claim against the Companies under the Indenture for voting purposes.

Noteholders should also consider Section 11.7 below in relation to the adjudication of Voting Proof of Debt Forms by the Chairperson.

(a) Voting by proxy

If a Noteholder does not wish to attend the Scheme Meeting in person, they can either appoint the Chairperson of the Scheme Meeting or another person as proxy to attend and vote at the Scheme Meeting on behalf of the Noteholder as directed by the Noteholder.

(b) Voting in person

Any Noteholder who wishes to attend and vote at the Scheme Meeting in person will still need to properly complete, sign and return a Proxy Form (with itself nominated as proxy) to their Registered Participant in sufficient time to enable the Registered Participant to complete and certify the Voting Forms and forward the same to the Information Agent by no later than 4.00 pm on 25 May 2017 (New York City Time).

Where the Noteholder is a corporation, it may appoint a proxy, attorney or corporate representative to attend the Scheme Meeting on its behalf. Any attorney or corporate representative should bring to the Scheme Meeting evidence of his or her appointment including authority under which the appointment was made.

11.7 Adjudication of Voting Proof of Debt Forms

The Chairperson of the Scheme Meeting has power to admit (wholly or in part) or reject a proof of debt or Claim, for the purposes of voting at the Scheme Meeting.

The Chairperson will adjudicate upon the Noteholder’s Claim as set out in a Voting Proof of Debt Form based on the information contained in or provided with the Voting Proof of Debt Form, as well the information known to the Chairperson and Information Agent. This may result in the Noteholder 's Claim being rejected, in whole or in part, or admitted for a higher or lower amount.

Any Noteholder who is aggrieved by the Chairperson's decision to admit or reject (in whole or in part) a Voting Proof of Debt Form or Claim for voting purposes may appeal the

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decision in Court by application to the Court filed within 48 hours of the decision, which application is to be heard at the time and place scheduled for the Second Court Hearing.

The admission of a Noteholder's Claim is for voting purposes only and does not constitute an admission of the existence or amount of the Noteholder's Claim against the Companies or any other person, and will not bind the Companies or the Noteholders concerned for any other purpose.

In the event of voluntary administration or liquidation of the Companies, the voluntary administrator or liquidator may adjudicate upon the Noteholder's Claim, if any, on a different basis than that which is used to adjudicate on the Noteholder's Claim for the purpose of voting at the Scheme Meeting, and therefore may admit Claims for a higher or lower amount. Noteholders are encouraged to obtain their own advice regarding the possible treatment of their Claims in a voluntary administration or liquidation scenario.

11.8 Modification of Scheme at Scheme Meeting

Noteholders may propose modifications to the Scheme at the Scheme Meeting. However, Noteholders should be aware that there are risks associated with modifying the terms of the Scheme at the Scheme Meeting. For more detail on these risks, refer to Section 6.13 of this Explanatory Statement.

11.9 Lodgement of documents and further queries

Complete Voting Proof of Debt Forms and Proxy Forms should be lodged in accordance with the instructions on those forms.

If you have any questions in relation to the Scheme Meetings, including completing and lodging Voting Proof of Debt Forms or Proxy Forms, please contact:

Attention: Boart Longyear Ballot Processing

c/o Prime Clerk LLC
830 Third Avenue

3rd Floor
New York

NY 10022
United States

Email: boartballotprocessing@primeclerk.com

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12. Interpretation and Glossary

12.1 Interpretation

The following general interpretation guidelines are included to assist Noteholders in understanding this document.

(b) Unless otherwise stated, all data contained in charts, graphs and tables is based on information available as at the date of this Explanatory Statement. All numbers are rounded unless otherwise indicated.

(c) A reference to:

(i) AU$, AUD or cents, is to Australian currency, unless otherwise stated; and

(ii) USD or US$ is to the currency of the United States of America, unless otherwise stated.

(d) All references to time are references to the time in Sydney, Australia.

(e) A reference to:

(i) a "section" or "paragraph" is to a section or paragraph of this Explanatory Statement;

(ii) a legislative provision or legislation (including subordinate legislation) is to that provision or legislation as amended, re-enacted or replaced, and includes any subordinate legislation issued under it;

(iii) a document (including this document) or agreement, or a provision of a document (including this document) or agreement, is to that document, agreement or provision as amended, supplemented, replaced or novated;

(iv) a party to an agreement includes a successor in title, permitted substitute or a permitted assign of that party;

(v) a person includes any type of entity or body of persons, whether or not it is incorporated or has a separate legal identity, and any executor, administrator or successor in law of the person; and

(vi) anything (including a right, obligation or concept) includes each part of it.

(f) A singular word includes the plural, and vice versa.

(g) If a word or phrase is defined, any other grammatical form of that word or phrase has a corresponding meaning.

(h) A word which suggests one gender includes the other genders.

(i) If an example is given of anything (including a right, obligation or concept), such as by saying that it includes something else, the example does not limit the scope of that thing.

(j) A reference to a matter being "to the knowledge" of the Companies means that the matter is to the best of the knowledge and belief of the Directors as at the date of this Explanatory Statement, after making reasonable enquiries in the circumstances.

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(k) A reference to "information" is to information of any kind in any form or medium, whether formal or informal, written or unwritten.

(l) The word "agreement" includes an undertaking or other binding arrangement or understanding, whether or not in writing.

(m) The expressions "subsidiary", "holding company" and "related body corporate" have the same meanings as is given to those expressions in the Corporations Act.

12.2 Glossary of terms

Capitalised terms used in this Explanatory Statement have the meanings set out below.

Noteholders should be aware that some of the documents in the Annexures to this Explanatory Statement have their own defined terms, which are sometimes different from those in this Glossary.

7% Note means the 7% senior notes issued under the Indenture.

7% Scheme Creditors means the Noteholders as at the Effective Date.

7% Scheme Creditor Deed Poll means the deed poll executed by the Scheme Administrator as attorney and agent for the 7% Scheme Creditors pursuant to the Scheme in substantially the form set out in Schedule 4 of the Scheme.

7% Unsecured Note Amendments means the proposed amendments to the Indenture, described in Section 5.3(a) and Section 5.3(c) of this Explanatory Statement.

10% Noteholders means each "Holder" or "Securityholder" as those terms are defined in the 10% Secured Notes Indenture.

10% Secured Note Amendments  means the proposed amendments to the 10% Secured Notes Indenture, described in Section 5.2(b) of this Explanatory Statement.

10% Secured Notes Indenture means the indenture dated 27 September 2013, between the BLY Issuer and U.S. Bank National Association, as trustee and collateral agent, amongst others, in respect of 10.00% secured notes due 2018, as amended, varied, or amended and restated from time to time.

A Warrants means the total number of A Warrants to be issued to the Noteholders in accordance with Step 4 (New Warrant issue) of the Scheme, of a number to be calculated in accordance with the formula set out in the Scheme and on the terms set out in schedule 8 of the Scheme.

Accrued Interest means the interest that would have accrued on the principal amount of the Securities under the Indenture in the period from and including 1 January 2017 to the Implementation Date if:

(a) as at 1 January 2017, the principal amounts of the Securities had been US$88,000,000 and not US$284,000,000; and

(b) the rate of interest payable on the principal amounts of the Securities during that period had been 1.5% and not 7%.

Administrative Requirements means the conditions precedent to the Fourth Supplemental Indenture.

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Admitted Claim means, in respect of a Noteholder, the amount for which the Noteholder's Claims against the Companies are admitted by the Chairperson for the purpose of voting at the relevant Scheme Meeting.

Affiliate has the meaning given to “affiliate” within the meaning of Rule 405 of the U.S. Securities Act.

Aggregate Amount means, in respect of a 7% Scheme Creditor, the amount of principal and accrued but unpaid interest owing by the Companies, whether actually or confidentially, to that 7% Scheme Creditor immediately prior to the commencement of Step 3 (New Share issue) of the Scheme on the Implementation Date.

Applicable Insurance Policy means any available policy of insurance under which BLY is entitled to indemnity in respect of any Subordinate Claim.

Ares means Ares Management LLC, on behalf of its affiliated funds and accounts being Ares Corporate Opportunities Fund IV, L.P. and Ares Special Situations Fund III, L.P. and Ares Enhanced Credit Opportunities Fund B, Ltd and Future Fund Board of Guardians and Ares Strategic Investment Partners Ltd and Ares SSF Riopelle, L.P. and SEI Institutional Managed Trust - High Yield Bond Fund and SEI Institutional Investments Trust - High Yield Bond Fund and AVIVA Staff Pension Scheme and Transatlantic Reinsurance Company and ASIP (HoldCo) IV S.À R.L. and Kaiser Foundation Hospitals and SEI Global Master Fund plc - The SEI High Yield Fixed Income Fund and Ares Enhanced Credit Opportunities Fund II, Ltd and Superannuation Funds Management Corporation of South Australia and Kaiser Permanente Group Trust and RSUI Indemnity Company and Goldman Sachs Trust II - Goldman Sachs Multi-Manager Alternatives Fund.

Ares Nominee Director means the person nominated by Ares to be considered by Shareholders for election at the Shareholders Meeting as a director of BLY pursuant to the Director Nomination Agreement whose notice of candidature is received by BLY by the date required by the Constitution.

Ares / Ascribe Joint Nominee Director means the person jointly nominated by Ares and Ascribe to be considered by Shareholders for election at the Shareholders Meeting as a director of BLY pursuant to the Director Nomination Agreements whose notice of candidature is received by BLY by the date required by the Constitution.

Ascribe means Ascribe II Investments LLC on behalf of itself and its managed funds being Ascribe Opportunities Fund II L.P. and Ascribe Opportunities Fund II(B) L.P.

Ascribe Nominee Director means the person nominated by Ascribe to be considered by Shareholders for election at the Shareholders Meeting as a director of BLY pursuant to the Director Nomination Agreement whose notice of candidature is received by BLY by the date required by the Constitution.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited or the financial market operated by ASX Limited, as the context requires.

ASX Listing Rules means the listing rules of ASX, as waived or modified by ASX in respect of BLY, the Scheme or otherwise.

B Warrants means the total number of B Warrants to be issued to the Noteholders in accordance with Step 4 (New Warrant issue) of the Scheme, of a number to be calculated in accordance with the formula set out in the Scheme and on the terms set out in Schedule 8 of the Scheme.

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BLY means Boart Longyear Limited ACN 123 052 728.

BLY Australia means Boart Longyear Australia Pty Ltd ACN 000 401 025.

BLY Issuer means Boart Longyear Management Pty Limited ACN 123 283 545.

BLY Schemes means the Scheme and the Secured Creditor Scheme.

Business Day means a day (other than a Saturday, Sunday or public holiday) on which banks are open for general banking business in Sydney, New South Wales and Adelaide, South Australia.

Calculation Date means the day that is the second Business Day after the Effective Date.

CBP means CCP II Dutch Acquisition - ND2, B.V and CCP Credit SC II Dutch Acquisition - ND, B.V

CBP Nominee Directors means those persons (not exceeding five) nominated by Centerbridge Partners, L.P. on behalf of CBP, and its and their affiliates and managed funds to be considered by Shareholders for election at the Shareholders Meeting as a director of BLY pursuant to the Director Nomination Agreement whose notice of candidature is received by BLY by the date required by the Constitution.

CBP Registered Holders means CCP II Dutch Acquisition – E2, B.V. and CCP Credit SC II Dutch Acquisition – E, B.V.

Centerbridge means Centerbridge Partners L.P. and those entities affiliated with it.

Chairperson means Marcus Derwin of FTI Consulting (or, if he is unavailable, Michael McCreadie of the FTI Consulting).

Claim means, in relation to a person, any claim, allegation, cause of action, proceeding, debt, liability, suit or demand made against the person concerned however it arises and whether it is present or future, fixed or unascertained, actual or contingent or otherwise whether at law, in equity, under statute or otherwise.

Change of Control Event means any change of control event, in each case howsoever described, which occurs under any of the Finance Documents at any time, up to and including the Implementation Date.

Companies means the BLY Issuer, BLY, BLY Australia and Votraint.

Competing Proposal means any dissolution, winding up, liquidation, reorganisation, assignment for the benefit of creditors, merger, transaction, consolidation, business combination, joint venture, partnership sale of assets, financing (debt or equity), refinancing, or restructuring of BLY, other than the proposed recapitalisation of BLY to be implemented through the Recapitalisation Transactions, including, but not limited to, any proposal, agreement, arrangement or transaction, received in writing within the period from the date on which the RSA has been duly executed by all parties expressed to be parties to it, to the date the Recapitalisation Transactions are completed, which the BLY Board determines, in good faith and in consultation with BLY's counsel, if completed, would mean a person who is not a party to the RSA (either alone or with any associate of that third party) may:

(a) directly or indirectly acquire a Relevant Interest (as defined in the Corporations Act) in 20% or more of the Shares or 50% or more of the share capital of any material subsidiary of BLY;

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(b) acquire Control (as defined in the Corporations Act) of BLY;

(c) directly or indirectly acquire a legal, beneficial or economic interest in, or Control of, all or a material part of BLY's business or assets or the business or assets of BLY taken as a whole; or

(d) otherwise directly or indirectly acquire or merge with BLY or acquire a material subsidiary of BLY.

Constitution means the constitution of BLY, as amended from time to time.

Conversion means the issue of Shares on conversion of the Convertible Preference Shares.

Convertible Preference Shares means the convertible preference shares in the capital of BLY.

Corporations Act means the Corporations Act 2001 (Cth).

Corporations Regulations means the Corporations Regulations 2001 (Cth).

Costs means costs, charges, fees and expenses.

Court means the Supreme Court of New South Wales.

DDTL means the term loan security agreement, dated 4 January 2017, by and among BLY IP Inc., the guarantors party thereto, and Wilmington Trust, National Association, as administrative agent, providing for the issuance of term loan securities due 2020.

Debt means, at any time, the total amount owing by the Companies to the Noteholders under the Finance Documents.

Debt Contribution Amount means, in relation to each 7% Scheme Creditor, its share of the Total Debt Contribution Amount to be calculated under the Scheme by the Scheme Administrators.

Deed Poll means the Scheme Administrators Deed Poll, the Trustee Deed Poll, the 7% Scheme Creditors Deed Poll, the Obligors Deed Poll or the Released Obligor Individual Deed Poll(s), as the context requires, and Deeds Poll means all of them or any combination of them, as the context requires..

Directors means the directors appointed to the Companies as at the date of this Explanatory Statement.

Director Nomination Agreement means:

(a) the agreement between CBP and BLY in relation to the nomination of the CBP Nominee Directors to stand for election to the board of BLY;

(b) the agreement between Ares and BLY in relation to the nomination of the Ares Nominee Director and the Ares/Ascribe Joint Nominee Director to stand for election to the board of BLY; or

(c) the agreement between Ascribe and BLY in relation to the nomination of the Ascribe Nominee Director and the Ares/Ascribe Joint Nominee Director to stand for election to the board of BLY,

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as the context requires, and Director Nomination Agreements means all of the above or any combination of them, as the context requires.

EBITDA means earnings before interest, taxes, depreciation and amortization.

Effective Date means the date on which each of the conditions precedent in the Scheme have been satisfied.

Event of Default has the meaning given to that term in the Indenture.

Existing ABL Revolver means the revolving credit and security agreement, dated 29 May 2015, among PNC Bank as lender and as agent, the BLY Issuer as borrower, and the guarantors party thereto.

Existing Shareholder Warrants means the tranche of Warrants to be issued by BLY to existing Shareholders (other than the CBP Registered Holders) pursuant to the Warrants Issue.

Explanatory Statement means this document.

FATA means the Foreign Acquisitions and Takeovers Act 1975 (Cth).

Final Chapter 15 Order means an order of the United States Bankruptcy Court Southern District of New York granting recognition to this Scheme and the Secured Creditor Scheme and giving full force and effect thereto.

Finance Documents means each of the documents listed in Schedule 1 of the Scheme.

FIRB means Foreign Investment Review Board.

First Court Date means the date of the hearing of an application for the First Court Orders or, if the hearing of that application is adjourned, the date to which the hearing is adjourned.

First Court Orders means the orders of the Court convening the Scheme Meeting under section 411(1) of the Corporations Act.

First Court Hearing means the hearing of an application for the First Court Orders, including any adjourned hearing.

Fourth Supplemental Indenture means the fourth supplemental indenture substantially in the form set out in Schedule 3 of the Scheme which fourth supplemental indenture will take effect pursuant to Step 7 (Amendment) of the Scheme.

Group means BLY and each of its Subsidiaries.

Guarantee Agreement has the meaning given to that term in the Indenture.

Implementation Date means the later of:

(a) five Business Days after the Effective Date; and

(b) if the Scheme Administrator forms the opinion that Steps 3 (New Share issue) to 8 (Compromise of Subordinate Claims) cannot occur on the date in (a) above, such later date on which, in the opinion of the Scheme Administrator, Steps 3 (New Share issue) to 8 (Compromise of Subordinate Claims) can occur on the same day, being a date that is not later than the Sunset Date.

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Implied Value has the meaning given to that term in section 7.1(d)(iii).

Indenture means the indenture dated 28 March 2011 between the BLY Issuer, as issuer, BLY, as guarantor, and U.S. Bank National Association, as trustee, amongst others, as amended by the first supplemental indenture dated 14 June 2013, the second supplemental indenture dated 27 September 2013 and the third Supplemental Indenture dated 2 April 2017 and, as amended, varied, or amended and restated from time to time.

Information Agent means Prime Clerk LLC.

Initial Term Loan Amendments means the proposed amendments to the Term Loan A and the Term Loan B, described in Section 5.2(a) of this Explanatory Statement.

KordaMentha means KordaMentha of Level 5 Chifley Tower, 2 Chifley Square, Sydney, New South Wales 2000.

KordaMentha Report means the independent expert report dated 1 May 2017 prepared by KordaMentha, a copy of which is set out at Annexure B.

KordaMentha Information means the information in Section 7 of this Explanatory Statement, the KordaMentha Report and certain other information in this Explanatory Statement that is identified as having been provided by or attributed to KordaMentha.

New ABL Revolver means a new revolving credit and security agreement, providing a facility in an aggregate principal amount up to US$75,000,000.

New Shares means the total number of Shares to be issued in accordance with Step 3 (New Share issue) to be calculated in accordance with the following formula:

B = A/(1-0.915512292431746) – A, where:

A is the number of Shares on issue as at the Implementation Date

B is the number of New Shares to be issued

Noteholder has the meaning given to the term "Holder" in the Indenture.

Nominee Directors means the CBP Nominee Directors, Ares Nominee Director and the Ascribe Nominee Director.

Notice of Meeting means the notice of Scheme Meeting that is to be sent to Noteholders with this Explanatory Statement.

Obligors means each of:

(a) BLY Issuer;

(b) BLY;

(c) BLY Australia;

(d) Votraint;

(e) Boart Longyear Canada;

(f) Boart Longyear Chile Limitada;

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(g) Boart Longyear Comercializadora Limitada;

(h) Boart Longyear Company;

(i) Boart Longyear Manufacturing and Distribution Inc.;

(j) Boart Longyear Manufacturing Canada Ltd.;

(k) Boart Longyear S.A.C.;

(l) Boart Longyear Suisse Sarl;

(m) Longyear Canada, ULC;

(n) Longyear Holdings Inc.; and

(o) Longyear TM, Inc.

Obligors Deed Poll means the deed poll executed by the Obligors dated on or around 12 May 2017.

Omnibus Proxy means an omnibus proxy pursuant to which Cede & Co. (as nominee of DTC) is expected to appoint those Registered Participants shown in the records of Cede & Co. and/or DTC as holding an interest in the 7% Notes held by DTC as its proxies in respect of the principal amount of the relevant 7% Notes shown on its records as being held by such Registered Participants on the Voting Entitlement Record Date.

Proxy Form means the form used by Noteholders to appoint a proxy to vote on their behalf at the Scheme Meeting, substantially in the form set out at Annexure F.

Recapitalisation Transactions means the transactions described in Section 5, including this Scheme and the Secured Creditor Scheme.

Record Date means the date that BLY issues the Existing Shareholder Warrants to existing Shareholders (other than the CBP Registered Holders), in accordance with Section 5.4(d) of this Explanatory Statement.

Registered Participant means a person recorded directly in the records of Cede & Co. and DTC as holding an interest in any 7% Note in an account held with DTC.

Released Obligor Individual means each person who was, at any time between 28 March 2011 and the Implementation Date inclusive, a director or officer of any Obligor who has executed, or at any time executes (including by way of joinder), a Released Obligor Individual Deed Poll.

Released Obligor Individual Deed Poll means the deed poll substantially in the form set out in Schedule 7 of the Scheme.

Relevant Interest has the meaning given in sections 608 and 609 of the Corporations Act.

Representation Letter means a letter in the form as set out in Annexure I or such other form as may be required by BLY from time to time, which must be duly executed and accompany each Notice of Exercise in respect of Warrants to be exercised by Applicable Warrant Holders.

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Resolution means the resolution contained in the Notice of Meeting which will be put to Noteholders at the Scheme Meeting.

RSA or Restructuring Support Agreement means the Restructuring Support Agreement entered into between, among others, BLY and BLY Issuer, dated 2 April 2017 as may be amended, modified or supplemented from time to time.

Scheme means the compromise or arrangement under Part 5.1 of the Corporations Act between the BLY Issuer, BLY, BLY Australia, Votraint, the 7% Scheme Creditors and the Subordinate Claim Holders, a copy of which is set out at Annexure A to this document, subject to any alterations or conditions made or required by the Court.

Scheme Administrator means Scott Kershaw and Jenny Nettleton of KordaMentha, or any other person who accepts the appointment to the role of scheme administrator of this Scheme, subject to section 411(7) of the Corporations Act provided, in each case, they have each executed a deed poll in substantially the same form as the Scheme Administrators Deed Poll.

Scheme Administrators Deed Poll means the deed poll substantially in the form set out in Schedule 6 of the Scheme and executed by the Scheme Administrators.

Scheme Meeting means the meeting of Noteholders ordered by the Court to be convened under section 411(1) of the Corporations Act in relation to this Scheme, and includes any adjournment of that meeting.

Scheme Notes means notes pursuant to the Indenture as amended by the Fourth Supplemental Indenture.

Scheme Shares means the Shares to be issued by BLY in accordance with Step 3 (New Share issue) of the Scheme.

Scheme Warrants means the A Warrants and B Warrants, to be issued by BLY in accordance with Step 4 (New Warrant issue) of the Scheme.

Second Court Datemeans the first day of the hearing of an application made to the Court for the Second Court Orders or, if the hearing of such application is adjourned for any reason, means the first day to which the hearing is adjourned.

Second Court Hearing means the hearing of an application made to the Court for the Second Court Orders, including any adjourned hearing.

Second Court Orders means the orders of the Court approving the Scheme under section 411(4)(b) (and, if applicable, section 411(6)) of the Corporations Act.

Second Out ABL means the term loan securities agreement entered into as of 2 April 2017 among the BLY Issuer, as issuer, BLY and certain affiliates thereof, as guarantors, and Wilmington Trust, National Association, as agent, providing for the issuance of term loan securities at an issue price of $15,000,000.

Secured Creditors means the TLA Purchasers, the TLB Purchasers and the 10% Noteholders.

Secured Creditor Scheme means the compromise or arrangement under Part 5.1 of the Corporations Act between the Companies and the Secured Scheme Creditors, proposed by the Companies and approved by the Court.

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Secured Scheme Creditors means the TLA Purchasers, the TLB Purchasers and the 10% Noteholders as at the Effective Date.

Securities has the meaning given to that term in the Indenture.

Share Purchase Plan means the share purchase plan to be made available by BLY

Shareholder means each person entered in the register of members of BLY as the holder of at least 1 (one) fully paid ordinary share in BLY as at the date for determining entitlements to vote at the Shareholder Meeting.

Shareholder Meeting means the general meeting of the Shareholders of BLY to be held on or around 13 June 2017 to consider and vote on the Shareholder Resolutions, amongst other matters.

Shareholder Resolutions means resolutions at the Shareholder Meeting:

(a) for the purposes of ASX Listing Rule 7.1 and for all other purposes, to approve BLY issuing:

(i) New Shares and Warrants pursuant to this Scheme, to the 7% Scheme Creditors; and

(iii) Warrants to Shareholders, other than affiliates of CBP;

(b) for the purposes of item 7 of section 611 of the Corporations Act, ASX Listing Rule 10.11 and Chapter 2E of the Corporations Act and all other purposes, to approve BLY issuing Shares to CBP and CBP acquiring Shares pursuant to the Subscription Deed;

(c) for the purposes of item 7 of section 611 of the Corporations Act and for all other purposes to approve:

(i) Ares; and

(ii) Ascribe,

acquiring Shares pursuant to the Scheme; and

(d) appointing the Nominee Directors as directors of BLY.

Shares means fully paid ordinary shares in the capital of BLY.

Standstill Period has the meaning given in clause 6.3.

Step means any of Steps 1 (Deeds and Amendment Documents) to 8 (Compromise of Subordinate Claims) set out in clause 7.5 of the Scheme and Steps mean all of them.

Subordinate Claim means a "subordinate claim" within the meaning of subsection 563A(2) of the Corporations Act, against BLY in respect of any fact, matter, circumstance or event which has arisen or occurred at any time prior to the commencement of Step 8 (Compromise of Subordinate Claims) of the Scheme.

Subordinate Claim Holder means any person who, as at immediately prior to the commencement of Step 8 (Compromise of Subordinate Claims) of the Scheme, has or, but for the Scheme, would be entitled to make, a Subordinate Claim.

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Subscription Deed means the agreement between BLY and CBP pursuant to which Shares will be issued to CBP (or their nominee).

Subsequent Term Loan Amendments means the agreement between the TLA Purchasers and the Obligors to amend the interest rate applicable to the Term Loan A and the agreement between the TLB Purchasers and the Obligors to amend the interest rate applicable to the Term Loan B, described in Section 5.4(c) of this Explanatory Statement.

Subsidiaries has the meaning given in the Corporations Act and, as applied to BLY, Subsidiary shall include the BLY Issuer, BLY Australia, Votraint, Boart Longyear Company, Boart Longyear Manufacturing Canada Ltd., Boart Longyear Suisse Sarl, Boart Longyear Chile Limitada, Boart Longyear Canada, Longyear Holdings, Inc., Boart Longyear Manufacturing and Distribution Inc., Boart Longyear Comercializadora Ltda., Longyear TM, Inc., BLY IP Inc., Longyear Canada, ULC, BL DDL NY Holdings Inc., BL DDL Holdings Pty, Ltd., BL DDL Holdings II Pty, Ltd., BL Canada DDL Inc., BL Canada Holdings Inc., and Boart Longyear S.A.C.

Sunset Date means 31 December 2017.

Superior Proposal means a bona fide written competing proposal of the kind referred to in (b) or (c) of the definition of Competing Proposal that the BLY Board, acting in good faith, and after receiving written legal advice from the BLY's counsel and advice from its financial advisor, determines:

(a) is reasonably capable of being valued and completed, taking into account all aspects of the competing proposal including any timing considerations, any conditions precedent, the identity, reputation and financial standing of the proponent, the current contractual rights of the Supporting Creditors under the relevant finance documents, and any requirements set forth by the Supporting Creditors in their response to a competing proposal;

(b) would, if completed substantially in accordance with its terms, be more favourable to Shareholders (as a whole) and the creditors of BLY than the Recapitalisation Transactions (having regard to the fact that trade creditors will be paid in full under the Recapitalisation Transactions) taking into account all terms and conditions of the competing proposal; and

(c) would reasonably be expected to require it by virtue of its directors' fiduciary or statutory duties under applicable law to respond to such competing proposal or to change, withdraw or modify its recommendation.

Supporting Creditors has the meaning given in clause 4.4.

TEV means total enterprise value of the Group.

Term Loan A means the Term Loan A Securities Agreement, dated 22 October 2014, between the BLY Issuer, as issuer, BLY, BLY Australia and Votraint, as guarantors, amongst others and Wilmington Trust, National Association, as administrative agent, amongst others,

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pursuant to which term loan securities due 2021 were issued, as amended, varied or amended and restated from time to time.

Term Loan Amendments means the Initial Term Loan Amendments and the Subsequent Term Loan Amendments.

Term Loan B means the Term Loan B Securities Agreement dated 22 October 2014, between the BLY Issuer, as issuer, BLY, BLY Australia and Votraint, as guarantors, amongst others and Wilmington Trust, National Association, as administrative agent, pursuant to which term loan securities due 2021 were issued, as amended, varied, or amended and restated from time to time.

TLA Purchasers means the "Purchasers" as that term is defined in the Term Loan A.

TLB Purchasers means the "Purchasers" as that term is defined in the Term Loan B.

Total Aggregate Amount means the aggregate amount of principal and accrued but unpaid interest owing by the companies, whether actually or contingently to the 7% Scheme Creditors under the Finance Documents immediately prior to the commencement of Step 3 (New Share issue) on the Implementation Date.

Total Debt Contribution Amount means the Total Aggregate Amount less US$88,000,000, less Accrued Interest.

Transaction Securities means the Scheme Shares and the Scheme Warrants.

Trustee means U.S. Bank National Association in its capacity as trustee under the Indenture and any successor trustee under that document.

Trustee Deed Poll means the deed poll substantially in the form set out in Schedule 5 of the Scheme and to be executed by the Trustee pursuant to the Scheme.

U.S. Exchange Act means the U.S. Securities Exchange Act of 1934, as amended.

U.S. Securities Act means the U.S. Securities Act of 1933, as amended.

Undertaking means the undertaking given by the Trustee to execute the Trustee Deed Poll in accordance with the Scheme.

U.S. Bankruptcy Court means the United States Bankruptcy Court for the Southern District of New York.

Voting Entitlement Record Date means the First Court Date.

Voting Proof of Debt Form means a proof of debt form substantially in the form set out at Annexure G, which may be lodged with the Information Agent by a Noteholder for the purpose of voting at the relevant Scheme Meeting.

Votraint means Votraint No. 1609 Pty Limited ACN 119 244 272.

Warrant Holder means each person who holds a Warrant.

Warrant Shares means Shares issued by BLY on exercise of Warrants and otherwise in accordance with the terms and conditions of the Warrants.

Warranties means any warranties given by the Companies in favour of the Noteholders (as that term is defined under this Explanatory Statement) under the RSA and any warranties given by the Noteholders (as that term is defined under this Explanatory Statement) in favour of each other or the Companies under the RSA in contemplation of the transactions to be effected by, or in connection with, this Scheme and the Secured Creditor Scheme.

Warrants means warrants issued by BLY.

Warrants Issue means the issue of warrants by BLY to existing Shareholders in accordance with Section 5.4(d) of the Explanatory Statement.

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Annexure A

Scheme of Arrangement

Annex A

 

Scheme of Arrangement

Boart Longyear Limited

ACN 123 052 728

and

Boart Longyear Management Pty Limited

ACN 123 283 545

and

Boart Longyear Australia Pty Limited

ACN 000 401 025

and

Votraint No. 1609 Pty Limited

ACN 119 244 272

and

The 7% Scheme Creditors

and

The Subordinate Claim Holders

CONTENTS

CLAUSE			PAGE
1.	INTERPRETATION		1
	1.1	Definitions	1
	1.2	Rules for interpreting this document	9
	1.3	Non Business Days	10
	1.4	The rule about "contra proferentem"	10
2.	Third parties		10
	2.1	Capacity of Trustee	10
	2.2	Deeds Poll	10
3.	Conditions Precedent		11
	3.1	Conditions	11
	3.2	Certificate	13
4.	The Trustee		13
5.	Grant of authority in favour of the Scheme Administrator		14
	5.1	General grant of authority	14
	5.2	7% Scheme Creditor Deed Poll	14
6.	Scheme Administrator		14
	6.1	Appointment of Scheme Administrators	14
	6.2	Qualification, appointment and cessation	14
	6.3	Powers in relation to this Scheme	15
	6.4	Exercise of Powers	15
	6.5	Liability	16
	6.6	Indemnity	16
	6.7	Remuneration	17
	6.8	Resignation of Scheme Administrator	17
	6.9	Directors of the Companies remain in control	17
7.	Implementation Steps		17
	7.1	Definitions, interpretation and undertaking not to make Claims	17
	7.2	Sunset date	18
	7.3	Scheme Administrator's register and certification	18
	7.4	Timing of Steps	18
	7.5	Steps	19
	7.6	No inconsistent acts	23
8.	Standstill AND CONSENTS		24
	8.1	Standstill	24
	8.2	Consent, waiver and release	25
9.	Notices		26
	9.1	How to give a notice	26
	9.2	When a notice is given	26
	9.3	Address for notices	26
10.	General Provisions		29
	10.1	Further assurances	29
	10.2	Binding effect of Scheme	29
	10.3	Costs and Stamp Duty	29
	10.4	Amendment	30
	10.5	Governing Law and jurisdiction	30

10.6 Holding statements, register of members and admission to official quotation 30

Schedule

1	Finance Documents	31
2	Scheme Administrator's Steps Register	33
3	Fourth Supplemental Indenture	35
4	Form of 7% Scheme Creditor Deed Poll	36
5	Form of Trustee Deed Poll	42
6	Form of Scheme Administrators Deed Poll	47
7	Form of Released Obligor Individual Deed Poll	54
8	Warrant terms	61

THIS SCHEME OF ARRANGEMENT is made on                                                          2017

BETWEEN:

(1) Boart Longyear Management Pty Limited ACN 123 283 545 of 26 Butler Boulevard, Burbridge Business Park, Adelaide Airport in the State of South Australia (BLY Issuer);

(2) Boart Longyear Limited ACN 123 052 728 of 26 Butler Boulevard, Burbridge Business Park, Adelaide Airport in the State of South Australia (BLY);

(3) Boart Longyear Australia Pty Ltd ACN 000 401 025 of 26 Butler Boulevard, Burbridge Business Park, Adelaide Airport in the State of South Australia (BLA);

(4) Votraint No. 1609 Pty Limited ACN 119 244 272 of 26 Butler Boulevard, Burbridge Business Park, Adelaide Airport in the State of South Australia (Votraint);

(5) the 7% Scheme Creditors; and

(6) the Subordinate Claim Holders.

RECITALS:

(A) This Scheme is proposed in connection with: (a) Claims against the BLY Issuer by the Holders under the Finance Documents; (b) Claims against BLY by the Holders under the Finance Documents; (c) Claims against BLA by the Holders under the Finance Documents; (d) Claims against Votraint by the Holders under the Finance Documents; (e) any Subordinate Claim of any Subordinate Claim Holder.

(B) Each Obligor, pursuant to the Obligors Deed Poll, has consented to this Scheme, agreed to be bound by this Scheme as if it were a party to this Scheme and undertaken to perform all obligations and actions attributed to it under this Scheme.

(C) The Scheme Administrators, pursuant to the Scheme Administrators Deed Poll, have consented to act as Scheme Administrators, consented to this Scheme, agreed to be bound by this Scheme as if they were a party to this Scheme and undertaken to perform all obligations and actions attributed to the Scheme Administrators under this Scheme.

(D) The Trustee has undertaken that, immediately after it has received the instructions referred to in, or contemplated by, Step 1 (Deeds and Amendment Documents), the Trustee will, pursuant to the Trustee Deed Poll perform all actions attributed to it under this Scheme.

THE PARTIES AGREE AS FOLLOWS:

1. INTERPRETATION

1.1 Definitions

The following definitions apply in this document.

7% Scheme Creditors means the Holders as at the Effective Date.

7% Scheme Creditor Deed Poll means the deed poll executed by the Scheme Administrator as attorney and agent for the 7% Scheme Creditors as contemplated by clauses 5.2 and 7.5(a)(i)(A) of this Scheme in substantially the form set out in Schedule 4.

10% Noteholders means each "Holder" or "Securityholder" as those terms are defined in the 10% Secured Notes Indenture.

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10% Secured Notes Indenture means the indenture dated 27 September 2013, between, amongst others, the BLY Issuer, as issuer, BLY, BLA and Votraint, as guarantors, amongst others, and U.S. Bank National Association, as trustee and collateral agent, in respect of the 10.00% secured notes, as amended, varied, or amended and restated from time to time.

A Warrants means the total number of Warrants to be issued to the Holders (or their nominee) on the terms set out in Schedule 8 in accordance with Step 4 (New Warrant issue) to be calculated in accordance with the following formula:

A = B x C / (1 – B)

Where:

A is the number of A Warrants to be issued to all Holders

B is 5.0%

C is the sum of the total number of Shares on issue on the Implementation Date after the issue of the New Shares and the Conversion of the Convertible Preference Shares, plus the number of Shares to be issued pursuant to the Subscription Deed.

Accrued Interest means the interest that would have accrued on the principal amount of the Securities under the Indenture in the period from and including 1 January 2017 to the Implementation Date if:

(a) as at 1 January 2017, the principal amounts of the Securities had been US$88,000,000 and not US$284,000,000; and

(b) the rate of interest payable on the principal amounts of the Securities during that period had been 1.5% and not 7%.

Administrative Requirements means the conditions precedent to the amendment and supplement of the Indenture other than the conditions precedent relating to this Scheme or the Secured Creditor Scheme becoming Effective.

Aggregate Amount means, in respect of a 7% Scheme Creditor, the amount of principal and accrued but unpaid interest owing by the Companies, whether actually or contingently, to that 7% Scheme Creditor immediately prior to the commencement of Step 3 (New Share issue) on the Implementation Date.

Applicable Insurance Policy means any available policy of insurance under which BLY is entitled to indemnity in respect of any Subordinate Claim.

Ares Nominee Director means the person nominated by Ares Management LLC, on behalf of its affiliated funds and accounts, to be considered by Shareholders for election at the Shareholders Meeting as a director of BLY pursuant to the Director Nomination Agreement whose notice of candidature is received by BLY by the date required by the Constitution.

Ares / Ascribe Joint Nominee Director means the person jointly nominated by Ares Management LLC, on behalf of its affiliated funds and accounts, and Ascribe II Investments LLC to be considered by Shareholders for election at the Shareholders Meeting as a director of BLY pursuant to the Director Nomination Agreements whose notice of candidature is received by BLY by the date required by the Constitution.

Ascribe Nominee Director means the person nominated by Ascribe II Investments LLC, to be considered by Shareholders for election at the Shareholders Meeting as a director of

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BLY pursuant to the Director Nomination Agreement whose notice of candidature is received by BLY by the date required by the Constitution.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited or the financial market operated by ASX Limited, as the context requires.

ASX Listing Rules means the listing rules of ASX, as waived or modified by ASX in respect of BLY, the Scheme or otherwise.

B Warrants means the total number of Warrants to be issued to the Holders (or their nominee) on the terms set out in Schedule 8 in accordance with Step 4 (New Warrant issue) of a number to be calculated in accordance with the following formula:

A = B x C / (1 – B)

Where:

A is the number of B Warrants to be issued to all Holders

B is 2.5%

C is the sum of the total number of Shares on issue on the Implementation Date after the issue of the New Shares, the Conversion of the Convertible Preference Shares and the issue of A Warrants pursuant to this Scheme, plus the number Shares to be issued under the Subscription Deed.

BLY Schemes means this Scheme and the Secured Creditor Scheme.

Business Day means a day (other than a Saturday, Sunday or public holiday) on which banks are open for general banking business in Sydney, New South Wales and Adelaide, South Australia.

Calculation Date means the day that is the second Business Day after the Effective Date.

CBP means CCP II Dutch Acquisition - ND2, B.V and CCP Credit SC II Dutch Acquisition - ND, B.V.

CBP Nominee Directors means those persons (not exceeding five) nominated by Centerbridge Partners, L.P. on behalf of CBP, and its and their affiliates and managed funds to be considered by Shareholders for election at the Shareholders Meeting as a director of BLY pursuant to the Director Nomination Agreement whose notice of candidature is received by BLY by the date required by the Constitution.

Change of Control Event has the meaning given in clause 8.2(c).

Claim means, in relation to a person, any claim, allegation, cause of action, proceeding, debt, liability, suit or demand made against the person concerned however it arises and whether it is present or future, fixed or unascertained, actual or contingent or otherwise whether at law, in equity, under statute or otherwise.

Companies means the BLY Issuer, BLY, BLA and Votraint.

Constitution means the constitution of BLY, as amended from time to time.

Conversion means the issue of Shares on conversion of the Convertible Preference Shares.

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Convertible Preference Shares means the 434,001,986 convertible preference shares in the capital of BLY held by CCP II Dutch Acquisition - E2, B.V.

Corporations Act means the Corporations Act 2001 (Cth).

Costs means costs, charges, fees and expenses.

Court means the Supreme Court of New South Wales.

Debt Contribution Amount means, in relation to each 7% Scheme Creditor, its share of the Total Debt Contribution Amount to be calculated by the Scheme Administrator as follows:

A = (B / C) x D, where:

A is the relevant 7% Scheme Creditor's Debt Contribution Amount

B is the relevant 7% Scheme Creditor's Aggregate Amount

C is the Total Aggregate Amount

D is the Total Debt Contribution Amount

Deed Poll means the Scheme Administrators Deed Poll, the Trustee Deed Poll, the 7% Scheme Creditors Deed Poll, the Obligors Deed Poll or the Released Obligor Individual Deed Poll(s), as the context requires, and Deeds Poll means all of them or any combination of them, as the context requires.

Demands has the meaning given in clause 6.5(c).

Director Nomination Agreement means:

(a) the agreement between Centerbridge Partners, L.P. on behalf of CBP, and its and their affiliates and managed funds, and BLY in relation to the nomination of the CBP Nominee Directors to stand for election to the board of BLY;

(b) the agreement between Ares Management LLC, on behalf of its affiliated funds and accounts, and BLY in relation to the nomination of the Ares Nominee Director and the Ares/Ascribe Joint Nominee Director to stand for election to the board of BLY; or

(c) the agreement between Ascribe II Investments LLC and BLY in relation to the nomination of the Ascribe Nominee Director and the Ares/Ascribe Joint Nominee Director to stand for election to the board of BLY,

as the context requires, and Director Nomination Agreements means all of the above or any combination of them, as the context requires.

Effective means, when used in relation to this Scheme, the coming into effect of the Second Court Orders pursuant to section 411(10) of the Corporations Act.

Effective Date means the date on which each of the conditions precedent in clause 3.1 has been satisfied.

FATA means the Foreign Acquisitions and Takeovers Act 1975 (Cth).

Final Chapter 15 Order means an order of the United States Bankruptcy Court Southern District of New York granting recognition to this Scheme and the Secured Creditor Scheme and giving full force and effect thereto.

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Finance Document means each of the documents listed in Schedule 1.

First Court Date means the date of the hearing of an application for the First Court Orders or, if the hearing of that application is adjourned, the date to which the hearing is adjourned.

First Court Orders means the orders of the Court convening the Scheme Meeting under section 411(1) of the Corporations Act.

Fourth Supplemental Indenture means the fourth supplemental indenture substantially in the form set out in Schedule 3 of this Scheme which fourth supplemental indenture will take effect pursuant to Step 7 (Amendment) of the Scheme

Governmental Agency means any government or representative of a government or any governmental, semi-governmental, administrative, fiscal, regulatory or judicial body, department, commission, authority, tribunal, agency, competition authority or entity and includes any minister (including the Treasurer of the Commonwealth of Australia), ASIC, the Australian Competition and Consumer Commission, the Australian Taxation Office, ASX and any regulatory organisation established under statute or any stock exchange.

Guarantee Agreement has the meaning given to that term in the Indenture.

Holder has the meaning given to that term in the Indenture.

Implementation Date means the later of:

(c) five Business Days after the Effective Date; and

(d) if the Scheme Administrator forms the opinion that Steps 3 (New Share issue) to 8 (Compromise of Subordinate Claims) cannot occur on the date in (a) above, such later date on which, in the opinion of the Scheme Administrator, Steps 3 (New Share issue) to 8 (Compromise of Subordinate Claims) can occur on the same day, being a date that is not later than the Sunset Date.

Indenture means the indenture dated 28 March 2011 between the BLY Issuer, as issuer, BLY, as guarantor, and U.S. Bank National Association, as trustee, amongst others, as amended by the first supplemental indenture dated 14 June 2013, the second supplemental indenture dated 27 September 2013 and the third Supplemental Indenture dated 2 April 2017, as amended, varied, or amended and restated from time to time.

Liabilities has the meaning given in clause 6.5(a).

Losses has the meaning given in clause 6.5(b).

New Equity means the New Shares and the New Warrants.

New Money ABL means a new revolving ABL facility in an aggregate principal amount equal to US$75,000,000 to be entered into by the Companies.

New Shares means the total number of Shares to be issued in accordance with Step 3 (New Share issue) to be calculated in accordance with the following formula:

B = A/(1-0.915512292431746) – A, where:

A is the number of Shares on issue as at the Implementation Date

B is the number of New Shares to be issued

New Warrants means the A Warrants and the B Warrants.

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Nominee Directors means any CBP Nominee Director, the Ares Nominee Director and the Ascribe Nominee Director.

Obligors means each of:

(a) BLY Issuer;

(b) BLY;

(c) BLA;

(d) Votraint;

(e) Boart Longyear Canada;

(f) Boart Longyear Chile Limitada;

(g) Boart Longyear Comercializadora Limitada.;

(h) Boart Longyear Company;

(i) Boart Longyear Manufacturing and Distribution Inc.;

(j) Boart Longyear Manufacturing Canada Ltd.;

(k) Boart Longyear S.A.C.;

(l) Boart Longyear Suisse Sarl;

(m) Longyear Canada, ULC;

(n) Longyear Holdings Inc.;

(o) Longyear TM, Inc.

Obligors Deed Poll means the deed poll executed by the Obligors dated on or around 12 May 2017.

Released Obligor Individual means each person who was, at any time between 28 March 2011 and the Implementation Date inclusive, a director or officer of any Obligor who has executed, or at any time executes (including by way of joinder), a Released Obligor Individual Deed Poll.

Released Obligor Individual Deed Poll means the deed poll substantially in the form set out in Schedule 7 of this Scheme.

Relevant Documents means this Scheme, the Obligors Deed Poll and the Fourth Supplemental Indenture.

RSA means the Restructuring Support Agreement entered into between, among others, BLY and BLY Issuer, dated 2 April 2017 as may be amended, modified or supplemented from time to time.

Scheme means the compromise or arrangement under Part 5.1 of the Corporations Act between the BLY Issuer, BLY, BLA and Votraint, the 7% Scheme Creditors and the Subordinate Claim Holders as set out in this document, subject to any alterations or conditions made or required by the Court.

Scheme Administrator means Scott Kershaw and Jenny Nettleton of Korda Mentha, or any other person who accepts the appointment to the role of scheme administrator of this

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Scheme, subject to section 411(7) of the Corporations Act provided, in each case, they have each executed a deed poll in substantially the same form as the Scheme Administrators Deed Poll.

Scheme Administrators Deed Poll means the deed poll substantially in the form set out in Schedule 6 of this Scheme and executed by the Scheme Administrators.

Scheme Meeting means the meeting of Holders ordered by the Court to be convened under section 411(1) of the Corporations Act in relation to this Scheme, and includes any adjournment of that meeting.

Second Court Date means the first day of hearing of an application made to the Court for the Second Court Orders or, if the hearing of such application is adjourned for any reason, means the first day to which the hearing is adjourned.

Second Court Orders means the orders of the Court approving this Scheme under section 411(4)(b) (and, if applicable, section 411(6)) of the Corporations Act.

Secured Scheme Creditors means, the TLA Purchasers, the TLB Purchasers and the 10% Noteholders as at the Effective Date.

Secured Creditor Scheme means the compromise or arrangement under Part 5.1 of the Corporations Act between the Companies and the Secured Scheme Creditors, being the compromise or arrangement proposed by the Companies and approved by the Court.

Securities has the meaning given to that term in the Indenture.

Shareholder means each person entered in the register of members of BLY as the holder of at least 1 (one) Share as at the date for determining entitlements to vote at the Shareholder Meeting.

Shareholder Meeting means the general meeting of the Shareholders of BLY to be held to consider and vote on the Shareholder Resolutions, amongst other matters.

Shareholder Resolutions means resolutions at the Shareholder Meeting:

(a) for the purposes of ASX Listing Rule 7.1 and for all other purposes, to approve BLY issuing:

(i) New Shares and New Warrants pursuant to this Scheme, to the 7% Scheme Creditors; and

(iii) Warrants to Shareholders, other than affiliates of CBP;

(b) for the purposes of item 7 of section 611 of the Corporations Act, ASX Listing Rule 10.11 and Chapter 2E of the Corporations Act and all other purposes, to approve BLY issuing Shares to CBP and CBP acquiring Shares pursuant to the Subscription Deed;

(b) for the purposes of item 7 of section 611 of the Corporations Act and for all other purposes to approve:

(i) Ares; and

(ii) Ascribe,

acquiring New Shares pursuant to the Scheme; and

(c) appointing the Nominee Directors as directors of BLY.

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Shares means fully paid ordinary shares in the capital of BLY.

Stamp Duty means any stamp, transaction or registration duty or similar charge imposed by any Governmental Agency and includes any interest, fine, penalty, charge or other amount in respect of the above.

Standard Tax Conditions means the conditions set out in Part A of the document entitled "Taxation Conditions of Certain No Objection Decisions" released by the Foreign Investment Review Board dated 3 May 2016.

Standstill Period has the meaning given in clause 8.1(a).

Step means any of Steps 1 (Deeds and Amendment Documents) to 8 (Compromise of Subordinate Claims) set out in clause 7.5 and Steps means all of them.

Subordinate Claim means a "subordinate claim" within the meaning of subsection 563A(2) of the Corporations Act, against BLY in respect of any fact, matter, circumstance or event which has arisen or occurred at any time prior to the commencement of Step 8 (Compromise of Subordinate Claims).

Subordinate Claim Holder means any person who, as at immediately prior to the commencement of Step 8 (Compromise of Subordinate Claims), has or, but for this Scheme, would be entitled to make, a Subordinate Claim.

Subscription Deed means the agreement between BLY and CBP pursuant to which Shares will be issued to CBP (or its nominee).

Subsequent Term Loan Amendments means the agreement between the TLA Purchasers and the Obligors to amend the interest rate applicable to the Term Loan A and the agreement between the TLB Purchasers and the Obligors to amend the interest rate applicable to the Term Loan B.

Sunset Date means 31 December 2017.

Term Loan A means the Term Loan A Securities Agreement, dated 22 October 2014, between, amongst others, the BLY Issuer, as issuer, BLY, BLA and Votraint, as guarantors, amongst others, and Wilmington Trust, National Association, as administrative agent and collateral agent, pursuant to which term loan securities were issued, as amended, varied or amended and restated from time to time.

Term Loan B means the Term Loan B Securities Agreement dated 22 October 2014, between, amongst others, the BLY Issuer, as issuer, BLY, BLA and Votraint, as guarantors, amongst others, and Wilmington Trust, National Association, as administrative agent and collateral agent, pursuant to which term loan securities were issued, as amended, varied, or amended and restated from time to time.

TLA Purchasers means the "Purchasers" as that term is defined in the Term Loan A.

TLB Purchasers means the "Purchasers" as that term is defined in the Term Loan B.

Total Aggregate Amount means the aggregate amount of principal and accrued but unpaid interest owing by the companies, whether actually or contingently, to the 7% Scheme Creditors under the Finance Documents immediately prior to the commencement of Step 3 (New Share issue) on the Implementation Date.

Total Debt Contribution Amount means the Total Aggregate Amount less US$88,000,000, less Accrued Interest.

Transaction Party means the parties to the Finance Documents.

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Trustee means U.S. Bank National Association in its capacity as trustee under the Indenture and any successor trustee under that document.

Trustee Deed Poll means the deed poll substantially in the form set out in Schedule 5 of this Scheme and to be executed by the Trustee as contemplated in clause 7.5(a)(i)(C) of this Scheme.

Undertaking means the undertaking given by the Trustee to execute the Trustee Deed Poll in accordance with this Scheme.

Warranties means any warranties given by the Companies in favour of the Holders (as that term is defined under this Scheme and the Secured Creditor Scheme) under the RSA and any warranties given by the Holders (as that term is defined under this Scheme and the Secured Creditor Scheme) in favour of each other or the Companies under the RSA in contemplation of the transactions to be effected by, or in connection with, this Scheme and the Secured Creditor Scheme.

Warrants means warrants issued by BLY on the terms set out in Schedule 8.

1.2 Rules for interpreting this document

Headings are for convenience only, and do not affect interpretation. The following rules also apply in interpreting this document, except where the context makes it clear that a rule is not intended to apply.

(a) A reference to:

(i) a legislative provision or legislation (including subordinate legislation) is to that provision or legislation as amended, re–enacted or replaced, and includes any subordinate legislation issued under it;

(ii) a document (including this document) or agreement, or a provision of a document (including this document) or agreement, is to that document, agreement or provision as amended, supplemented, replaced or novated;

(iii) a party is a reference to a person who is bound by this Scheme, and any person who agrees to be bound whether by deed poll or otherwise;

(iv) a person includes a natural person, partnership, joint venture, Government Agency, association, corporation or other body corporate;

(v) a clause, term, schedule or attachment is a reference to a clause or term of, or, schedule or attachment to this Scheme;

(vi) this Scheme includes all schedules and attachments to it;

(vii) a law includes:

(A) any constitutional provision, treaty, decree, statute, regulation, by-law, ordinance or instrument;

(B) any order, direction, determination, approval requirement, licence or licence condition made, granted or imposed under any of them;

(C) any judgment; and

(D) any rule or principle of common law or equity,

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and is a reference to that law as amended, supplemented, consolidated, replaced, overruled or applied to new or different facts;

(viii) an agreement other than this Scheme includes an undertaking, or legally enforceable arrangement or understanding, whether or not in writing;

(ix) "dollars" or "US$" or "$" is to an amount in the currency of the United States of America unless otherwise indicated;

(x) "AU$" is to an amount in the currency of the Commonwealth of Australia;

(xi) a thing (including, but not limited to, a chose in action or other right) includes a part of that thing; and

(xii) anything (including a right, obligation or concept) includes each part of it.

(b) A singular word includes the plural, and vice versa.

(c) A word which suggests one gender includes the other genders.

(d) If a word or phrase is defined, any other grammatical form of that word or phrase has a corresponding meaning.

(e) If an example is given of anything (including a right, obligation or concept), such as by saying it includes something else, the example does not limit the scope of that thing.

(f) Unless expressly provided otherwise, an agreement on the part of two or more persons binds them severally.

(g) Unless expressly provided otherwise, a reference to a date or time is to that date or time in Sydney, New South Wales.

1.3 Non Business Days

If the day on or by which a person must do something under this document is not a Business Day the person must do it on or by the next Business Day.

1.4 The rule about "contra proferentem"

This document is not to be interpreted against the interests of a party merely because that party proposed this document or some provision of it or because that party relies on a provision of this document to protect itself.

2. Third parties

2.1 Capacity of Trustee

Any action taken (including the giving of any release) in connection with this Scheme by the Trustee, or on its behalf, is done in its capacity as trustee under the Indenture and not in the Trustee's personal capacity.

2.2 Deeds Poll

(a) This Scheme attributes actions to persons other than the Companies, the 7% Scheme Creditors and the Subordinate Claim Holders, being the Trustee, each Obligor (other than the Companies), each Released Obligor Individual and the Scheme Administrator.

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(b) The Trustee has agreed or will agree, by executing the Trustee Deed Poll, to perform the actions attributed to it under this Scheme subject to the instructions set out in clause 4 and clause 7.5(a)(i)(B)(aa) of this Scheme.

(c) Each Obligor (other than the Companies), each Scheme Administrator and each Released Obligor Individual has agreed or will agree, by executing the relevant Deed Poll, to perform the actions attributed to it under this Scheme, and is taken to be a party to this Scheme on and subject to the provisions of the relevant Deed Poll.

(d) This Scheme also contemplates:

(i) the 7% Scheme Creditors entering into a deed poll as set out in clause 5.2; and

(ii) that any person who is entitled to become a Released Obligor Individual may enter into a Released Obligor Individual Deed Poll either on, before or after the Effective Date.

3. Conditions Precedent

3.1 Conditions

This Scheme is conditional upon, and will have no force or effect until, the satisfaction of each of the following conditions precedent:

(a) (FATA) in the case of each 7% Scheme Creditor and each other creditor of the Companies who notified the Treasurer of the Commonwealth of Australia in accordance with FATA (Prescribed Creditor) that it proposes to acquire Shares or Warrants or both under this Scheme or the Subscription Deed (the Action) and paid any applicable fee, one of the following occurs at or before 8.00 am on the Second Court Date:

(i) the day that is 10 days after the end of the decision period mentioned in section 77 of FATA passes without an order prohibiting the Action having been made under section 67 or 68;

(ii) if an interim order is made under section 68 of FATA, the end of the period specified in the order passes without an order prohibiting the Action under section 67 having been made; or

(iii) the Prescribed Creditor receives a no objection notice (within the meaning of FATA) in respect of the Action that notice being unconditional other than the Standard Tax Conditions or such other conditions which are acceptable to the Prescribed Creditor acting reasonably.

(b) (Shareholder approval) at or before 8.00 am on the Second Court Date the Shareholder Resolutions are passed by the requisite majority of Shareholders;

(c) (ASX approval) ASX provides written confirmation that the terms of the New Warrants are appropriate and equitable for the purposes of ASX Listing Rule 6.1 or otherwise waives the requirement for the warrants to comply with ASX Listing Rule 6.1;

(d) (ASX waiver) ASX provides a waiver of ASX Listing Rule 10.1 in respect of the Amended Term Loan A and the Amended Term Loan B;

(e) (Holder approval) the Scheme is agreed to by a majority of the Holders present and voting in person or by proxy at the Scheme Meeting, holding at least 75% of

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the debt owed by the Companies to those Holders, in accordance with section 411(4)(a)(i) of the Corporations Act;

(f) (Director Nomination Agreement) each Director Nomination Agreement has been executed by the parties to that Director Nomination Agreement;

(g) (deeds poll) as at 8.00 am on the Second Court Date:

(i) the Scheme Administrators Deed Poll and the Obligors Deed Poll have been executed by the Scheme Administrators and the Obligors and continue to benefit the beneficiaries named in those deeds poll in accordance with their terms; and

(ii) no such Deed Poll has been terminated;

(h) (undertaking) as at 8.00 am on the Second Court Date:

(i) the Undertaking has been executed by the Trustee and continues to benefit the beneficiaries named in that Undertaking in accordance with its terms; and

(ii) no such Undertaking has been terminated;

(i) (independent expert) as at 8.00 am on the Second Court Date, KPMG Financial Advisory Services (Australia) Pty Ltd, the independent expert appointed by BLY, has not concluded that the Shareholder Resolutions are "not fair" and "not reasonable";

(j) (New Money ABL) as at 8.00 am on the Second Court Date, the New Money ABL has been duly executed and delivered by all parties to it and all conditions precedent to the New Money ABL have been satisfied (other than conditions precedent relating to this Scheme becoming Effective, the Secured Creditor Scheme becoming effective pursuant to section 411(10) of the Corporations Act, the Subsequent Term Loan Amendments becoming effective and the Final Chapter 15 Order being entered);

(k) (Amendment) as at 8.00 am on the Second Court Date, each of the Administrative Requirements have been satisfied (other than the execution of the Fourth Supplemental Indenture, the conditions precedent relating to this Scheme becoming Effective and the Secured Creditor Scheme becoming effective pursuant to section 411(10) of the Corporations Act);

(l) (Subscription Deed) as at 8.00 am on the Second Court Date, the Subscription Deed has been duly executed and delivered by all parties to it, remains in full force and effect, and all conditions precedent to the Subscription Deed have been satisfied (other than conditions precedent relating to this Scheme becoming effective and the Secured Creditor Scheme becoming effective pursuant to section 411(10) of the Corporations Act);

(m) (Subsequent Term Loan Amendments) as at 8.00 am on the Second Court Date, the Subsequent Term Loan Amendments have been duly executed and delivered by all parties to them, and all conditions precedent to the Subsequent Term Loan Amendments have been satisfied (other than conditions precedent relating to this Scheme becoming Effective and the Secured Creditor Scheme becoming effective pursuant to section 411(10) of the Corporations Act and being implemented);

(n) (Regulatory Approvals) as at 8.00 am on the Second Court Date, any approvals or consents, which are not otherwise described in this clause 3.1 but which are

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required by law or by any Government Agency to have been obtained in order to implement this Scheme or the 7% Creditor Scheme, have been obtained on an unconditional basis and remain in full force and effect;

(o) (Warranties) as at 8.00 am on the Second Court Date, the Warranties are true and correct in all material respects;

(p) (Court approval) the Court makes the Second Court Orders, including with such alterations or conditions required by the Court under section 411(6) of the Corporations Act and the alterations or conditions (if any) do not change the substance of this Scheme, including the Steps, in any material respect or impose unduly onerous obligations on any of the parties, acting reasonably;

(q) (other conditions) any other conditions made or required by the Court under section 411(6) of the Corporations Act in relation to this Scheme (which conditions do not change the substance of this Scheme, including the Steps, in any material respect, or impose unduly onerous obligations on any of the parties, acting reasonably) have been satisfied;

(r) (Effective) this Scheme becomes Effective;

(s) (Secured Creditor Scheme) the court order pursuant to section 411(4)(b), and if applicable section 411(6), of the Corporations Act in respect of the Secured Creditor Scheme becomes effective pursuant to section 411(10) of the Corporations Act; and

(t) (RSA) the RSA has not been terminated in accordance with its terms.

3.2 Certificate

(a) On the Second Court Date, the Companies will provide a certificate to the Court (or such other evidence as the Court may request) confirming, in respect of matters within its knowledge, whether or not the conditions precedent set out in clauses 3.1(a) to 3.1(o) have been satisfied.

(b) The certificate (or other evidence) given by the Companies constitutes conclusive evidence, as between the parties, that the conditions precedent set out in clause 3.1(a) to 3.1(o) above have (or have not) been satisfied, as the case may be.

4. The Trustee

(a) On and from the Effective Date, notwithstanding any term of any relevant document, the 7% Scheme Creditors hereby:

(i) provide the Trustee with all instructions and consents that it requires from those 7% Scheme Creditors under the Indenture to amend or amend and restate (as applicable) the Indenture in accordance with this Scheme;

(ii) direct the Trustee to execute and do, and to instruct any other Transaction Party which it is entitled to instruct to execute and do, or otherwise procure to be executed and done, all such documents (including, without limitation, the applicable Deed Poll and the Fourth Supplemental Indenture), acts or things as may be necessary or desirable to be executed or done by it for the purposes of giving effect to the terms of this Scheme; and

(iii) provide the Trustee with all other instructions and consents that are necessary to enable the Trustee to do anything that this Scheme requires or otherwise provides for the Trustee to do.

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(b) Each 7% Scheme Creditor and each Obligor will, if required, do such acts as may be required of it by the Scheme Administrator to give the instructions, consents and notifications referred to above and failing which the Scheme Administrator will do so on their behalf pursuant to clauses 5.1(a) and 5.1(b).

(c) Without limiting the provisions of clause 4(a) and Step 1 (Deeds and Amendment Documents), on the Effective Date, the 7% Scheme Creditors hereby irrevocably direct the Trustee to execute the Fourth Supplemental Indenture in accordance with clause 7.5(a)(i)(D) of this Scheme.

5. Grant of authority in favour of the Scheme Administrator

5.1 General grant of authority

(a) The Trustee, each 7% Scheme Creditor and each Obligor irrevocably authorise each Scheme Administrator to take all steps and do all other things necessary or advisable to give effect to this Scheme.

(b) Without limitation to the generality of clause 5.1(a) and subject to clause 7.1(c), on and from the Effective Date, each 7% Scheme Creditor and each Obligor irrevocably appoints each Scheme Administrator as its agent and attorney to enter into, execute and deliver as a deed (or otherwise) any document and to take any step necessary, desirable or advisable to give effect to this Scheme (except for the Fourth Supplemental Indenture, which is to be executed by the Trustee as the party thereto in accordance with clause 7.5(a)(i)(D)).

(c) The appointments and authorities granted under this clause 5 and clauses 4 and 6 shall be treated for all purposes as being fully effective and having been granted by deed poll. The authorities granted in favour of each Scheme Administrator under this Scheme will terminate immediately on the retirement or resignation of each Scheme Administrator in accordance with clause 6 of this Scheme.

5.2 7% Scheme Creditor Deed Poll

Without limiting the generality of clause 5.1, on and from the Effective Date, each 7% Scheme Creditor irrevocably authorises the Scheme Administrator to execute and deliver, as its attorney and agent, a deed poll substantially in the form of Schedule 4, as amended to include the list of 7% Scheme Creditors.

6. Scheme Administrator

6.1 Appointment of Scheme Administrators

Each Scheme Administrator will, on and from the Effective Date, be appointed jointly and severally as scheme administrator of this Scheme.

6.2 Qualification, appointment and cessation

(a) A person shall only be appointed as a scheme administrator of this Scheme, or replace a Scheme Administrator who ceases to be a scheme administrator of this Scheme (except by reason of resignation as the Scheme Administrator under clause 6.8) if the person:

(i) is not disqualified pursuant to section 411(7) of the Corporations Act;

(ii) consents to act as a scheme administrator; and

(iii) signs and delivers a deed poll substantially in the form of the Scheme Administrators Deed Poll.

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(b) A person ceases to be a Scheme Administrator if he or she:

(i) is disqualified pursuant to section 411(7) of the Corporations Act;

(ii) resigns from the position of Scheme Administrator by not less than one month's notice in writing to the Companies;

(iii) is removed from the position of Scheme Administrator by an order of the Court;

(iv) becomes of unsound mind or a person whose person or estate is liable to be dealt with in any way under the law relating to mental health;

(v) becomes bankrupt; or

(vi) dies.

6.3 Powers in relation to this Scheme

Subject to clause 6.8, each Scheme Administrator:

(a) has the power to supervise, administer, implement and carry out its functions as set out in this Scheme;

(b) has the power to do anything else that is necessary or advisable for the purposes of administering this Scheme; and

(c) has the power to do anything that is incidental to the exercise of the powers conferred on him or her under clauses 6.3(a) and 6.3(b).

6.4 Exercise of Powers

(a) Each Scheme Administrator shall be entitled to:

(i) employ its partners and staff to assist it in the performance or exercise of its duties, obligations, responsibilities and powers under this Scheme;

(ii) appoint agents to attend to any matter that the Scheme Administrator might attend to under this Scheme and which the Scheme Administrator is unable to attend to or which it is unreasonable to expect the Scheme Administrator to attend to in person; and

(iii) appoint a solicitor, accountant, barrister or other professionally qualified person or persons to assist or advise the Scheme Administrator.

(b) Except as expressly provided in this Scheme, in exercising or performing any of its duties, obligations, responsibilities or powers under this Scheme, each Scheme Administrator is taken not to act as, nor to have any of the duties of, a trustee.

(c) Except where this Scheme expressly authorises a Scheme Administrator to act as agent and attorney for a person in the execution of documents, the Scheme Administrator does not act as agent or attorney for any party to, or person bound by, this Scheme and Claims or obligations of any kind whatsoever incurred in connection with its role as Scheme Administrator are incurred by it personally.

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6.5 Liability

Subject to the Corporations Act, a Scheme Administrator is not, in the performance or exercise of its powers, obligations, functions and duties under this Scheme, personally liable for:

(a) any Claims or obligations of any kind whatsoever incurred by or on behalf of the Companies including, without limitation, any monies borrowed and interest thereon and any contracts adopted or otherwise agreed and any Stamp Duty payable on this Scheme and any tax liable to be remitted or otherwise paid (Liabilities);

(b) any loss or damage of any kind whatsoever caused by or resulting from any act, default or omission (Losses); or

(c) any actions, suits, proceedings, accounts, Claims or demands arising out of this Scheme which may be commenced, incurred by or made by any person and all Costs incurred in respect thereof (Demands),

whether before, during or after the Effective Date, unless attributable to fraud, wilful misconduct, reckless or gross negligence or breach of fiduciary duty.

6.6 Indemnity

(a) The Companies shall indemnify each Scheme Administrator for:

(i) all Liabilities, Losses and Demands (as defined in clause 6.5); and

(ii) all personal liability that the Scheme Administrator may incur in respect of his or her role as Scheme Administrator of the Companies,

unless attributable to fraud, wilful misconduct, reckless or gross negligence or breach of fiduciary duty.

(b) The indemnity under clause 6.6(a) takes effect on and from the Effective Date and is without limitation as to time notwithstanding the removal of the Scheme Administrator and the appointment of a replacement Scheme Administrator, the resignation of the Scheme Administrator or the termination of this Scheme for any reason whatsoever.

(c) The indemnity under clause 6.6(a) shall not:

(i) be affected, limited or prejudiced in any way by any irregularity, defect or invalidity in the appointment of the Scheme Administrator and shall extend to all actions, suits, proceedings, accounts, Liabilities, Claims and Demands arising in any way out of any defect in the appointment of the Scheme Administrator, the approval and implementation of this Scheme or otherwise; or

(ii) affect or prejudice all or any rights that the Scheme Administrator may have against any other person to be indemnified against the Costs, Losses and Liabilities incurred by the Scheme Administrator in, or incidental to the exercise or performance of any of the powers or authorities conferred on the Scheme Administrator by or in connection with this Scheme.

(d) This indemnity survives completion or termination of this Scheme.

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6.7 Remuneration

Subject to the Corporations Act, each Scheme Administrator shall be entitled to remuneration for its services together with reimbursement for its Costs, from, and in accordance with the terms of their letter of engagement with, the Companies.

6.8 Resignation of Scheme Administrator

Immediately following the delivery of the register pursuant to clause 7.3(b) evidencing completion of the Steps, each Scheme Administrator resigns as (and is taken to have resigned as) Scheme Administrator.

6.9 Directors of the Companies remain in control

Subject to the terms of this Scheme:

(a) the directors of each of the Companies:

(i) remain in control of each of the Companies with respect to the conduct of their respective business; and

(ii) remain in control of all of the assets of the Companies; and

(b) the Scheme Administrators do not have, and cannot exercise, any power in connection with the matters reserved to the directors of the Companies referred to in clause 6.9(a) above.

7. Implementation Steps

7.1 Definitions, interpretation and undertaking not to make Claims

(a) The parties acknowledge and agree that:

(i) subject to clause 7.1(c), all releases and discharges in this clause 7 are irrevocable at and from the time they are expressed to take effect;

(ii) a reference to an amount owing in this clause 7 is a reference to that amount whether actually or contingently owing;

(iii) notwithstanding anything in clause 7.5, anything (including an issue, allotment, release or discharge) occurring under a Step is binding and effective even if there is no consideration for it; and

(iv) solely for the purposes of determining:

(A) the time at which the Steps under this Scheme have been completed or have occurred (including as set out in clauses 7.2 and 7.4(c)); or

(B) whether or not Steps 3 (New Share issue) to 8 (Compromise of Subordinate Claims) can occur on the same day (including for the purposes of paragraph (b) of the definition of Implementation Date),

the Steps shall be deemed to have been completed or to have occurred immediately following the completion of the matters contemplated by paragraph (i) of Step 8 (Compromise of Subordinate Claims).

(b) Subject to clause 7.1(c), each party releasing a Claim or releasing any other party from an obligation owed to it by that party under this clause 7 absolutely and irrevocably undertakes to that party, at and from the time each such release is

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expressed to take effect and subject to all conditions to that released Claim or released obligation (if any) having been satisfied in accordance with their terms, that it will not make any Claim in respect of the released Claim or obligation to the extent that the Claim or obligation has been released in accordance with this Scheme and this document may be pleaded as a bar to any such Claim in any jurisdiction whatsoever.

(c) Where, in the opinion of the Scheme Administrator, acting reasonably, as a result of a release, discharge, allotment, issue or other event referred to or contemplated by a Step failing to occur or to take effect, it is not possible to give effect to the intent and purpose of this Scheme in all material respects:

(i) no other release, discharge, allotment, issue or other event referred to or contemplated by the Steps has effect (including as a result of non-satisfaction of a condition to a released Claim or released obligation, if any), and each such release, discharge, allotment, issue or other event is deemed not to have effect; and

(ii) the Obligors, the Trustee, the Released Obligor Individuals and the 7% Scheme Creditors shall do all things reasonably necessary to put each other party in the position it would have been in if none of the Steps had occurred. This clause 7.1(c)(ii) survives and continues in effect notwithstanding the effect of clause 7.2.

7.2 Sunset date

If all of the Steps in clause 7.5 have not been completed by 11.59 pm on the Sunset Date, then with effect from that time, this Scheme will not be capable of implementation and this Scheme will lapse, terminate and be of no further force or effect (other than clause 7.1(c)(ii)).

7.3 Scheme Administrator's register and certification

(a) The Scheme Administrator must keep a register noting the time of completion of the Steps in the form of Schedule 2, and the Scheme Administrator must sign it where indicated on completion of each Step. Each of the register and a copy of the register certified by the Scheme Administrator will be conclusive evidence that the Step was completed at the time noted in the register.

(b) As soon as practicable after completion of the Steps, the Scheme Administrator will give a copy of the register, certified by the Scheme Administrator, to each of the Companies and the Trustee.

7.4 Timing of Steps

(a) As early as practicable on the Effective Date, the Scheme Administrator shall notify the Companies and the Trustee of the Effective Date and the Implementation Date. If the date notified by the Scheme Administrator as being the Implementation Date is a date other than the fifth Business Day after the Effective Date, the Scheme Administrator must give the Companies and the Trustee full details of the reasons for which Steps 3 (New Share issue) to 8 (Compromise of Subordinate Claims) inclusive are unable to occur on the fifth Business Day after the Effective Date.

(b) As soon as the Companies have received the notification referred to in clause 7.4(a), BLY must make a public announcement setting out the Effective Date and the anticipated Implementation Date.

(c) Steps 3 (New Share issue) to 8 (Compromise of Subordinate Claims) (inclusive) are to occur on the Implementation Date as set out in clause 7.5, subject to the prior

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completion of Steps 1 (Deeds and Amendment Documents) and 2 (Calculations) (inclusive) in accordance with their terms.

(d) If there is a change to the date notified by the Scheme Administrator pursuant to clause 7.4(a) as being the Implementation Date:

(i) the Scheme Administrator must, as soon as practicable after the change, notify the Companies and the Trustee of the details of that change (including the reasons for it);

(ii) BLY must make a further public announcement setting out the change to the Implementation Date; and

(iii) any steps taken to comply with Step 2 (Calculations) must be repeated, taking into account the change to the Implementation Date.

7.5 Steps

(a) Step 1 (Deeds and Amendment Documents):

(i) On the Effective Date, prior to any other Step commencing:

(A) first, the Scheme Administrator must execute and deliver the 7% Scheme Creditor Deed Poll;

(B) second:

(aa) each 7% Scheme Creditor and each Obligor gives the Trustee all instructions, consents and directions to execute and deliver the Trustee Deed Poll and to perform its obligations under the Trustee Deed Poll and this Scheme; and

(bb) the Scheme Administrator must provide to the Trustee written notice of the instructions and consents referred to in clause 7.5(a)(i)(B)(aa) on behalf of each 7% Scheme Creditor pursuant to the appointment in clause 5.1(b);

(C) third, in accordance with the instructions set out in clauses 4 and 7.5(a)(i)(B)(aa) of this Scheme, the Trustee will execute and deliver to the Scheme Administrator the Trustee Deed Poll;

(D) fourth, the Trustee (in each case, for itself and on behalf of the 7% Scheme Creditors in accordance with the powers granted by the 7% Scheme Creditors in clause 4 of this Scheme) and each Obligor shall execute and deliver the Fourth Supplemental Indenture to the Scheme Administrator to be held in escrow until immediately after completion of Step 3 (New Share issue) in accordance with Step 7 (Amendment); and

(E) fifth, the Trustee shall provide to the Scheme Administrator and the Companies a table which shows, according to the Trustee's records:

(aa) as at the Effective Date, the full name, postal address, email address and contact phone number of each 7% Scheme Creditor;

(bb) the Aggregate Amount in respect of each 7% Scheme Creditor; and

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(cc) the Total Aggregate Amount.

(b) Step 2 (Calculations):

On the Calculation Date, the Scheme Administrator shall:

(i) based on the information referred to in clause 7.5(a)(i)(E), and in accordance with the calculations set out in Step 3 (New Share issue) and Step 4 (New Warrant issue), calculate:

(A) the Debt Contribution Amount in respect of each 7% Scheme Creditor;

(B) the Total Debt Contribution Amount;

(C) the number of New Shares and New Warrants; and

(D) in respect of each 7% Scheme Creditor, the number of the New Shares and New Warrants to be issued to that 7% Scheme Creditor in accordance with Step 3 (New Share issue) and Step 4 (New Warrant issue) of this Scheme; and

(ii) provide the details of the calculations referred to in clauses 7.5(b)(i) and 7.5(a)(i)(E) above to the Companies and the Trustee and, subject to clause 7.4(d)(iii) and in the absence of manifest error, all of the calculations in clauses 7.5(b)(i) and 7.5(a)(i)(E) shall be final and binding on the parties.

(c) Step 3 (New Share issue):

As early as practicable on the Implementation Date:

(i) BLY must allot and issue a number of the New Shares to each 7% Scheme Creditor (or their nominee, whose name and address is notified to BLY by any 7% Scheme Creditor, by no later than the Calculation Date) which is to be calculated as follows in respect of each 7% Scheme Creditor:

A = (B / C) x D

Where:

A is the number of New Shares to be issued to that 7% Scheme Creditor

B is that 7% Scheme Creditor's Debt Contribution Amount

C is the Total Debt Contribution Amount

D is total number of New Shares

(d) Step 4 (New Warrant issue):

Immediately after the completion of the issue of Shares under the Subscription Deed, on the Implementation Date:

(i) BLY must issue a number of New Warrants to each 7% Scheme Creditor (or their nominee, whose name and address is notified to BLY by any 7% Scheme Creditor, by no later than the Calculation Date) of a number which is to be calculated as follows in respect of each 7% Scheme Creditor:

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E = (F / G) x H

Where:

E is the number of A Warrants to be issued to that 7% Scheme Creditor

F is that 7% Scheme Creditor's Debt Contribution Amount

G is the Total Debt Contribution Amount

H is total number of A Warrants

I = (J / K) x L

Where:

I is the number of B Warrants to be issued to that 7% Scheme Creditor

J is that 7% Scheme Creditor's Debt Contribution Amount

K is the Total Debt Contribution Amount

L is total number of B Warrants

(ii) BLY shall procure that the name and address of each 7% Scheme Creditor (or its nominee, whose name and address is notified to BLY in accordance with clause 7.5(c)(i) or 7.5(d)(i)) to whom New Shares and New Warrants are issued under Step 3 (New Share issue) and Step 4 (New Warrant issue) is entered into BLY's register of members together with the number of New Shares and New Warrants issued to that 7% Scheme Creditor pursuant to clause 7.5(c) and this clause 7.5(d).

(iii) Where a 7% Scheme Creditor (or its nominee) would receive a fractional number of New Shares as a result of the operation of clause 7.5(c)(i), then the number of New Shares issued to that person under this Step 3 (New Share issue) will be rounded down to the nearest whole number.

(iv) Where a 7% Scheme Creditor (or its nominee) would receive a fractional number of A Warrants or B Warrants as a result of the operation of clause 7.5(d)(i), then the number of A Warrants or the number of B Warrants issued to that person under this Step 4 (New Warrant issue) will be rounded down to the nearest whole number.

(v) All Shares issued under Step 3 (New Share issue) and on the exercise of Warrants issued under Step 4 (New Warrant issue) rank pari passu amongst themselves and all other Shares then on issue and will be free from any encumbrances.

(vi) Each 7% Scheme Creditor to whom Shares are issued under Step 3 (New Share issue) and on the exercise of Warrants issued under Step 4 (New Warrant issue) is taken to have applied for such Shares and to have consented to become a member and agreed to the terms of the Constitution.

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(e) Step 5 (Release):

(i) Immediately after the completion of Step 4 (New Warrant issue), and simultaneously with Step 6 (Partial release of debt) and Step 7 (Amendment), subject to clause (ii) below:

(A) each 7% Scheme Creditor:

(aa) releases each Obligor from any Claim it has against that Obligor arising out of any Obligor's failure to comply with the Finance Documents between 28 March 2011 and the Implementation Date or the RSA prior to this Scheme becoming Effective;

(bb) releases each Released Obligor Individual from all Claims relating to any fact, matter, circumstance or event that arose or occurred in respect of, or in connection with, any Obligor between 28 March 2011 and the Implementation Date;

(cc) releases each other person that is a 7% Scheme Creditor from all Claims relating to any fact, matter, circumstances or event that arose or occurred as a result of any person's failure to comply with any Finance Document between 28 March 2011 and the Implementation Date or the RSA prior to this Scheme becoming Effective;

(B) each Obligor releases each 7% Scheme Creditor from any Claim it has against that 7% Scheme Creditor arising out of any 7% Scheme Creditor's failure to comply with the Finance Documents between 28 March 2011 and the Implementation Date or the RSA prior to this Scheme becoming Effective;

(C) each Released Obligor Individual releases each 7% Scheme Creditor and the Companies from all Claims relating to any fact, matter, circumstance or event that arose or occurred in respect of, or in connection with, any Obligor between 28 March 2011 and the Implementation Date;

except in the case of each of (A), (B) and (C), and in respect of each Claim:

(D) to the extent that such Claim relates to the released party's obligations under the RSA that require performance subsequent to this Scheme becoming Effective; or

(E) to the extent that the released party has engaged in fraud or wilful misconduct or been reckless, grossly negligent or dishonest in respect of the facts, matters, circumstances or events to which that Claim relates.

(ii) Notwithstanding paragraph (i) above, and subject to clause 7.5(g), each of the Finance Documents and the RSA remain in full force and effect.

(iii) Notwithstanding anything to the contrary in this Scheme, the releases, waivers and covenants given in this clause 7.5(e) shall not disentitle any 7% Scheme Creditor, the Obligors or the Released Obligor Individuals from enforcing their rights under this Scheme or in respect of any transaction to be implemented or consummated in connection therewith and each party

22

agrees that those releases, waivers and covenants will be limited to the extent necessary to permit each of them to enforce any such rights.

(f) Step 6 (Partial release of debt):

Simultaneously with Step 5 (Release) and Step 7 (Amendment):

(i) each 7% Scheme Creditor releases each of the Obligors from its obligation to pay to the Trustee or the 7% Scheme Creditors pursuant to the Finance Documents an amount equal to the Total Debt Contribution Amount; and

(ii) each of the Trustee and the 7% Scheme Creditors consents to the release in clause 7.5(f)(i) and waives all rights that it may have to require that any person comply with any requirements relating to waiver or any other matter in any of the Finance Documents to the extent necessary to effect the release under clause 7.5(f)(i).

(g) Step 7 (Amendment)

Simultaneously with Step 5 (Release) and Step 6 (Partial release of debt), the Scheme Administrator shall release the Fourth Supplemental Indenture from escrow, at which point the Fourth Supplemental Indenture shall operate in accordance with its terms.

(h) Step 8 (Compromise of Subordinate Claims):

(i) Immediately after the completion of Step 7 (Amendment):

(A) the right and entitlement of each Subordinate Claim Holder to enforce as against BLY any Subordinate Claim is limited to the amount (if any) actually recovered by BLY under any Applicable Insurance Policy, net of any expenses (including defence costs) incurred by BLY and/or any relevant insurer in connection with the claim (Net Proceeds); and

(B) BLY is released from any obligation to pay any amount in respect of any Subordinate Claim (including interest and costs) in excess of the Net Proceeds referrable to that claim.

(ii) Where BLY is entitled to claim under any Applicable Insurance Policy all or part of the amount claimed under a Subordinate Claim, BLY shall take all reasonable steps to make and pursue a claim for indemnity under the Applicable Insurance Policy in respect of that Subordinate Claim.

(iii) Immediately after the completion of Step 8 (Compromise of Subordinate Claims), each 7% Scheme Creditor releases each other person that is a 7% Scheme Creditor from all Claims and obligations under the Scheme and the Steps, except to the extent that such Claim relates to the released party's obligations under the RSA that require performance subsequent to this Scheme becoming Effective.

7.6 No inconsistent acts

The parties agree to treat themselves as bound by this Scheme for all purposes and not to act otherwise than in accordance with this Scheme.

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8. Standstill AND CONSENTS

8.1 Standstill

(a) During the period on and from the Effective Date up to the completion of Step 8 (Compromise of Subordinate Claims) (the Standstill Period), the Trustee and each 7% Scheme Creditor agrees that it will not, except for the purpose of enforcing the terms of this Scheme, or any Deed Poll or as otherwise expressly provided by this Scheme:

(i) exercise any right or remedy it may have under or in connection with the documents governing their respective Claims against the Obligors, including any right to seek interest payments under any such document, or under any applicable United States, Australian, Canadian or foreign law or otherwise with respect to any defaults, events of default or default events, howsoever described, which may arise under such documents;

(ii) commence or continue any legal action, Claim or other proceedings against any Obligor or the assets of any Obligor, including but not limited to in connection with any rights arising out of an event of default, default or default event, howsoever described, under any Finance Document;

(iii) exercise and, in the case of the 7% Scheme Creditors, not direct the Trustee to exercise, and shall instruct the Trustee to desist from exercising, any rights under any Finance Document;

(iv) take any step to enforce or make any demand under any guarantee, security or other right of recourse held by the 7% Scheme Creditors in respect of any Finance Document;

(v) take, or concur in the taking, of any step to wind up, appoint a liquidator, administrator, receiver, receiver and manager, or analogous office over, or commence any other insolvency related or attachment proceedings against, any Obligor or the assets of any Obligor;

(vi) take any steps to demand or enforce payment of all or part of any money owing, whether actually or contingently, by any Obligor pursuant to a right under any Finance Document;

(vii) declare any event of default, default or default event, howsoever described, under any Finance Document, including in respect of any circumstances subsisting as at or prior to the Effective Date;

(viii) ask or require any Obligor under any Finance Document to make any payment in respect of any indebtedness, liability or obligations (in each case, including at law) of such Obligor, including under or in connection with any Finance Document or any transaction under, or contemplated by, any Finance Document;

(ix) institute or prosecute any legal proceedings in relation to any Claim under any Finance Document against any Obligor or any other person to be released under this Scheme to the extent that such Claim or obligation is to be released under this Scheme; or

(x) exercise any rights against any Obligor which they may have on the occurrence of a breach, default, event of default, potential event of default or termination event (in each case, howsoever described or arising) under any Finance Document.

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(b) During the Standstill Period, the Trustee and each 7% Scheme Creditor agrees not to dispose of or transfer any right under the Indenture and the 7% Scheme Creditors direct the Trustee not to register any such disposal or transfer.

8.2 Consent, waiver and release

The Trustee, each 7% Scheme Creditor, and each Obligor whose consent or agreement is necessary under the Indenture to give effect to this Scheme:

(a) irrevocably consents and agrees to each Obligor:

(i) entering into, or otherwise becoming bound by, each Relevant Document;

(ii) performing its respective obligations and transactions under, or as contemplated by those Relevant Documents (including, but not limited to, Court applications for the purposes of this Scheme); and

(iii) carrying out any step for the purposes of, or otherwise acting consistently with, those Relevant Documents;

(b) agrees that no breach, non-compliance, default, event of default or potential event of default or termination event (in each case, howsoever described) under any Finance Document:

(i) has occurred (and agrees that it is taken to have not occurred), as a result of;

(ii) has been caused by (and agrees that it is taken to have not been caused by);

(iii) is continuing (and agrees that it is taken not to be continuing), as a result of; or

(iv) will or can occur, as a result of or be caused by,

any Obligor entering into or performing any Relevant Document or the obligations or transactions under, or contemplated by, any Relevant Document (including, but not limited to, any court applications for the purposes of this Scheme) or carrying out any step for the purposes of, or otherwise acting consistently with the Relevant Documents, and if any such event is deemed to have occurred then it is expressly waived notwithstanding any requirements relating to waiver in the Finance Documents;

(c) without limiting any other clause in this Scheme, agrees that if any change of control, in each case howsoever described, (Change of Control Event) has occurred under any of the Finance Documents at any time, up to and including the Implementation Date, any rights arising out of or in connection with the Change of Control Event are waived notwithstanding any requirements relating to waiver in the Finance Documents;

(d) agrees and consents to any releases which are given, or disposals of rights or other property which are made or occur, by any Obligor under, or which are otherwise contemplated by, the Relevant Documents; and

(e) agrees that the Trustee has committed no breach, non-compliance or default under the Finance Documents by executing the Undertaking, and if any such event is deemed to have occurred then it is expressly waived notwithstanding any requirements relating to waiver in the Finance Documents.

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9. Notices

9.1 How to give a notice

A notice, consent or other communication under this document is only effective if it is:

(a) in writing, signed by or on behalf of the person giving it;

(b) addressed to the person to whom it is to be given; and

(c) either:

(i) sent by pre-paid mail (by airmail, if the addressee is overseas) or delivered to that person's address;

(ii) sent by fax to that person's fax number and the machine from which it is sent produces a report that states that it was sent in full without error; or

(iii) sent in electronic form (such as email).

9.2 When a notice is given

A notice, consent or other communication that complies with this clause is regarded as given and received:

(a) if it is sent by fax or delivered, if received:

(i) by 5.00 pm (local time in the place of receipt) on a Business Day - on that day; or

(ii) after 5.00 pm (local time in the place of receipt) on a Business Day, or on a day that is not a Business Day - on the next Business Day;

(b) if it is sent by mail:

(i) within Australia - three Business Days after posting; or

(ii) to or from a place outside Australia - seven Business Days after posting; and

(c) if it is sent in electronic form - when the sender receives confirmation on its server that the message has been transmitted:

(i) if it is transmitted by 5.00 pm (Sydney time) on a Business Day – on that Business Day; or

(ii) if it is transmitted after 5.00 pm (Sydney time) on a Business Day, or on a day that is not a Business Day – on the next Business Day.

9.3 Address for notices

A person's mail and email address and fax number are those set out below, or as the person notifies the sender:

(a) Scheme Administrator

Attention:	Scott Kershaw and Jenny Nettleton
Address:	Korda Mentha
	Level 5, 2 Chifley Square
	Sydney

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	New South Wales 2000
	Australia
Fax:	+61 2 8257 3044
Email:	jnettleton@kordamentha.com

(b) Trustee

Attention:	Corporate Trust Services
Address:	U.S. Bank National Association
	170 South Main Street, Suite 200
	Salt Lake City
	Utah 84101
	United States

Fax: (801) 534-6013

With a copy to (but which will not constitute notice):

Attention:	Mark Williamson
Address:	Piper Alderman
	Level 23
	Governor Macquarie Tower
	1 Farrer Place
	Sydney
	New South Wales 2000
	Australia
Fax:	+61 2 9253 9900

Email: mwilliamson@piperalderman.com.au

And

Attention:	Frank Ciaccio
Address:	Dorsey & Whitney LLP
	51 West 52nd Street
	New York
	NY 10019-6119
	United States
Email:	ciaccio.frank@dorsey.com

(c) Obligors (including the Companies)

Attention:	Fabrizio Rasetti
Address:	Boart Longyear
	2570 West 1700 South
	Salt Lake City
	UT. 84104
	United States
Email:	frasetti@boartlongyear.com

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With a copy to (but which will not constitute notice):

Attention:	James Marshall
Address:	Ashurst Australia
	Level 11
	5 Martin Place
	Sydney NSW 2000
	Australia
Fax:	+ 61 2 9258 6999
Email:	james.marshall@ashurst.com

With a copy to (but which will not constitute notice):

Attention:	Dennis F. Dunne and Evan R. Fleck
Address:	Milbank Tweed Hadley & McCloy LLP
	28 Liberty Street
	New York
	NY 10005
	United States
Fax:	+1 212 822 5567
Email:	efleck@milbank.com / ddunne@milbank.com

(d) 7% Scheme Creditors

Attention:	Matt Sheahan
Address:	Ares Management LLC
	2000 Avenue of the Stars
	12th Floor
	Los Angeles, California 90067
	United States
Fax:	+1 (310) 861-1611
Email:	msheahan@aresmgmt.com

And:

Attention:	Lawrence First
	Ascribe II Investments LLC
	299 Park Avenue, 34th Floor
	New York, New York 10171
	United States
Fax:	+1 (212) 697-5524
Email:	lfirst@ascribecapital.com

With a copy to (but which will not constitute notice):

Attention: Michael Dodge and Genevieve Sexton

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Address:	Arnold Bloch Leibler
	333 Collins Street
	Level 21
	Melbourne Victoria 3000
	Australia
Fax:	+61 3 9916 9321 / +61 3 9916 9391
Email:	mdodge@abl.com.au / gsexton@abl.com.au

With a copy to (but which will not constitute notice):

Attention:	Michael H. Torkin and Daniel L. Biller
Address:	Sullivan & Cromwell LLP
	125 Broad Street
	New York, New York 10004
	United States
Fax:	+1 (212) 291-9376 / +1 (212) 291-9693
Email:	torkinm@sullcrom.com / billerd@sullcrom.com

10. General Provisions

10.1 Further assurances

The Scheme Administrator, the Trustee, each 7% Scheme Creditor and each Obligor must do all things and execute all deeds, instruments, transfers or other documents as may be necessary or desirable (in the opinion of the Companies, acting in good faith) to give full effect to the terms of this Scheme and the transactions contemplated by it.

10.2 Binding effect of Scheme

This Scheme binds the Companies, each 7% Scheme Creditor (including each 7% Scheme Creditor who did not attend the Scheme Meeting, who did not vote at the Scheme Meeting or who voted against this Scheme) and each Subordinate Claim Holder (despite the fact that a meeting of those creditors has not been ordered by the Court under section 411(1) of the Corporations Act) and, to the extent of any inconsistency, overrides the terms of the Indenture. This Scheme also binds any party who agrees to be bound by this Scheme pursuant to a Deed Poll.

10.3 Costs and Stamp Duty

(a) The Companies are liable for, and must pay all Stamp Duty on or relating to the execution, delivery and performance of this Scheme, any instrument executed under or in connection with this Scheme or any transaction evidenced, effected or contemplated by this Scheme.

(b) If a person other than the Companies pays any Stamp Duty on or relating to the execution, delivery and performance of this Scheme, any instrument executed under or in connection with this Scheme or any transaction evidenced, effected or contemplated by this Scheme, then the Companies must pay that amount to the paying party on demand.

(c) This clause 10.3 survives completion of this Scheme.

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10.4 Amendment

A provision of this Scheme may not be amended or varied except by an order of the Court pursuant to section 411(6) of the Corporations Act, being an order which imposes alterations or conditions which do not change the substance of this Scheme, including the Steps, in any material respect.

10.5 Governing Law and jurisdiction

(a) This Scheme is governed by the laws of the State of New South Wales.

(b) Each party submits to the non-exclusive jurisdiction of the courts of that State and courts of appeal from them, in respect of any proceedings arising out of or in connection with the subject matter of the Scheme.

10.6 Holding statements, register of members and admission to official quotation

(a) BLY must procure that, within 10 Business Days after completion of the Steps, each 7% Scheme Creditor to whom New Shares under Step 3 (New Share issue) are issued is sent a holding statement (or equivalent document) representing the number of Shares issued to that 7% Scheme Creditor pursuant to this Scheme; and

(b) On the Implementation Date, BLY must apply to ASX for, and will use its best endeavours to obtain quotation of the New Shares.

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Schedule 1

Finance Documents

Tab	Document	Parties	Date
Credit Agreements
1.	Unsecured Notes	Boart Longyear Management Pty Limited (Issuer), Boart Longyear Limited, Boart Longyear Australia Pty Limited, Votraint No. 1609 Pty Limited, Longyear Canada ULC, Boart Longyear Manufacturing Canada Ltd., Boart Longyear Company, Boart Longyear Canada, Longyear Holdings Inc, Longyear TM Inc, Boart Longyear Manufacturing and Distribution Inc, Boart Longyear Suisse SARL, Boart Longyear Chile Limitada, Boart Longyear Comercializadora Limitada, Boart Longyear S.A.C. (Guarantors), U.S. Bank, National Association (Trustee)	28 March 2011
2.	First Supplemental Indenture to the Unsecured Notes	Boart Longyear Management Pty Limited (Issuer), Boart Longyear Limited, Boart Longyear Australia Pty Limited, Votraint No. 1609 Pty Limited, Longyear Canada ULC, Boart Longyear Manufacturing Canada Ltd., Boart Longyear Company, Boart Longyear Canada, Longyear Holdings Inc, Longyear TM Inc, Boart Longyear Manufacturing and Distribution Inc, Boart Longyear Suisse SARL, Boart Longyear Chile Limitada, Boart Longyear Comercializadora Limitada, Boart Longyear S.A.C. (Guarantors), U.S. Bank, National Association (Trustee)	14 June 2013
3.	Second Supplemental Indenture to the Unsecured Notes	Boart Longyear Management Pty Limited (Issuer), Boart Longyear Limited, Boart Longyear Australia Pty Limited, Votraint No. 1609 Pty Limited, Longyear Canada ULC, Boart Longyear Manufacturing Canada Ltd., Boart Longyear Company, Boart Longyear Canada, Longyear Holdings Inc, Longyear TM Inc, Boart Longyear Manufacturing and Distribution Inc, Boart Longyear Suisse SARL, Boart Longyear Chile Limitada, Boart Longyear Comercializadora Limitada, Boart Longyear S.A.C. (Guarantors), U.S. Bank, National Association (Trustee)	27 September 2013

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Tab	Document	Parties	Date
4.	Third Supplemental Indenture to the Unsecured Notes	Boart Longyear Management Pty Limited (Issuer), Boart Longyear Limited, Boart Longyear Australia Pty Limited, Votraint No. 1609 Pty Limited, Longyear Canada ULC, Boart Longyear Manufacturing Canada Ltd., Boart Longyear Company, Boart Longyear Canada, Longyear Holdings Inc, Longyear TM Inc, Boart Longyear Manufacturing and Distribution Inc, Boart Longyear Suisse SARL, Boart Longyear Chile Limitada, Boart Longyear Comercializadora Limitada, Boart Longyear S.A.C. (Guarantors), U.S. Bank, National Association (Trustee)	2 April 2017

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Schedule 2

Scheme Administrator's Steps Register

Step	Time/Date completed	Scheme Administrator's signature
Step 1 (Deeds and Amendment Documents)	Time: Date:
		Name:
Step 2 (Calculations)	Time: Date:
		Name:
Step 3 (New Share issue)	Time: Date:
		Name:
Step 4 (New Warrant issue)	Time: Date:
		Name:
Step 5 (Release)	Time: Date:
		Name:
Step 6 (Partial release of debt)	Time: Date:
		Name:
Step 7 (Amendment)	Time: Date:
		Name:
Step 8 (Compromise of Subordinate Claims)	Time: Date:
		Name:

Time/Date all Steps completed	Time: Date:
Signature of Scheme Administrator
	Name:

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Schedule 3

Fourth Supplemental Indenture

34

BOART LONGYEAR MANAGEMENT PTY LIMITED,
as Issuer,

the Guarantors party hereto,

and

U.S. BANK NATIONAL ASSOCIATION,
as Trustee

FOURTH SUPPLEMENTAL INDENTURE

Dated as of [       ], 2017

1.50% Subordinated PIK Notes due 2022

FOURTH SUPPLEMENTAL INDENTURE

FOURTH SUPPLEMENTAL INDENTURE, dated as of [       ], 2017 (this “Fourth Supplemental Indenture”), among BOART LONGYEAR MANAGEMENT PTY LIMITED, a corporation incorporated under the laws of the Commonwealth of Australia (the “Issuer”), the Guarantors and U.S. BANK NATIONAL ASSOCIATION, as trustee (the “Trustee”). Terms used herein which are defined in the Indenture (as hereinafter defined) shall have the respective meanings assigned to them in the Indenture.

RECITALS

WHEREAS, the Issuer, Boart Longyear Limited (the “Parent”), certain Guarantors and the Trustee entered into an indenture, dated as of March 28, 2011, as supplemented by the first supplemental indenture dated as of June 14, 2013, the second supplemental indenture dated as of September 27, 2013 and the third supplemental indenture dated as of April 2, 2017 (the “Indenture”), pursuant to which the Issuer issued $300,000,000 in aggregate principal amount of its 7% Senior Notes due 2021; and

WHEREAS, the Parent, the Issuer, the Subsidiary Guarantors and the New Subsidiary Guarantor executed a deed poll dated [      ], the Trustee executed a deed poll dated [     ] and the Supreme Court of New South Wales approved a scheme of arrangement under Part 5.1 of the Corporations Act 2001 (Cth) (the “Scheme”) between the Parent, the Issuer, certain Subsidiary Guarantors and the Holders of the Securities which became effective on [      ], by operation of which the Parent, the Issuer, the Subsidiary Guarantors, the New Subsidiary Guarantor, the Holders of the Securities and the Trustee, in accordance with the instructions of the Holders of the Securities given by operation of the Scheme pursuant to the Court’s order and the Corporations Act 2001 (Cth), are entering into this Fourth Supplemental Indenture; and

WHEREAS, all acts and things prescribed by law and by the articles of incorporation and bylaws of the Issuer and the Trustee necessary to make this Fourth Supplemental Indenture a valid instrument legally binding on the Issuer and the Trustee, in accordance with its terms, have been done and performed.

NOW, THEREFORE, in consideration of the premises hereof and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders from time to time of the Securities, as follows:

ARTICLE I

Ratification and Confirmation of the Indenture

This Fourth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes. Except as specifically modified herein, the Indenture and the Securities are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms.

ARTICLE II

Effectiveness

Each of the Issuer, the Parent and the Guarantors, represents and warrants that each of the conditions precedent to the amendment and supplement of the Indenture have been satisfied in all respects.

This Fourth Supplemental Indenture shall become effective upon execution and delivery by each of the Issuer, the Guarantors and the Trustee.

The amendments set forth in Article III hereof shall become operative in respect of the Securities, and the terms of the Indenture and each Global Security shall be waived, amended, supplemented, modified or deleted as provided for in Article III below upon execution of this Fourth Supplemental Indenture.

ARTICLE III

INDENTURE AMENDMENTS

Subject to Article II hereof, the Indenture is hereby amended as follows:

A. All references in the Indenture and Exhibit 1 to “7% Senior Notes Due 2021” shall be amended to “1.50% Subordinated PIK Notes due 2022”;

B. The Stated Maturity of the Securities is hereby changed from “April 1, 2021” to “December 31, 2022”;

C. All references to minimum denominations with respect to redemption of Securities in the Indenture, including with respect to the selection of any Securities to be redeemed pursuant to Sections 4.06 and 4.09, and Exhibit 1 shall be changed from minimum denominations of $2,000 principal amount or any greater integral multiple of $1,000 to Securities in denominations of at least $2,000, or integral multiples of $1 in excess thereof;

D. The definition of “Change of Control” is hereby amended by deleting the period at the end thereof and inserting the text: “;

provided, however, that no merger or amalgamation of the Issuer or the Parent with or into another person effected to change the domicile of the Issuer or the Parent, as applicable, shall be a Change of Control; and provided further, that the foregoing definition of “Change of Control” shall apply only to such events occurring after [ ].”

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E. The definition of “Initial Securities” shall be amended and restated in its entirety as follows:

““Initial Securities” means $[__] aggregate principal amount of 1.50% Subordinated PIK Notes due 2022 issued on the Reissue Date.”

F. The following definitions shall be added to Section 1.01:

(1) “12.0% / 10.0% Senior Secured PIK Toggle Notes due 2022” means the 12.0% / 10.0% Senior Secured PIK Toggle Notes due 2022 issued under that indenture, dated as of September 27, 2013, among the Issuer, each of the subsidiary guarantors named therein and U.S. Bank National Association, as trustee thereunder, as supplemented by the first supplemental indenture thereto, dated as of [ ], 2017.

(2) “Designated Senior Indebtedness” means the Term Loan A Securities, the Term Loan B Securities and the 12.0% / 10.0% Senior Secured PIK Toggle Notes due 2022.

(3) “Existing ABL” means the Revolving Credit and Security Agreement, dated as of May 29, 2015, among PNC Bank, National Association, as lender and agent, Boart Longyear Management Pty Limited and the guarantors party thereto, as amended by the First Amendment to Revolving Credit and Security Agreement, dated as of April 2, 2017.

(4) “New Money ABL” means a new revolving asset-based lending facility being entered into by the Issuer on or about the Reissue Date to replace the Existing ABL.

(5) “Payment Default” has the meaning specified in Section 12.03.

(6) “Permitted Junior Securities” means unsecured debt or Equity Interests of the Issuer or any Guarantor or any successor corporation issued pursuant to a plan of reorganization or readjustment of the Issuer or any Guarantor, as applicable, that are subordinated to the payment of all then outstanding Senior Indebtedness of the Issuer or any Guarantor, as applicable (and any debt securities issued in exchange for Senior Indebtedness), at least to the same extent that the Securities and the Guarantee thereof are subordinated to the payment of the Designated Senior Indebtedness and guarantees thereof, as applicable, on the Reissue Date, so long as to the extent that any Senior Indebtedness of the Issuer or any Guarantor, as applicable, outstanding on the date of consummation of any such plan of reorganization or readjustment is not paid in full in cash on such date, the holders of any such Senior Indebtedness not so paid in full in cash have consented to the terms of such plan of reorganization or readjustment.

(7) “PIK Interest” has the meaning specified in Exhibit 1.

(8) “PIK Payment” has the meaning specified in Section 2.01(a).

(9) “Representative” means the trustee, agent or representative (if any) for an issue of Indebtedness, as applicable; provided that if, and for so long as, such Indebtedness lacks such a Representative, then the Representative for such Indebtedness shall at all times constitute the holder or holders of a majority in outstanding principal amount of obligations under such Indebtedness.

(10) “Reissue Date” means [        ].

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(11) “Secured Term Loan Interest” means (a) Obligations (as defined in the Term Loan A Securities Agreement as of the Reissue Date) owed under the Term Loan A Securities in excess of $85 million and (b) Obligations (as defined in the Term Loan B Securities Agreement as of the Reissue Date) owed under the Term Loan B Securities in excess of $105 million, up to, in the aggregate for clauses (a) and (b), the Secured Term Loan Interest Amount.

(12) “Secured Term Loan Interest Amount” means, as of any date of determination, the sum of:

(a) The greater of (x) zero dollars and (y):

(i) the amount of Permitted Indebtedness permitted to be outstanding under Section 4.03(b)(16)(i) hereof (which for clarification purposes is $35,000,000 as of the Reissue Date) minus

(ii) advances (including revolving advances and letters of credit, if any, and equivalent concepts) drawn under the New Money ABL; and

(b) the greater of (x) zero dollars and (y):

(i) $385 million dollars (representing the sum of the principal amounts outstanding (not including any accrued, accreted and/or capitalized interest) immediately prior to the Reissue Date of (I) the 12.0% / 10.0% Senior Secured PIK Toggle Notes due 2022, (II) the Term Loan A Securities and (III) the Term Loan B Securities) less

(ii) as of such date of determination, the sum of (I) principal amounts then outstanding (not including any accrued, accreted and/or capitalized interest, whether or not accrued, accreted and/or capitalized before, on or after the Reissue Date) of (A) the 12.0% / 10.0% Senior Secured PIK Toggle Notes due 2022, (B) the Term Loan A Securities and (C) the Term Loan B Securities and (II) commitments, whether or not drawn, under the New Money ABL in excess of $75 million (except to the extent that such commitments are or would be secured by Permitted Liens described in clause (26) of the definition thereof).

(13) “Term Loan A Securities” has the meaning given in Section 2.01 of the Term Loan A Securities Agreement (as read without giving effect to any amendment to the Term Loan A Securities Agreement subsequent to the Reissue Date to the extent that such amendment would increase the amount of Term Loan A Securities by an amount in excess of 20% of the face value as of the Reissue Date, increase the Applicable Premium (as defined therein), increase the Applicable Rate (as defined therein) by more than 200 basis points if such increase is not paid in cash, change the manner by which interest is paid thereunder, shorten the Maturity Date (as defined therein) or modify the terms of Sections 8.01 or 8.02 (as in effect on the Reissue Date)).

(14) “Term Loan A Securities Agreement” means the Loan A Securities Agreement, dated as of October 22, 2014, among the Issuer, the guarantors party thereto, and Wilmington Trust, National Association, as administrative agent, as amended from time to time.

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(15) “Term Loan B Securities” means has the meaning given in Section 2.01 of the Term Loan B Securities Agreement (as read without giving effect to any amendment to the Term Loan B Securities Agreement subsequent to the Reissue Date to the extent that such amendment would increase the amount of Term Loan B Securities by an amount in excess of 20% of the face value as of the Reissue Date, increase the Applicable Premium (as defined therein), increase the Applicable Rate (as defined therein) by more than 200 basis points if such increase is not paid in cash, change the manner by which interest is paid thereunder, shorten the Maturity Date (as defined therein) or modify the terms of Sections 8.01 or 8.02 (as in effect on the Reissue Date)).

(16) “Term Loan B Securities Agreement” means the Term Loan B Securities Agreement, dated as of October 22, 2014, among the Issuer, the guarantors party thereto, and Wilmington Trust, National Association, as administrative agent, as amended from time to time.

G. The first sentence of Section 1.03 is hereby amended and restated as follows: “This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture; provided, however, that for the avoidance of doubt, Sections 315(d)(3) and 316(a) of the TIA are hereby expressly excluded.”

H. Clause (1) of Section 4.03(b) shall be amended and restated in its entirety as follows:

“(1) (A) Indebtedness Incurred pursuant to any Credit Facility; provided, however, that, immediately after giving effect to any such Incurrence, the aggregate principal amount of all Indebtedness Incurred under this clause (1)(A) and then outstanding does not exceed $385 million less the sum of all principal payments with respect to such Indebtedness pursuant to Section 4.06(c)(1); and (B) Indebtedness constituting Obligations (as defined in the Term Loan A Securities Agreement as of the Reissue Date) owed under the Term Loan A Securities in excess of $85 million and Obligations (as defined in the Term Loan B Securities Agreement as of the Reissue Date) owed under the Term Loan B Securities in excess of $105 million and Refinancings thereof;”

I. Clause (3) of Section 4.03(b) shall be amended and restated in its entirety as follows:

“(3) the Securities (including for the avoidance of doubt, any increase in principal amount reflecting PIK Interest in accordance with the terms of the Indenture) and the Subsidiary Guarantees;”

J. Clauses (16) and (17) of Section 4.03(b) shall be amended and restated in their entirety as follows:

“(16) (i) Indebtedness Incurred by the Parent or any of its Restricted Subsidiaries in an aggregate principal amount at any time outstanding which, when taken together with all other Indebtedness of the Parent and its Restricted Subsidiaries outstanding on the date of such Incurrence (other than Coverage Indebtedness incurred pursuant to Section 4.03(a) above and Permitted Indebtedness Incurred pursuant to clauses (1) through (15) and (17) through (19) of this Section 4.03(b), and clause (ii) hereof) does not exceed $35 million, and (ii) Indebtedness Incurred pursuant to the New Money ABL; provided, that immediately before giving effect to any such Incurrence under the

5

foregoing clause (ii), the aggregate principal amount of all Indebtedness then outstanding under the New Money ABL is at least $35 million; and provided further, that immediately after giving effect to any such Incurrence under the foregoing clause (ii), the aggregate principal amount of all Indebtedness then outstanding under the New Money ABL does not exceed the sum of (I) $75 million‎ plus (II) an amount equal to the lesser of (1) $25 million and (2) the greater of (A) zero and (B) $385 million minus, as of the time of determination, principal amounts then outstanding (not including any accrued, accreted and/or capitalized interest, whether accrued, accreted and/or capitalized before, on or after the Reissue Date) of the Term Loan A Securities, Term Loan B Securities and/or the 12.0% / 10.0% Senior Secured PIK Toggle Notes due 2022;

(17) (A) unpaid interest on the 12.0% / 10.0% Senior Secured PIK Toggle Notes due 2022 accrued through December 31, 2016, in an amount not exceeding $[ ], and (B) unpaid accreted and capitalized interest on the 12.0% / 10.0% Senior Secured PIK Toggle Notes due 2022 from January 1, 2017 through December 31, 2018, in an amount not exceeding $[ ];”

K. New clauses (18) and (19) shall be added to Section 4.03(b) as follows:

“(18) Indebtedness constituting existing and future fees and expenses owing to holders of the 12.0% / 10.0% Senior Secured PIK Toggle Notes due 2022 and lenders under the New Money ABL pursuant to the terms of those instruments. For the avoidance of doubt, no principal, premium or interest shall constitute Permitted Indebtedness pursuant to this clause (18); and

(19) Indebtedness Incurred by the Parent or any of its Restricted Subsidiaries, which for the avoidance of doubt shall not include any accreted and/or capitalized interest under the Term Loan A Securities or the Term Loan B Securities; provided, that immediately before giving effect to any such Incurrence, the aggregate principal amount of all Indebtedness Incurred under this clause (19) and then outstanding, when taken together with all other Indebtedness Incurred by the Parent and its Restricted Subsidiaries (other than Coverage Indebtedness incurred pursuant to Section 4.03(a) above and Permitted Indebtedness Incurred pursuant to clauses (1) through (18) of this Section 4.03(b)) does not exceed $40 million; and provided further, that prior to such Incurrence:

(a) on or before December 31, 2018, a meeting of the shareholders of a successor to the Parent (or the Parent, if the Parent is the surviving entity following a redomiciliation to a jurisdiction outside Australia) shall have been held to vote on the approval of any merger or amalgamation with, acquisition of, scheme of arrangement or other similar transaction effectuating a business combination involving such successor, or the sale in one transaction or a series of related transactions involving all or substantially all of such successor’s assets, in each case, whether or not the successor continues or survives following such transaction, if the purchase price in such merger, amalgamation, acquisition, business combination or sale implied a total enterprise value of the Parent and each of its Subsidiaries, in the aggregate, of less than $750 million;

(b) such approval required the affirmative vote of the holders of 75% of the common stock of such successor (or, as applicable, the Parent) then issued and outstanding; and

(c) such approval was not obtained.”

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L. Clause (7) of the definition of “Permitted Liens” shall be amended and restated in its entirety as follows:

“Liens to secure (A) Indebtedness Incurred under the New Money ABL and any Refinancing thereof, (B) Indebtedness (which, for the avoidance of doubt, shall not include any accreted and/or capitalized interest) outstanding under (1) the 12.0% / 10.0% Senior Secured PIK Toggle Notes due 2022 and any Refinancing thereof (in the aggregate, in an amount up to but not exceeding $195 million), (2) the Term Loan A Securities and any Refinancing thereof (in the aggregate, in an amount up to but not exceeding $85 million) and (3) the Term Loan B Securities and any Refinancing thereof (in the aggregate, in an amount up to but not exceeding $105 million) and (C) Secured Term Loan Interest and any Refinancing thereof (in the aggregate, in an amount up to but not exceeding the Secured Term Loan Interest Amount); provided that, the sum of the amounts described in the foregoing clauses (A) through (C) shall not exceed $460 million;”

M. Clause (16) of the definition of “Permitted Liens” is hereby amended by deleting “(7),” in the two instances where it appears;

N. Clause (23) of the definition of “Permitted Liens” shall be amended and restated in its entirety as follows:

“(23) [reserved];

O. Clause (24) of the definition of “Permitted Liens” shall be amended and restated in its entirety as follows:

“(24) Liens to secure the Indebtedness described in Section 4.03(b)(17); and”

P. A new “Clause (25)” shall be added to the definition of “Permitted Liens” as follows:

“(25) Liens securing Indebtedness Incurred pursuant to Section 4.03(b)(18).”

Q. A new “Clause (26)” shall be added to the definition of “Permitted Liens” as follows:

“(26) Liens securing Indebtedness Incurred pursuant to Section 4.03(b)(19).”

R. Section 2.01 of the Indenture shall be amended and restated in its entirety as follows:

“(a) Form and Dating. The Securities will be substantially in the form of Exhibit 1 hereto (the “Appendix”). The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Security will be dated the date of its authentication. The Securities shall be issued in minimum denominations of $2,000 and any integral multiples of $1 in excess thereof. The terms and provisions contained in the Securities will constitute, and are hereby expressly made, a part of this Indenture and the Issuer and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Security conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

In connection with the payment of PIK Interest in respect of the Securities, the outstanding principal amount of the Securities shall be increased through the capitalization of such

7

interest thereon (the “PIK Payment”). Unless the context requires otherwise, references to the “principal” or “principal amount” of Securities, including for purposes of calculating any redemption price or redemption amount, includes any increase in the principal amount of the Securities as a result of a PIK Payment.

(b) Global Securities. Securities issued in global form will be substantially in the form of Exhibit A hereto (including the Legend thereon and the “Schedule of Increases or Decreases in the Global Security” attached thereto). Securities issued in definitive form will be substantially in the form of Exhibit 1 hereto (but without the Legend thereon and without the “Schedule of Increases or Decreases in the Global Security” or the “Schedule of Increases or Decreases in the Regulation S Temporary Global Security” attached thereto). Each Global Security will represent such of the outstanding Securities as will be specified therein and each shall represent the aggregate principal amount of outstanding Securities from time to time endorsed thereon and the aggregate principal amount of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions and PIK Payments. Any endorsement of a Global Security to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Securities represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in the case of an increase resulting from a PIK Payment, in accordance with the applicable provisions hereof.”

S. Section 2.02 of the Indenture shall be amended and restated in its entirety as follows:

“Execution and Authentication. Two Officers shall sign the Securities by manual signature.

If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless.

A Security shall not be valid or obligatory for any purpose until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated and delivered under this Indenture

The Trustee will, upon receipt of a written order of the Issuer signed by two Officers (an “Authentication Order”), authenticate Securities for original issue that may be validly issued under this Indenture. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and, in the case of an issuance of Additional Securities pursuant to Section 2.13 after the Reissue Date, shall certify that such issuance is in compliance with Section 4.03. The aggregate principal amount of the Securities that may be issued under this Indenture may not exceed $[__] (exclusive of Securities issued pursuant to Sections 2.06, 2.07 or 2.09); provided that nothing in this sentence shall restrict the payment of PIK Payments (or the increasing of the principal amount of the Securities in connection with the payment of PIK Payments).

On any Interest Payment Date (as defined in Exhibit 1) on which the Issuer pays PIK Interest with respect to a Security, the principal amount of such Security shall be increased by an amount equal to the interest payable, rounded up to the nearest $1, for the relevant interest period on the principal amount of such Security as of the relevant record date for such Interest Payment Date, to the credit of the Holders on such record date, pro rata in accordance with their interests or, if applicable, otherwise in accordance with the procedures of the Depository, and an adjustment shall be made on the books and records of the Trustee (if it is

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then the Custodian for such Security) with respect to such Security, by the Trustee or the Custodian, to reflect such increase. In connection with any payment of PIK Interest, no later than two (2) Business Days prior to the relevant Interest Payment Date, the Issuer shall deliver to the Trustee and the Paying Agent (if other than the Trustee) written notification, executed by two Officers, setting forth the amount of PIK Interest to be paid on such Interest Payment Date and directing the Trustee and the Paying Agent (if other than the Trustee) to increase the principal amount of the Securities in accordance with this paragraph, which notification the Trustee and Paying Agent shall be entitled to rely upon.

The Trustee may appoint an authenticating agent reasonably acceptable to the Issuer to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.”

T. All references in Sections 1.04(10) and 2.13 of the Indenture to the “Issue Date” are hereby amended to be references to the “Reissue Date”;

U. Section 4.01 of the Indenture shall be amended and restated in its entirety as follows:

“Payment of Securities. The Issuer shall promptly pay or cause to be paid the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture, including any additional interest required to be paid as a result of the operation of Paragraph 1 of Exhibit 1 hereto. Principal shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture (as of 1:00 p.m., New York City time, on the due date) money deposited by the Issuer in immediately available funds sufficient to pay all principal then due. PIK Interest shall be considered paid on the date due in accordance with the terms hereof and of the Securities, when the principal amount of the applicable Securities is increased in an amount equal to the amount of the applicable PIK Interest. The Issuer shall pay interest on overdue principal at the rate specified therefor in the Securities, and they shall pay interest on overdue installments of interest at the same rate to the extent lawful.”

V. Section 4.06(d) of the Indenture is hereby amended by (i) deleting the phrase “Section 4.06(b)” and inserting the phrase “Section 4.06(c)” in lieu thereof and (ii) deleting the phrase “30 days” and inserting the phrase “15 Business Days” in lieu thereof;

W. Section 5.01(a)(1) of the Indenture shall be amended and restated as follows:

(1) either (i) the Parent is the surviving or continuing Person or (ii) the resulting, surviving or transferee Person, if not the Parent (the “Successor Parent”) shall be organized or existing under the laws of (A) the United States, Canada, the Cayman Islands, Bermuda, and in each case any jurisdiction of the foregoing, or (B) Mexico, Switzerland, the United Kingdom or any other country that is a member country of the European Union on the Reissue Date, and in each case any jurisdiction of the foregoing, so long as (in the case of this sub-clause (B)) as a result thereof no holder of Securities (at the time when the documents effecting such transaction become binding on the Parent) is reasonably expected (at the time of such transaction) to be subject to withholding tax with respect to payments on the Securities; provided that in each case, (I) the Issuer shall take, or shall cause to be taken such steps, including the transfer or contribution of assets to, from or

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among the Issuer or any Guarantors, so that after giving effect to such transfers or contributions, no Guarantor shall be prohibited, whether as a result of tax consequences or otherwise, from providing guarantees with respect to the Securities, and (II) the guaranty provided to the Trustee after giving effect to such transaction including to cause the Issuer or any Guarantor that after giving effect to such transaction has not been adversely affected, and the Successor Parent (if not the Parent) shall expressly assume, by an indenture supplemental thereto, all the obligations of the Parent under the Securities and this Indenture; provided that the conditions described in the foregoing clauses (I) and (II) may be waived by the holders of not less than a majority in principal amount of the Securities;

X. Section 5.01(b)(1) of the Indenture shall be amended and restated as follows:

(1) either (i) the Issuer is the surviving or continuing Person or (ii) the resulting, surviving or transferee Person, if not the Issuer (the “Successor Issuer”) shall be organized or existing under the laws of (A) the United States, Canada, the Cayman Islands, Bermuda, and in each case any jurisdiction of the foregoing, or (B) Mexico, Switzerland, the United Kingdom or any other country that is a member country of the European Union on the Reissue Date, and in each case any jurisdiction of the foregoing, so long as (in the case of this sub-clause (B)) as a result thereof no holder of Securities (at the time when the documents effecting such transaction become binding on the Issuer) is reasonably expected (at the time of such transaction) to be subject to withholding tax with respect to payments on the Securities; provided that, in each case, (I) the Issuer and Successor Issuer shall take, or shall cause to be taken such steps, including the transfer or contribution of assets to, from or among the Issuer, Successor Issuer or any Guarantors, so that after giving effect to such transfers or contributions, no Guarantor shall be prohibited, whether as a result of tax consequences or otherwise, from providing guarantees with respect to the Securities, and (II) the guaranty provided to the Trustee after giving effect to such transaction including to cause the Issuer, the Successor Issuer or any Guarantor that after giving effect to such transaction has not been adversely affected, and the Successor Issuer (if not the Issuer) shall expressly assume, by an indenture supplemental thereto, all the obligations of the Issuer under the Securities and this Indenture; provided that the conditions described in the foregoing clauses (I) and (II) may be waived by the holders of not less than a majority in principal amount of the Securities;

Y. Section 6.02 of the Indenture shall be amended by deleting the words “April 1, 2021” and inserting the words “December 31, 2022” in lieu thereof;

Z. Clause (9) of Section 9.01 shall be amended by removing “and” at the end thereof;

AA. Clause (10) of Section 9.01 shall be amended by removing “.” at the end thereof and adding “; and”

BB. A new “Clause (11)” shall be added at the end of Section 9.01 as follows:

“(11) in order to change the Person that is the Issuer or change the Person that is the Parent so long as (A) such successor (i) expressly assumes, by indenture supplemental hereto, executed and delivered by such entity the due and punctual payment of the principal of and interest and premium, if any, on all the Securities, according to their tenor, and the due and punctual performance and observance of all other obligations to the Holders of Securities and the

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Trustee under this Indenture such entity; (ii) is organized and validly existing under the laws of (x) the United States or any jurisdiction thereof, Canada, Cayman Islands, Bermuda, and in each case any jurisdiction of the foregoing, or (y) Mexico, Switzerland, the United Kingdom or any other country that is a member country of the European Union on the Reissue Date, and in each case any jurisdiction of the foregoing so long as (in the case of this sub-clause (y)) as a result thereof no holder of Securities (at the time when documents effecting such transaction become binding on the Issuer or Parent, as applicable) is reasonably expected (at the time of such transaction) to be subject to withholding tax with respect to payments on the Securities; and (iii) owns, or a Guarantor of the Securities shall own, directly or indirectly substantially, all the assets held directly and/or indirectly by the Parent or Issuer, as the case may be, immediately prior to such amendment; and (B) as a result of any such transaction described in clause (A) above, (I) the Issuer shall, or shall cause to be taken such steps, including the transfer or contribution of assets to, from or among the Issuer or any Guarantors, so that after giving effect to such transfers or contributions, no Guarantor shall be prohibited, whether as a result of tax consequences or otherwise, from providing guarantees with respect to the Securities, and (II) the guaranty provided to the Trustee after giving effect to such transaction has not been adversely affected; provided that the conditions described in the foregoing clauses (I) and (II) may be waived by the holders of not less than a majority in principal amount of the Securities.”

CC. Section 9.03 of the Indenture shall be amended and restated as follows:

“9.03 [Reserved]”

DD. Section 11.06 of the Indenture shall be amended and restated as follows:

When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Issuer or by any Affiliate that the Issuer controls shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver, or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination.

EE. The Indenture shall be amended to add new Article 12 in its entirety as follows:

“ARTICLE 12

SUBORDINATION

Section 12.01. Agreement To Subordinate.

The Issuer agrees, and each Holder by accepting a Security agrees, that the payment of all Obligations owing in respect of the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article 12, to the prior payment in full of the Designated Senior Indebtedness and that the subordination is for the benefit of and enforceable by the holders of such Designated Senior Indebtedness. Only Indebtedness of the Issuer that is Designated Senior Indebtedness shall rank senior to the Securities in accordance with the provisions set forth herein. All provisions of this Article 12 shall be subject to Section 12.12.

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Section 12.02. Liquidation, Dissolution, Bankruptcy.

Upon any payment or distribution of the assets of the Issuer to creditors upon a total or partial liquidation or a total or partial dissolution of the Issuer or in a reorganization of or similar proceeding relating to the Issuer or its property:

(i) the holders of Designated Senior Indebtedness shall be entitled to receive payment in full in cash of such Designated Senior Indebtedness (including interest accruing after, or which would accrue but for, the commencement of any such proceeding at the rate specified in the applicable Designated Senior Indebtedness, whether or not a claim for such interest would be allowed) before Holders of the Securities shall be entitled to receive any payment; and

(ii) until the Designated Senior Indebtedness is paid in full in cash, any payment or distribution to which Holders of the Securities would be entitled but for the subordination provisions of this Indenture shall be made to holders of such Designated Senior Indebtedness as their interests may appear, except that Holders of the Securities may receive and retain (x) Permitted Junior Securities and (y) payments or deposits made pursuant to Article 8 so long as, on the date or dates the respective amounts were paid into the trust, such payments were made with respect to the Securities without violating the subordination provisions described herein; and

(iii) if a distribution is made to Holders of the Securities that, due to the subordination provisions, should not have been made to them, such Holders of the Securities are required to hold it in trust for the holders of Designated Senior Indebtedness and pay it over to them as their interests may appear.

Section 12.03. Default on Designated Senior Indebtedness.

The Issuer shall not pay principal of, premium, if any, or interest on the Securities (or pay any other Obligations relating to the Securities, including fees, costs, expenses, indemnities and rescission or damage claims) or make any deposit pursuant to Article 8 hereof and may not purchase, redeem or otherwise retire any Securities (collectively, “pay the Securities”) (except that Holders of the Securities may receive and retain (x) Permitted Junior Securities and (y) payments or deposits made pursuant to Article 8), if either of the following occurs (a “Payment Default”):

(i) a default in the payment of the principal of, premium, if any, or interest on any Designated Senior Indebtedness occurs and is continuing or any other amount owing in respect of any Designated Senior Indebtedness is not paid when due, or

(ii) any other default on Designated Senior Indebtedness occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms,

unless, in either case, the Payment Default has been cured or waived and any such acceleration has been rescinded or such Designated Senior Indebtedness has been paid in full in cash; provided, however, that the Issuer shall be entitled to pay the Securities without regard to the foregoing if the Issuer and the Trustee receive written notice approving such payment from the Representatives of the Designated Senior Indebtedness with respect to which the Payment Default has occurred and is continuing.

During the continuance of any default (other than a Payment Default) (a “Non-Payment Default”) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Issuer shall not pay the Securities (except in the form

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of Permitted Junior Securities) for a period (a “Payment Blockage Period”) commencing upon the receipt by the Trustee (with a copy to the Issuer) of written notice (a “Blockage Notice”) of such Non-Payment Default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter, unless earlier terminated as provided below. The Payment Blockage Period shall end earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Issuer from the Person or Persons who gave such Blockage Notice; (ii) because the default giving rise to such Blockage Notice is cured, waived or otherwise no longer continuing; or (iii) because such Designated Senior Indebtedness have been repaid in full in cash.

Notwithstanding the provisions described in the immediately preceding paragraph (but subject to the provisions contained in the first paragraph of this Section 12.03 and Section 12.02 hereof), unless the holders of such Designated Senior Indebtedness or the Representative of such Designated Senior Indebtedness shall have accelerated the maturity of such Designated Senior Indebtedness or a Payment Default exists, the Issuer shall be permitted to resume paying the Securities after the end of such Payment Blockage Period (including any missed payments). The Securities shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to the Designated Senior Indebtedness during such period. However, in no event shall the total number of days during which any Payment Blockage Period or Periods on the Securities is in effect exceed 179 days in the aggregate during any consecutive 360-day period. Notwithstanding the foregoing, however, no default or event of default that existed or was continuing on the date of commencement of any Payment Blockage Period with respect to Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis for a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness whether or not within a period of 360 consecutive days unless such default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants during the period after the date of delivery of a Blockage Notice, that, in either case, would give rise to a Non-Payment Default pursuant to any provisions of the Designated Senior Indebtedness under which a Non-Payment Default previously existed or was continuing shall constitute a new Non-Payment Default for this purpose).

Section 12.04. Acceleration of Payment of Securities.

If payment of the Securities is accelerated because of an Event of Default, the Issuer or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness or the Representative of such Designated Senior Indebtedness of the acceleration; provided that any failure to give such notice shall have no effect whatsoever on the provisions of this Article 12. If any Designated Senior Indebtedness is outstanding, the Issuer may not pay the Securities until five Business Days after the Representatives of all such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Securities only if this Indenture otherwise permits payment at that time.

Section 12.05. When Distribution Must Be Paid Over.

If a distribution is made to Holders that, due to the subordination provisions, should not have been made to them, such Holders are required to hold it in trust for the holders of Designated Senior Indebtedness, and pay it over to them as their interests may appear.

Section 12.06. Subrogation.

After all Designated Senior Indebtedness is paid in full and until the Securities are paid in full, Holders shall be subrogated to the rights of holders of such Designated Senior Indebtedness to receive distributions applicable to such Designated Senior Indebtedness. A distribution made under this Article

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12 to holders of such Designated Senior Indebtedness which otherwise would have been made to Holders is not, as between the Issuer and Holders, a payment by the Issuer on such Designated Senior Indebtedness.

Section 12.07. Relative Rights.

This Article 12 defines the relative rights of Holders and holders of Designated Senior Indebtedness. Nothing in this Indenture shall:

(i) impair, as between the Issuer and Holders, the obligation of the Issuer, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms;

(ii) prevent the Trustee or any Holder from exercising its available remedies upon a Default, subject to the rights of holders of Designated Senior Indebtedness to receive payments or distributions otherwise payable to Holders and such other rights of such holders of Designated Senior Indebtedness as set forth herein; or

(iii) affect the relative rights of Holders and creditors of the Issuer other than their rights in relation to holders of Designated Senior Indebtedness.

Section 12.08. Subordination May Not Be Impaired by the Issuer.

No right of any holder of Designated Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Issuer or by their failure to comply with this Indenture.

Section 12.09. Rights of Trustee and Paying Agent.

Notwithstanding Section 12.03 hereof, the Trustee or any Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any payments unless, not less than three Business Days prior to the date of such payment, a Trust Officer at the corporate trust office of the Trustee receives notice satisfactory to him that payments may not be made under this Article 12; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 7.01, shall be entitled in all respects to assume that no such facts exist; provided, however, that if a Trust Officer of the Trustee shall not have received, at least three Business Days prior to the date upon which by the terms hereof any such money may become payable for any purpose (including, without limitation, the payment of principal, premium, if any, interest, the redemption price, or the purchase price set forth in Section 4.09, as the case may be, in respect of any Security), the notice with respect to such money provided for in this Section 12.09 then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date. The Issuer, a Representative, or any trustee of or agent thereof shall be entitled to give the notice.

The Trustee in its individual or any other capacity shall be entitled to hold Designated Senior Indebtedness the same rights it would have if it were not Trustee. The Registrar and the Paying Agent shall be entitled to do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 12 with respect to any Designated Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Designated Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 12 shall apply to claims of,

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or payments to, the Trustee under or pursuant to Section 7.07 hereof or any other Section of this Indenture.

Section 12.10. Distribution or Notice to Representative.

Whenever a distribution is to be made or a notice given to holders of Designated Senior Indebtedness, the distribution may be made and the notice given to their Representative (if any).

Section 12.11. Article 12 Not To Prevent Events of Default or Limit Right To Accelerate.

The failure to make a payment pursuant to the Securities by reason of any provision in this Article 12 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 12 shall have any effect on the right of the Holders or the Trustee to accelerate the maturity of the Securities.

Section 12.12. Trust Moneys Not Subordinated.

Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust by the Trustee for the payment of principal of and interest on the Securities pursuant to Article 8 hereof shall not be subordinated to the prior payment of any Designated Senior Indebtedness or subject to the restrictions set forth in this Article 12, and none of the Holders shall be obligated to pay over any such amount to the Issuer or any holder of Designated Senior Indebtedness or any other creditor of the Issuer; provided that the subordination provisions of this Article 12 were not violated at the time the applicable amounts were deposited in trust pursuant to Article 8 hereof, as the case may be.

Section 12.13. Trustee Entitled To Rely.

Upon any payment or distribution pursuant to this Article 12, the Trustee and the Holders shall be entitled to conclusively rely (a) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 hereof are pending, (b) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders or (c) upon the Representatives of Designated Senior Indebtedness for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Designated Senior Indebtedness and other Indebtedness of the Issuer, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Designated Senior Indebtedness to participate in any payment or distribution pursuant to this Article 12, the Trustee shall be entitled to request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Designated Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 12, and, if such evidence is not furnished, the Trustee shall be entitled to defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 hereof shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 12.

Section 12.14. Trustee To Effectuate Subordination.

A Holder by its acceptance of a Security agrees to be bound by this Article 12 and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination between the Holders and the holders of Designated Senior Indebtedness as provided in this Article 12 and appoints the Trustee as attorney-in-fact for any and all such purposes.

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Section 12.15. Trustee Not Fiduciary for Holders of Designated Senior Indebtedness.

The Trustee shall not be deemed to owe any fiduciary duty to the holders of Designated Senior Indebtedness and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders or the Issuer or any other Person, money or assets to which any holders of Designated Senior Indebtedness shall be entitled by virtue of this Article 12 or otherwise.

Section 12.16. Reliance by Holders of Designated Senior Indebtedness on Subordination Provisions.

Each Holder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Designated Senior Indebtedness, whether such Designated Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Designated Senior Indebtedness and such holder of such Designated Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Designated Senior Indebtedness.

Without in any way limiting the generality of the foregoing paragraph, the holders of Designated Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Trustee or the Holders and without impairing or releasing the subordination provided in this Article 12 or the obligations hereunder of the Holders to the holders of Designated Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, the Designated Senior Indebtedness, or otherwise amend or supplement in any manner Designated Senior Indebtedness, or any instrument evidencing the same or any agreement under which Designated Senior Indebtedness are outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Designated Senior Indebtedness; (iii) release any Person liable in any manner for the payment or collection of Designated Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Issuer and any other Person.”

H. The Indenture shall be amended to add new Article 13 in its entirety as follows:

“ARTICLE 13

SUBORDINATION OF SECURITY GUARANTEES

Section 13.01. Agreement To Subordinate.

Each Guarantor agrees, and each Holder by accepting a Security agrees, that the obligations of such Guarantor under its Guarantee are subordinated in all respects, including right of payment, to the extent and in the manner provided in this Article 13, to the prior payment in full of Designated Senior Indebtedness guaranteed by such Guarantor and that the subordination is for the benefit of and enforceable by the holders of such Designated Senior Indebtedness. Only Indebtedness of such Guarantor that is a guarantee of Designated Senior Indebtedness shall rank senior to the obligations of such Guarantor under its Guarantee in accordance with the provisions set forth herein. All provisions of this Article 13 shall be subject to Section 13.12.

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Section 13.02. Liquidation, Dissolution, Bankruptcy.

Upon any payment or distribution of the assets of a Guarantor to creditors upon a total or partial liquidation or a total or partial dissolution of such Guarantor or in a reorganization of or similar proceeding relating to such Guarantor or its property:

(1) the holders of Designated Senior Indebtedness guaranteed by such Guarantor shall be entitled to receive payment in full in cash of such Designated Senior Indebtedness (including interest accruing after, or which would accrue but for, the commencement of any such proceeding at the rate specified in the applicable Designated Senior Indebtedness, whether or not a claim for such interest would be allowed) before Holders of the Securities shall be entitled to receive any payment; and

(2) until the Designated Senior Indebtedness guaranteed by such Guarantor are paid in full in cash, any payment or distribution to which Holders of the Securities would be entitled but for the subordination provisions of this Article 13 shall be made to holders of such Designated Senior Indebtedness as their interests may appear, except that Holders of the Securities may receive and retain (x) Permitted Junior Securities and (y) payments or deposits made pursuant to Article 8 so long as, on the date or dates the respective amounts were paid into the trust, such payments were made with respect to the Securities without violating the subordination provisions described herein; and

(3) if a distribution is made to Holders of the Securities that, due to the subordination provisions, should not have been made to them, such Holders of the Securities are required to hold it in trust for the holders of Designated Senior Indebtedness guaranteed by such Guarantor and pay it over to them as their interests may appear.

Section 13.03. Default on Designated Senior Indebtedness.

Guarantor shall not make any payment pursuant to its Guarantee (or pay any other Obligations relating to its Guarantee, including fees, costs, expenses, indemnities and rescission or damage claims) and may not purchase, redeem or otherwise retire any Securities (collectively, “pay its Guarantee”) (except that Holders of the Securities may receive and retain (x) Permitted Junior Securities and (y) payments or deposits made pursuant to Article 8), if either of the following occurs (a “Guarantor Payment Default”):

(1) a default in the payment of the principal of, premium, if any, or interest on any Designated Senior Indebtedness guaranteed by such Guarantor occurs and is continuing or any other amount owing in respect of any Designated Senior Indebtedness guaranteed by such Guarantor is not paid when due, or

(2) any other default on Designated Senior Indebtedness guaranteed by such Guarantor occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms,

unless, in either case, the Guarantor Payment Default has been cured or waived and any such acceleration has been rescinded or such Designated Senior Indebtedness have been paid in full in cash; provided, however, that such Guarantor shall be entitled to pay its Guarantee without regard to the foregoing if such Guarantor and the Trustee receive written notice approving such payment from the Representatives of the Designated Senior Indebtedness with respect to which the Guarantor Payment Default has occurred and is continuing.

During the continuance of any default (other than a Guarantor Payment Default) (a “Guarantor Non-Payment Default”) with respect to any Designated Senior Indebtedness guaranteed by Guarantor pursuant to which the maturity thereof may be accelerated without further notice (except such notice as

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may be required to effect such acceleration) or the expiration of any applicable grace periods, such Guarantor shall not pay its Guarantee (except in the form of Permitted Junior Securities) for a period (a “Guarantee Payment Blockage Period”) commencing upon the receipt by the Trustee (with a copy to such Guarantor and the Issuer) of written notice (a “Guarantee Blockage Notice”) of such Guarantor Non-Payment Default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Guarantee Payment Blockage Period and ending 179 days thereafter unless earlier terminated as provided below. The Guarantee Payment Blockage Period shall end earlier if such Guarantee Payment Blockage Period is terminated (i) by written notice to the Trustee, the relevant Guarantor and the Issuer from the Person or Persons who gave such Guarantee Blockage Notice; (ii) because the default giving rise to such Guarantee Blockage Notice is cured, waived or otherwise no longer continuing; or (iii) because such Designated Senior Indebtedness have been repaid in full in cash.

Notwithstanding the provisions described in the immediately preceding paragraph (but subject to the provisions contained in the first paragraph of this Section 13.03 and Section 12.02 hereof), unless the holders of such Designated Senior Indebtedness or the Representative of such Designated Senior Indebtedness shall have accelerated the maturity of such Designated Senior Indebtedness or a Guarantor Payment Default exists, the relevant Guarantor shall be permitted to resume paying its Guarantee after the end of such Guarantee Payment Blockage Period. Each Guarantor shall not be subject to more than one Guarantee Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness guaranteed by the relevant Guarantee during such period. However, in no event shall the total number of days during which any Guarantee Payment Blockage Period or Periods on a Guarantor is in effect exceed 179 days in the aggregate during any consecutive 360-day period. Notwithstanding the foregoing, however, no default that existed or was continuing on the date of delivery of any Guarantee Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Guarantee Blockage Notice unless such default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants during the period after the date of delivery of a Guarantee Blockage Notice, that, in either case, would give rise to a Guarantor Non-Payment Default pursuant to any provisions of the Designated Senior Indebtedness under which a Guarantor Non-Payment Default previously existed or was continuing shall constitute a new Guarantor Non-Payment Default for this purpose).

Section 13.04. Demand for Payment.

If payment of the Securities is accelerated because of an Event of Default and a demand for payment is made on a Guarantor pursuant to Article 10 hereof, the Issuer, the Trustee or such Guarantor shall promptly notify the holders of the Designated Senior Indebtedness guaranteed by such Guarantor or the Representative of such Designated Senior Indebtedness of such demand; provided that any failure to give such notice shall have no effect whatsoever on the provisions of this Article 13. If any Designated Senior Indebtedness guaranteed by a Guarantor is outstanding, such Guarantor may not pay its Guarantee until five Business Days after the Representatives of all such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay its Guarantee only if this Indenture otherwise permits payment at that time.

Section 13.05. When Distribution Must Be Paid Over.

If a distribution is made to Holders that, due to the subordination provisions, should not have been made to them, such Holders are required to hold it in trust for the holders of Designated Senior Indebtedness guaranteed by the relevant Guarantor and pay it over to them as their interests may appear.

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Section 13.06. Subrogation.

After all Designated Senior Indebtedness guaranteed by a Guarantor is paid in full and until the Securities are paid in full, Holders shall be subrogated to the rights of holders of such Designated Senior Indebtedness to receive distributions applicable to such Designated Senior Indebtedness. A distribution made under this Article 13 to holders of such Designated Senior Indebtedness which otherwise would have been made to Holders is not, as between the relevant Guarantor and Holders, a payment by such Guarantor on such Designated Senior Indebtedness.

Section 13.07. Relative Rights.

This Article 13 defines the relative rights of Holders and holders of Designated Senior Indebtedness guaranteed by a Guarantor. Nothing in this Indenture shall:

(1) impair, as between such Guarantor and Holders, the obligation of such Guarantor, which is absolute and unconditional, to make payments under its Guarantee in accordance with its terms;

(2) prevent the Trustee or any Holder from exercising its available remedies upon a default by such Guarantor under its obligations with respect to its Guarantee, subject to the rights of holders of Designated Senior Indebtedness guaranteed by such Guarantor to receive payments or distributions otherwise payable to Holders and such other rights of such holders of Designated Senior Indebtedness as set forth herein; or

(3) affect the relative rights of Holders and creditors of such Guarantor other than their rights in relation to holders of Designated Senior Indebtedness.

Section 13.08. Subordination May Not Be Impaired by a Guarantor.

No right of any holder of Designated Senior Indebtedness guaranteed by a Guarantor to enforce the subordination of the obligations of such Guarantor under its Guarantee shall be impaired by any act or failure to act by such Guarantor or by its failure to comply with this Indenture.

Section 13.09. Rights of Trustee and Paying Agent.

Notwithstanding Section 13.03 hereof, the Trustee or any Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any payments unless, not less than three Business Days prior to the date of such payment, a Trust Officer at the corporate trust office of the Trustee receives notice satisfactory to him that payments may not be made under this Article 13; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 7.01, shall be entitled in all respects to assume that no such facts exist; provided, however, that if a Trust Officer of the Trustee shall not have received, at least three Business Days prior to the date upon which by the terms hereof any such money may become payable for any purpose (including, without limitation, the payment of principal, premium, if any, interest, the redemption price or the purchase price set forth in Section 4.09, as the case may be, in respect of any Security), the notice with respect to such money provided for in this Section 13.09 then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date. A Guarantor, a Representative, or any trustee of or agent hereof shall be entitled to give the notice.

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The Trustee in its individual or any other capacity shall be entitled to hold Designated Senior Indebtedness guaranteed by a Guarantor with the same rights it would have if it were not Trustee. The Registrar and the Paying Agent shall be entitled to do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 13 with respect to any Designated Senior Indebtedness guaranteed by a Guarantor which may at any time be held by it, to the same extent as any other holder of such Designated Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 13 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof or any other Section of this Indenture

Section 13.10. Distribution or Notice to Representative.

Whenever a distribution is to be made or a notice given to holders of Designated Senior Indebtedness guaranteed by a Guarantor, the distribution may be made and the notice given to their Representative (if any).

Section 13.11. Article 13 Not To Prevent Events of Default or Limit Right To Demand Payment.

The failure of a Guarantor to make a payment pursuant to its Guarantee by reason of any provision in this Article 13 shall not be construed as preventing the occurrence of a default by such Guarantor under its Guarantee. Nothing in this Article 13 shall have any effect on the right of the Holders or the Trustee to make a demand for payment on a Guarantor pursuant to Article 10 hereof.

Section 13.12. Trust Moneys Not Subordinated.

Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust by the Trustee for the payment of principal of and interest on the Securities pursuant to Article 8 hereof shall not be subordinated to the prior payment of any Designated Senior Indebtedness guaranteed by any Guarantor or subject to the restrictions set forth in this Article 13, and none of the Holders shall be obligated to pay over any such amount to such Guarantor or any holder of Designated Senior Indebtedness guaranteed by such Guarantor or any other creditor of such Guarantor, provided that the subordination provisions of this Article 13 were not violated at the time the applicable amounts were deposited in trust pursuant to Article 8 hereof, as the case may be.

Section 13.13. Trustee Entitled To Rely.

Upon any payment or distribution pursuant to this Article 13, the Trustee and the Holders shall be entitled to conclusively rely (a) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 13.02 hereof are pending, (b) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders or (c) upon the Representatives of Designated Senior Indebtedness guaranteed by a Guarantor for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Designated Senior Indebtedness and other Indebtedness guaranteed by such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 13. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Designated Senior Indebtedness guaranteed by a Guarantor to participate in any payment or distribution pursuant to this Article 13, the Trustee shall be entitled to request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Designated Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 13, and, if such evidence is not furnished, the Trustee shall be entitled to defer any payment to such Person pending judicial determination as to the right of such Person to receive

20

such payment. The provisions of Sections 7.01 and 7.02 hereof shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 13.

Section 13.14. Trustee To Effectuate Subordination.

A Holder by its acceptance of a Security agrees to be bound by this Article 13 and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination between the Holders and the holders of Designated Senior Indebtedness guaranteed by a Guarantor as provided in this Article 13 and appoints the Trustee as attorney-in-fact for any and all such purposes.

Section 13.15. Trustee Not Fiduciary for Holders of Designated Senior Indebtedness.

The Trustee shall not be deemed to owe any fiduciary duty to the holders of Designated Senior Indebtedness guaranteed by a Guarantor and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders or such Guarantor or any other Person, money or assets to which any holders of Designated Senior Indebtedness guaranteed by such Guarantor shall be entitled by virtue of this Article 13 or otherwise.

Section 13.16. Reliance by Holders of Designated Senior Indebtedness on Subordination Provisions.

Each Holder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Designated Senior Indebtedness guaranteed by a Guarantor, whether such Designated Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Designated Senior Indebtedness and such holder of such Designated Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Designated Senior Indebtedness.

Without in any way limiting the generality of the foregoing paragraph, the holders of Designated Senior Indebtedness guaranteed by a Guarantor may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Trustee or the Holders and without impairing or releasing the subordination provided in this Article 13 or the obligations hereunder of the Holders to the holders of Designated Senior Indebtedness guaranteed by such Guarantor, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Designated Senior Indebtedness guaranteed by such Guarantor, or otherwise amend or supplement in any manner Designated Senior Indebtedness guaranteed by such Guarantor, or any instrument evidencing the same or any agreement under which Designated Senior Indebtedness guaranteed by such Guarantor are outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Designated Senior Indebtedness guaranteed by such Guarantor; (iii) release any Person liable in any manner for the payment or collection of Designated Senior Indebtedness guaranteed by such Guarantor; and (iv) exercise or refrain from exercising any rights against such Guarantor and any other Person.”

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ARTICLE IV

GLOBAL SECURITY AMENDMENTS

Each Global Security, with effect on and from the date hereof and subject to becoming operative, pursuant to Article II hereof shall be deemed supplemented, modified and amended in such manner as necessary to make the terms of such Global Security consistent with the terms of the Indenture, as amended by this Fourth Supplemental Indenture and giving effect to the amendments and waivers set forth in Article II hereof.

A. In addition, the “Face of Security” in Exhibit 1 shall be replaced in its entirety as follows:

“[Face of Security]

Boart Longyear Management PTY Limited.

1.50% Senior PIK Notes due 2022

[Initially] $                 plus all PIK Interest

added to the principal amount hereof

[If the Note is a Global Note, include the following:

and as such amounts may otherwise be

revised by the Schedule of Increases or

Decreases in [Global Security]

[Regulation S Temporary Global Security]

CUSIP No.                       

ISIN No.                     

Certificate No.                     

Boart Longyear Management Pty Limited (ABN 49 123 052 728), a corporation incorporated under the laws of the Commonwealth of Australia, promises to pay to Cede & Co., or registered assigns, the principal sum of $[__] U.S. dollars, plus all PIK Interest added to the principal amount hereof [If this Security is a Global Security, add the following: and as such amount may otherwise be revised by the Schedule of Increases or Decreases in [Global Security][Regulation S Temporary Global Security attached hereto]], on December 31, 2022 (the “Stated Maturity”).

Interest Payment Dates: March 31, June 30, September 30 and December 31

Record Dates: March 15, June 15, September 15 and December 15

Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which will for all purposes have the same effect as if set forth at this place.”

B. The Schedule of Increases or Decreases in Global Security in Exhibit 1 shall be replaced in its entirety as follows:

“[INSERT IN EACH GLOBAL SECURITY (OTHER THAN ANY REGULATION S TEMPORARY GLOBAL SECURITY):]

22

SCHEDULE OF INCREASES OR DECREASES IN THE GLOBAL SECURITY

The initial outstanding principal amount of this Global Security is $________. The following exchanges of a part of this Global Security for an interest in another Global Security or for a Definitive Security, or exchanges of a part of another Global Security or Definitive Security for an interest in this Global Security, or increase (including for PIK Payments) or decrease in the principal amount of this Global Security, have been made:

Date of Exchange
or
Increase/Decrease Amount of
decrease in
Principal Amount
of this Global
Security Amount of
increase in
Principal Amount
of this Global
Security Principal Amount
of this Global
Security following
such decrease or
increase Signature of
authorized
signatory of
Trustee or
Custodian

[INSERT IN EACH REGULATION S TEMPORARY GLOBAL SECURITY:]

SCHEDULE OF INCREASES OR DECREASES IN THE REGULATION S TEMPORARY GLOBAL SECURITY

The initial outstanding principal amount of this Regulation S Temporary Global Security is $________. The following exchanges of a part of this Regulation S Temporary Global Security for an interest in another Global Security, or exchanges of a part of another Restricted Global Security for an interest in this Regulation S Temporary Global Security, or increase (including for PIK Payments) or decrease in the principal amount of this Regulation S Temporary Global Security, have been made:

Date of Exchange
or
Increase/Decrease Amount of
decrease in
Principal Amount
of this Global
Security Amount of
increase in
Principal Amount
of this Global
Security Principal Amount
of this Global
Security following
such decrease or
increase Signature of
authorized
signatory of
Trustee or
Custodian

C. Paragraph 1 in Exhibit 1 shall be replaced in its entirety as follows:

“Interest

Boart Longyear Management Pty Limited (ABN 38 123 283 545), a corporation incorporated under the laws of the Commonwealth of Australia (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the “Issuer”), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Issuer will pay interest quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”). The first Interest Payment Date shall be [June 30, 2017]. Interest on the Securities will be paid entirely by capitalizing accrued and unpaid interest on each Interest Payment Date and adding the same to the principal amount of the Securities then outstanding (“PIK Interest”). Following an increase in the principal amount of the Securities as a result of a PIK Payment, this Security will bear interest on such increased principal amount from and after the date of such PIK Payment. Unless the context requires otherwise, references to Securities or the “principal” or the “principal amount” of Securities, including for

23

purposes of calculating any redemption price or redemption amount, include any increase in the principal amount of the Securities as a result of a PIK Payment. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance. Interest will be computed on the basis of a 360-day year of twelve 30-day months. On the Stated Maturity, the Issuer shall pay the entire aggregate principal amount of the outstanding Securities and all accrued and unpaid interest thereon, in each case, solely in cash.

Upon the occurrence of an Event of Default under Section 6.01(1) or (6) of the Indenture, the entire aggregate principal amount of the outstanding Securities (and any overdue payments of principal, premium and interest) shall bear interest at a rate per annum that is 1.0% above the then applicable interest rate on the Securities so long as such Event of Default remains unwaived.

Notwithstanding anything to the contrary, (a) the payment of any accrued and unpaid interest in connection with any redemption or repurchase of Securities pursuant to Article III of the Indenture, Section 4.06 of the Indenture and/or Section 4.09 of the Indenture, as applicable, (b) the payment of any accrued and unpaid interest on the Stated Maturity and (c) the payment of any accrued and unpaid interest upon any acceleration of the Securities shall, in each case of clauses (a), (b) and (c), be made solely in cash.

If the due date for any payment in respect of any Securities is not a Business Day, the Holder thereof will not be entitled to payment of the amount due until the next succeeding Business Day, and will not be entitled to any further interest or other payment as a result of any such delay.”

D. Paragraph 2 in Exhibit 1 shall be replaced in its entirety as follows:

“Method of Payment

The Issuer will pay interest on the Securities (except defaulted interest), if any, to the Persons who are registered Holders of Securities at the close of business on the December 15, March 15, June 15 and September 15 next preceding the Interest Payment Date, even if such Securities are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.11 of the Indenture with respect to defaulted interest. The Securities will be payable as to principal, premium, if any, and interest (other than PIK Interest, which is payable as described above) at the office or agency of the Issuer maintained for such purpose; provided that payment by wire transfer of immediately available funds will be required with respect to principal of, and interest (other than PIK Interest, which is payable as described above) and premium, if any, on all Global Securities and all other Securities the Holders of which will have provided wire transfer instructions to the Issuer or the Paying Agent. Such payment will be in U.S. dollars.”

E. Paragraph 9 in Exhibit 1 shall be replaced in its entirety as follows:

“Denominations, Transfer, Exchange

The Securities are in registered form without coupons in denominations of $2,000 and integral multiples of $1 in excess thereof. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuer need not exchange or register the transfer of any Security or portion of a Security selected for redemption, except for the unredeemed portion of any Security being redeemed in part. Also, the Issuer need not exchange or

24

register the transfer of any Securities for a period of 15 days before the mailing of a notice of redemption of Securities or during the period between a record date and the corresponding Interest Payment Date.”

F. Paragraph 20 in Exhibit 1 shall be replaced in its entirety as follows:

“THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

The Issuer will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to:

Boart Longyear Management Pty Limited

2570 West 1700 South

Salt Lake City, Utah 84104

Attention: General Counsel

G. Paragraph 21 shall be added to Exhibit 1 in its entirety as follows:

“Subordination

The Securities shall be subordinated to the extent set forth in Article 12 and Article 13 of the Indenture. To the extent provided in the Indenture, Designated Senior Indebtedness must be paid before the Securities may be paid. The Issuer agrees, and each Holder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give effect thereto and appoints the Trustee as attorney-in-fact for such purpose.”

ARTICLE V

MISCELLANEOUS

Section 5.1. NO ADDITIONAL RESPONSIBILITIES ASSUMED BY THE TRUSTEE.

Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Fourth Supplemental Indenture. This Fourth Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto. The Trustee makes no representations as to the validity or sufficiency of this Fourth Supplemental Indenture. The recitals and statements herein are deemed to be those of the Issuer and not of the Trustee.

Section 5.2. GOVERNING LAW.

THIS FOURTH SUPPLEMENTAL INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

25

Section 5.3. COUNTERPART ORIGINALS.

The parties may sign any number of copies of this Fourth Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

Section 5.4. HEADINGS.

The section headings are for convenience only and shall not affect the construction hereof.

Section 5.5. ENTIRE AGREEMENT.

This Fourth Supplemental Indenture constitutes the entire agreement of the parties hereto with respect to the amendments to the Indenture set forth herein.

Section 5.6. SUCCESSORS.

This Fourth Supplemental Indenture constitutes the entire agreement of the parties hereto with respect to the amendments to the Indenture set forth herein.

Section 5.7. SEVERABILITY.

In case any provision in this Fourth Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof or of the Indenture shall not in any way be affected or impaired thereby.

[signatures on following pages]

26

IN WITNESS WHEREOF, the parties hereto have caused this Fourth Supplemental Indenture to be duly executed as of the day and year first above written.

ISSUER:

Executed in accordance with section 127 of the Corporations Act 2001 by BOART LONGYEAR MANAGEMENT PTY LIMITED

By:
	Name:	Jeffrey Olsen
	Title:	Director
By:
	Name:	Fabrizio Rasetti
	Title:	Director/Secretary

GUARANTORS:

BOART LONGYEAR LIMITED

Executed in accordance with section 127 of the Corporation Act 2001 by BOART LONGYEAR LIMITED

By:
	Name:	Jeffrey Olsen
	Title:	Director
By:
	Name:	Fabrizio Rasetti
	Title:	Director/Secretary

BOART LONGYEAR AUSTRALIA PTY LIMITED

Executed in accordance with section 127 of the Corporation Act 2001 by BOART LONGYEAR AUSTRALIA PTY LIMITED

By:
	Name:	Jeffrey Olsen
	Title:	Director
By:
	Name:	Fabrizio Rasetti
	Title:	Director/Secretary

VOTRAINT NO. 1609 PTY LIMITED

Executed in accordance with section 127 of the Corporation Act 2001 by VOTRAINT NO. 1609 PTY LIMITED

By:
	Name:	Jeffrey Olsen
	Title:	Director
By:
	Name:	Fabrizio Rasetti
	Title:	Director/Secretary

BOART LONGYEAR CHILE LIMITADA
By:
	Name:	Fabrizio Rasetti
	Title:	President
By:
	Name:	Juan Pablo Glaessner Piccone
	Title:	Director
BOART LONGYEAR COMERCIALIZADORA LIMITADA
By:
	Name:	Fabrizio Rasetti
	Title:	Authorized Representative
By:
	Name:	Juan Pablo Glaessner Piccone
	Title:	Authorized Representative
BOART LONGYEAR S.A.C.
By:
	Name:	Fabrizio Rasetti
	Title:	Director and Appointed Attorney
By:
	Name:	Juan Pablo Glaessner Piccone
	Title:	Director and President

BOART LONGYEAR COMPANY
LONGYEAR HOLDINGS, INC.
LONGYEAR TM, INC.
BOART LONGYEAR MANUFACTURING AND DISTRIBUTION INC.
By:
	Name:	Fabrizio Rasetti
	Title:	President

BOART LONGYEAR MANUFACTURING CANADA LTD.
By:
	Name:	Fabrizio Rasetti
	Title:	President
LONGYEAR CANADA, ULC
By:
	Name:	Fabrizio Rasetti
	Title:	President

BOART LONGYEAR CANADA

Signed for BOART LONGYEAR CANADA by its Partners:

BOART LONGYEAR ALBERTA LIMITED
By:
	Name:	Fabrizio Rasetti
	Title:	President
LONGYEAR CANADA, ULC
By:
	Name:	Fabrizio Rasetti
	Title:	President

BOART LONGYEAR SUISSE SARL
By:
	Name:	Guillaume Dubuy
	Title:	Managing Director
By:
	Name:	Fabrizio Rasetti
	Title:	Managing Director

TRUSTEE:
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
	Name:
	Title:

Schedule 4

Form of 7% Scheme Creditor Deed Poll

35

 

7% Scheme Creditor Deed Poll

The 7% Scheme Creditors

2017

36

THIS DEED POLL is made on                                                           2017

Made by:

(1) Each 7% Scheme Creditor set out in Schedule 1 of this deed poll.

In favour of:

(2) Each other 7% Scheme Creditor, the Scheme Administrators, the Trustee, each Obligor and each Released Obligor Individual (each a Recipient).

EACH SCHEME CREDITOR DECLARES:

1. INTERPRETATION

1.1 Definitions

The following definitions apply in this document.

(a) Scheme means the scheme of arrangement under Part 5.1 of the Corporations Act in relation to the Companies and the 7% Scheme Creditors approved by the Court on [date] and which became Effective on or about [date].

(b) Unless the context requires otherwise, a capitalised term or expression which is defined in the Scheme has the same meaning when used in this deed poll.

1.2 Rules for interpreting this document

Clause 1.2 (Rules for interpreting this document) of the Scheme applies to the interpretation of this deed poll as if references to "this Scheme" were references to "this deed poll".

1.3 Nature of deed poll

This deed poll is made for the benefit of the Recipients and may be relied on and enforced against each 7% Scheme Creditor in accordance with its terms by each Recipient on and from the date of this deed poll even though the Recipients are not party to this deed poll.

1.4 Several obligations

This deed poll binds each 7% Scheme Creditor severally and not jointly.

1.5 Termination

(a) Subject to clause 1.5(b), if the Steps are not completed by 11.59pm on the Sunset Date this deed poll will automatically terminate and the terms of this deed poll will be of no further force or effect.

(b) Where the Scheme has become Effective but all the Steps are not completed by 11.59pm on the Sunset Date, the terms of this deed poll to the extent that they relate to clause 7.1(c)(ii) of the Scheme remain in full force and effect.

2. releases and waivers

(a) Each 7% Scheme Creditor:

(i) gives each release, waiver and indemnity which is to be given by it under the Scheme:

37

(A) at the time that release, waiver or indemnity is to be given under the Scheme; and

(B) in favour of the Recipient to whom the release, waiver or indemnity is to be given under the Scheme; and

(ii) acknowledges and agrees that each Recipient may rely on this deed poll in order to enforce the releases, waivers and indemnities given in its favour under the Scheme and this deed poll.

3. consents and instructions

Each 7% Scheme Creditor gives each consent and instruction which is required to be given by it for the purposes of the Scheme in accordance with the Scheme.

4. General

4.1 Notices

The provisions of clause 9 (Notices) of the Scheme are incorporated into this document by reference as if set out in this document in full, mutatis mutandis.

4.2 Governing law and jurisdiction

(a) This document and any dispute arising out of or in connection with this document is governed by the laws of New South Wales.

(b) Each party submits to the exclusive jurisdiction of the courts of that State and courts of appeal from them in respect of any proceedings arising out of or in connection with this document.

4.3 Continuing obligations

This deed poll is irrevocable.

4.4 Waiver

Each 7% Scheme Creditor may not rely on the words or conduct of any Recipient as a waiver of any right arising under or in connection with this deed poll unless the waiver is in writing and signed by the Recipient granting the waiver.

4.5 Inconsistency

The terms of the Scheme prevail over the terms of this deed poll to the extent of any inconsistency between them.

4.6 Cumulative Rights

Except as expressly provided in this deed poll, the rights of each 7% Scheme Creditor and of each Recipient under this deed poll are in addition to and do not exclude or limit any other rights or remedies provided by law.

4.7 Assignment and other dealings

(a) The rights and remedies of each Recipient under this deed poll are personal and must not be assigned or otherwise dealt with at law or in equity.

(b) Any purported dealing in contravention of clause 4.7(a) is void.

38

SCHEDULE 1

7% Scheme Creditors

39

Schedule 5

Form of Trustee Deed Poll

40

 

Trustee Deed Poll

The Trustee

2017

41

THIS DEED POLL is made on                                                                 2017

Made by:

(1) U.S. Bank National Association in its capacity as Trustee under the Indenture (the Trustee).

In favour of:

(2) Each 7% Scheme Creditor, each Subordinate Claim Holder, the Scheme Administrators, each Obligor and each Released Obligor Individual (each a Recipient)

THE TRUSTEE DECLARES:

1. INTERPRETATION

1.2 Definitions

The following definitions apply in this document.

(a) Scheme means the scheme of arrangement under Part 5.1 of the Corporations Act in relation to the Companies and the 7% Scheme Creditors approved by the Court on [date] and which became Effective on or about [date].

(b) Unless the context requires otherwise, a capitalised term or expression which is defined in the Scheme has the same meaning when used in this deed poll.

1.3 Rules for interpreting this document

Clause 1.2 (Rules for interpreting this document) of the Scheme applies to the interpretation of this deed poll as if references to "this Scheme" were references to "this deed poll".

1.4 Nature of deed poll

This deed poll is made for the benefit of the Recipients and may be relied on and enforced against the Trustee in accordance with its terms by each Recipient on and from the date of this deed poll even though the Recipients are not party to this deed poll.

1.5 Capacity of Trustee

Any reference to the Trustee in this deed poll is to be read as a reference to the Trustee in its capacity as Trustee under the Finance Documents and in no other capacity (including any personal capacity).

1.6 Termination

(a) Subject to clause 1.5(b), if the Steps are not completed by 11.59pm on the Sunset Date this deed poll will automatically terminate and the terms of this deed poll will be of no further force or effect.

(b) Where the Scheme has become Effective but all the Steps are not completed by 11.59pm on the Sunset Date, the terms of this deed poll to the extent that they relate to clause 7.1(c)(ii) of the Scheme remain in full force and effect.

2. obligations in relation to scheme

The Trustee, in accordance with the instructions given to it by the 7% Scheme Creditors and the Obligors under the Scheme:

42

(a) consents to the Scheme; and

(b) undertakes in favour of each Recipient:

(i) to perform all actions attributed to the Trustee under the Scheme;

(ii) to do all things and execute all further documents necessary to give full effect to the Scheme, including but not limited to executing the Fourth Supplemental Indenture; and

(iii) not to act inconsistently with any provision of the Scheme.

3. General

3.1 Notices

The provisions of clause 9 (Notices) of the Scheme are incorporated into this document by reference as if set out in this document in full, mutatis mutandis.

3.2 Governing law and jurisdiction

(a) This document and any dispute arising out of or in connection with this document is governed by the laws of New South Wales.

(b) Each party submits to the exclusive jurisdiction of the courts of that State and courts of appeal from them in respect of any proceedings arising out of or in connection with this document.

3.3 Continuing obligations

This deed poll is irrevocable.

3.4 Waiver

The Trustee may not rely on the words or conduct of any Recipient as a waiver of any right arising under or in connection with this deed poll unless the waiver is in writing and signed by the Recipient granting the waiver.

3.5 Inconsistency

The terms of the Scheme prevail over the terms of this deed poll to the extent of any inconsistency between them.

3.6 Cumulative Rights

Except as expressly provided in this deed poll, the rights of the Trustee and of each Recipient under this deed poll are in addition to and do not exclude or limit any other rights or remedies provided by law.

3.7 Assignment and other dealings

(a) The rights and remedies of each Recipient under this deed poll are personal and must not be assigned or otherwise dealt with at law or in equity.

(b) Any purported dealing in contravention of clause 3.7(a) is void.

43

EXECUTED as a deed poll.

executed by U.S. BANK NATIONAL ASSOCIATION as Trustee by its authorised signatories

By:

Name:

Title:

By:

Name:

Title:

44

Schedule 6

Form of Scheme Administrators Deed Poll

45

 

Scheme Administrators Deed Poll

The Scheme Administrators

2017

46

THIS DEED POLL is made on                                                   2017

Made by:

(1) Scott Kershaw and Jenny Nettleton, of KordaMentha, (the Scheme Administrators)

In favour of:

(2) each 7% Scheme Creditor, the Trustee, each Released Obligor Individual and each Obligor (each a Recipient)

THE SCHEME ADMINISTRATORS DECLARE:

1. INTERPRETATION

1.1 Definitions

The following definitions apply in this document.

(a) Scheme means the scheme of arrangement under Part 5.1 of the Corporations Act in relation to the Companies and the 7% Scheme Creditors substantially in the form set out in Schedule 1 to this deed poll, subject to any alterations made or conditions imposed by the Court pursuant to section 411(6) of the Corporations Act.

(b) Unless the context requires otherwise, a capitalised term or expression which is defined in the Scheme has the same meaning when used in this deed poll.

1.2 Rules for interpreting this document

Clause 1.2 (Rules for interpreting this document) of the Scheme applies to the interpretation of this deed poll as if references to "this Scheme" were references to "this deed poll".

1.3 Nature of deed poll

This deed poll is made for the benefit of the Recipients and may be relied on and enforced against each Scheme Administrator in accordance with its terms by each Recipient on and from the date of this deed poll even though the Recipients are not party to this deed poll.

1.4 Joint and several obligations

This deed poll binds each Scheme Administrator jointly and severally.

1.5 Termination

(a) Subject to clause 1.5(b), if the Steps are not completed by 11.59pm on the Sunset Date this deed poll will automatically terminate and the terms of this deed poll will be of no further force or effect.

(b) Where the Scheme has become Effective but all the Steps are not completed by 11.59pm on the Sunset Date, the terms of this deed poll to the extent that they relate to clause 7.1(c)(ii) of the Scheme remain in full force and effect.

2. Conditions to obligations

The obligations of the Scheme Administrators under this deed poll are subject to the Scheme becoming Effective.

47

3. Consent to Act

Each Scheme Administrator:

(a) consents to act as a scheme administrator in accordance with the terms and conditions of the Scheme;

(b) acknowledges that another person may be appointed to act as scheme administrator under the Scheme;

(c) represents and warrants that he or she is not disqualified from acting as a scheme administrator of the Scheme pursuant to section 411(7) of the Corporations Act; and

(d) undertakes to notify the Companies and the Trustee immediately if the representation and warranty in clause 3(c) ceases to be correct.

4. obligations in relation to scheme

With effect on and from the Effective Date, each Scheme Administrator irrevocably:

(a) consents to the Scheme;

(b) agrees to be bound by the Scheme as if he or she were a party to the Scheme; and

(c) undertakes in favour of each Recipient:

(i) to perform all obligations and to undertake all actions attributed to him or her under the Scheme;

(ii) to accept, and act in accordance with, any instructions, authorisations, directions or appointments given to him or her under the Scheme;

(iii) to do all things and execute all further documents necessary to give full effect to the Scheme and the transactions contemplated by it; and

(iv) not to act inconsistently with any provision of the Scheme.

5. Limitation of liability

In the performance or exercise of the Scheme Administrators' powers, obligations and duties under the Scheme, the Scheme Administrators' liability is limited in accordance with the Scheme.

6. General

6.1 Notices

The provisions of clause 9 (Notices) of the Scheme are incorporated into this document by reference as if set out in this document in full, mutatis mutandis.

6.2 Governing law and jurisdiction

(a) This document and any dispute arising out of or in connection with this document is governed by the laws of New South Wales.

(b) Each party submits to the exclusive jurisdiction of the courts of that State and courts of appeal from them in respect of any proceedings arising out of or in connection with this document.

48

6.3 Continuing obligations

This deed poll is irrevocable.

6.4 Waiver

The Scheme Administrators may not rely on the words or conduct of any Recipient as a waiver of any right arising under or in connection with this deed poll unless the waiver is in writing and signed by the Recipient granting the waiver.

6.5 Inconsistency

The terms of the Scheme prevail over the terms of this deed poll to the extent of any inconsistency between them.

6.6 Variation

(a) A provision of this deed poll may be varied on or before the time of the Second Court Orders provided that:

(i) the variation is consistent with the Scheme;

(ii) the variation is agreed to in writing by the Companies and a majority of the Holders; and

(iii) the Court has not indicated on or before the Second Court Date that the variation would of itself preclude approval of the Scheme.

(b) Where the conditions set out in clause 6.6(a) are satisfied in relation to a variation, the Scheme Administrators will enter into a further deed poll in favour of each Recipient giving effect to the variation.

6.7 Cumulative Rights

Except as expressly provided in this deed poll, the rights of the Scheme Administrators and of each Recipient under this deed poll are in addition to and do not exclude or limit any other rights or remedies provided by law.

6.8 Assignment and other dealings

(a) The rights and remedies of each Recipient under this deed poll are personal and must not be assigned or otherwise dealt with at law or in equity.

(b) Any purported dealing in contravention of clause 6.8(a) is void.

49

SCHEDULE 1

Scheme

50

EXECUTED as a deed poll.

Each person who executes this document on behalf of a party under a power of attorney declares that he or she is not aware of any fact or circumstance that might affect his or her authority to do so under that power of attorney.

signed, sealed and delivered by SCOTT KERSHAW in the presence of:
	Signature of party
Signature of witness
Name
Address of witness

signed, sealed and delivered by JENNY NETTLETON in the presence of:
	Signature of party
Signature of witness
Name
Address of witness

51

Schedule 7

Form of Released Obligor Individual Deed Poll

52

 

Released Obligor Individuals Deed Poll

Released Obligor Individuals

2017

53

THIS DEED POLL is made on                                                2017

Made by:

(1) [Names of Released Obligor Individuals] (each a Released Obligor Individual)

In favour of:

(2) each 7% Scheme Creditor, the Trustee, each Obligor and the Scheme Administrators (each a Recipient)

THE RELEASED OBLIGOR INDIVIDUAL DECLARES:

1. INTERPRETATION

1.1 Definitions

The following definitions apply in this document.

(a) Scheme means the scheme of arrangement under Part 5.1 of the Corporations Act in relation to the Companies and the 7% Scheme Creditors substantially in the form set out in Schedule 1 to this deed poll, subject to any alterations made or conditions imposed by the Court pursuant to section 411(6) of the Corporations Act.

(b) Unless the context requires otherwise, a capitalised term or expression which is defined in the Scheme has the same meaning when used in this deed poll.

1.2 Rules for interpreting this document

Clause 1.2 (Rules for interpreting this document) of the Scheme applies to the interpretation of this deed poll as if references to "this Scheme" were references to "this deed poll".

1.3 Nature of deed poll

This deed poll is made for the benefit of the Recipients and may be relied on and enforced against the Released Obligor Individual in accordance with its terms by each Recipient on and from the date of this deed poll even though the Recipients are not party to this deed poll.

1.4 Several obligations

This deed poll binds the Released Obligor Individual severally and not jointly.

1.5 Termination

(a) Subject to clause 1.5(b), if the Steps are not completed by 11.59pm on the Sunset Date this deed poll will automatically terminate and the terms of this deed poll will be of no further force or effect.

(b) Where the Scheme has become Effective but all the Steps are not completed by 11.59pm on the Sunset Date, the terms of this deed poll to the extent that they relate to clause 7.1(c)(ii) of the Scheme remain in full force and effect.

2. obligations in relation to scheme

The Released Obligor Individual irrevocably:

54

(a) consents to the Scheme;

(b) agrees to be bound by the Scheme as if it were a party to the Scheme; and

(c) undertakes in favour of each Recipient:

(i) to perform all obligations and undertake all actions attributed to the Released Obligor Individual under the Scheme;

(ii) to do all things and execute all further documents necessary to give full effect to its obligations under the Scheme; and

(iii) not to act inconsistently with any provision of the Scheme.

3. Releases

(a) Without limiting clause 2 above, the Released Obligor Individual:

(i) gives each release which is to be given by it under Step 5 (Release) of the Scheme:

(A) at the time that release is to be given under the Scheme; and

(B) in favour of each Recipient to whom the release is to be given under the Scheme; and

(ii) acknowledges and agrees that each Recipient may rely on this deed poll in order to enforce the releases given in its favour under the Scheme and this deed poll.

4. General

4.1 Notices

The provisions of clause 9 (Notices) of the Scheme are incorporated into this document by reference as if set out in this document in full, mutatis mutandis.

4.2 Governing law and jurisdiction

(a) This document and any dispute arising out of or in connection with this document is governed by the laws of New South Wales.

(b) Each party submits to the exclusive jurisdiction of the courts of that State and courts of appeal from them in respect of any proceedings arising out of or in connection with this document.

4.3 Continuing obligations

This deed poll is irrevocable.

4.4 Waiver

The Released Obligor Individual may not rely on the words or conduct of any Recipient as a waiver of any right arising under or in connection with this deed poll unless the waiver is in writing and signed by the Recipient granting the waiver.

4.5 Inconsistency

The terms of the Scheme prevail over the terms of this deed poll to the extent of any inconsistency between them.

55

4.6 Variation

(a) A provision of this deed poll may be varied on or before the time of the Second Court Orders provided that:

(i) the variation is consistent with the Scheme;

(ii) the variation is agreed to in writing by the Companies and a majority of the Holders (by value); and

(iii) the Court has not indicated on or before the Second Court Date that the variation would of itself preclude approval of the Scheme.

(b) Where the conditions set out in clause 4.6(a) are satisfied in relation to a variation, the Released Obligor Individual will enter into a further deed poll in favour of each Recipient giving effect to the variation.

4.7 Cumulative Rights

Except as expressly provided in this deed poll, the rights of the Released Obligor Individual and of each Recipient under this deed poll are in addition to and do not exclude or limit any other rights or remedies provided by law.

4.8 Assignment and other dealings

(a) The rights and remedies of each Recipient under this deed poll are personal and must not be assigned or otherwise dealt with at law or in equity.

(b) Any purported dealing in contravention of clause 4.8(a) is void.

56

SCHEDULE 1

Scheme

57

EXECUTED as a deed poll.

signed, sealed and delivered by [released obligor individUAL] in the presence of:
	Signature of party
Signature of witness
Name
Address of witness

58

Schedule 8

Warrant terms

59

Agreed form

 

7% Warrant Deed Poll

Boart Longyear Limited

ACN 123 052 728

2017

CONTENTS

CLAUSE			PAGE
1.	Definitions and Interpretation		1
	1.1	Definitions	1
	1.2	Rules for interpreting this Deed Poll	5
	1.3	Adjustments to VWAP	6
2.	Title and Rights		6
	2.1	Constitution and Form of 7% Warrants	6
	2.2	Benefit and Enforcement	7
	2.3	Warrants Register and Warrant Certificates	7
	2.4	Subscription Rights	7
3.	Exercise of the 7% Warrants		7
	3.1	Exercise by Notice	7
	3.2	Manner of exercise	8
	3.3	Option to elect cashless exercise	8
	3.4	Consequences of cashless exercise	8
	3.5	Lapse of 7% Warrants	8
4.	ALLOTMENT		9
	4.1	Allotment of Shares on exercise of 7% Warrants	9
	4.2	Fractions of Shares	9
	4.3	Ranking	9
	4.4	Quotation	9
5.	New Issues of Shares		9
	5.1	Participation in new issues	9
6.	Adjustments		9
	6.1	Pro rata issues	9
	6.2	Bonus issues	10
	6.3	7% Warrants to be reorganised on reorganisation of capital	10
	6.4	Change in Capital	10
	6.5	Redomiciling Event	11
	6.6	Undertaking not to make a Distribution whilst listed on ASX	11
	6.7	Adjustment for Distribution if not listed on ASX	11
	6.8	Compliance with Listing Rules	12
	6.9	Compliance with rules of an Alternative Exchange	12
7.	change of control		12
	7.1	Change of Control	12
	7.2	Public Stock Merger	12
	7.3	Small Public Stock Merger	13
8.	Miscellaneous		13
	8.1	Governing Law	13
	8.2	Notices	13
	8.3	Authorisation	13
	8.4	7% Warrants not registered under the Securities Act	13
	8.5	Replacement 7% Warrant Certificates	13
9.	Transfer of 7% Warrants		14
	9.1	Transfers by the Warrant Holder	14
	9.2	Effecting a transfer	14

THIS Deed Poll is made on                                                          2017

BY:

(1) Boart Longyear Limited ACN 123 052 728 whose registered office is at 26 Butler Boulevard, Burbridge Business Park, Adelaide Airport, South Australia 5950, Australia (the Company)

RECITALS:

(A) The Company has determined to create 7% Warrants, exercisable into Shares on the terms and subject to the conditions set out in this Deed Poll.

(B) The Company enters into this Deed Poll for the benefit of each person who is a Warrant Holder from time to time.

THE PARTIES AGREE AS FOLLOWS:

1. Definitions and Interpretation

1.1 Definitions

The following definitions apply unless the context requires otherwise.

7% Warrant means an option to subscribe for one Share at the Exercise Price on and subject to the terms and conditions in this Deed Poll.

7% Warrant Certificate means a certificate evidencing the Warrant Holder as the registered holder of any one or more 7% Warrants, and substantially in the form set out in Attachment 3.

Alternative Exchange means, if the Company is no longer listed on ASX, a national or internationally recognised securities exchange other than ASX on which the Company, or a Successor Company, is listed.

Ares means Ares Corporate Opportunities Fund IV, L.P. and Ares Special Situations Fund III, L.P. and Ares SSF Riopelle, L.P. and Ares Strategic Investment Partners Ltd. And Future Fund Board Of Guardians and ASIP (Holdco) IV S.À R.L. and Transatlantic Reinsurance Company and RSUI Indemnity Company and Ares Enhanced Credit Opportunities Fund II, Ltd. and Ares Enhanced Credit Opportunities Fund B, Ltd. and Superannuation Funds Management Corporation Of South Australia and Goldman Sachs Trust II - Goldman Sachs Multi-Manager Alternatives Fund and Aviva Staff Pension Scheme and Kaiser Foundation Hospitals and Kaiser Permanente Group Trust and SEI Global Master Fund Plc - The SEI High Yield Fixed Income Fund and SEI Institutional Investments Trust - High Yield Bond Fund and SEI Institutional Managed Trust - High Yield Bond Fund and Ares Senior Loan Trust and Anthem, Inc. and OPSEU (Ontario Public Service Employees Union) Pension Plan Trust Fund and Renaissance Floating Rate Income Fund and Lloyds Bank Pension Scheme No. 1 and Lloyds Bank Pension Scheme No. 2 and Goldman Sachs Trust II – Goldman Sachs Multi-Manager Non-Core Fixed Income Fund and Ares Institutional Loan Fund B.V. and SEI Institutional Investments Trust – Opportunistic Income Fund and SEI Institutional Managed Trust Enhanced Income Fund.

Ascribe means Ascribe II Investments LLC, on behalf of itself and its managed funds that hold Supporting Debt (as that term is defined in the Restructuring Support Agreement).

ASX means ASX Limited (ABN 98 008 624 691).

bonus issue has the meaning given to the expression in the Listing Rules at the date of this Deed Poll.

1

Business Day means a day, other than Saturday or Sunday, on which banks are open in Sydney and Adelaide.

Change in Capital means any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets or other transaction, which in each case is effected in such a way that Shares are converted into the right to receive (either directly or upon subsequent liquidation) stock, securities, other equity interests or assets (including cash), but does not include:

(a) a Redomiciling Event;

(b) a Change of Control;

(c) a Public Stock Merger; or

(d) a Small Public Stock Merger.

Change of Control occurs when a Third Party (other than as custodian, nominee or bare trustee):

(a) acquires an interest in, or a relevant interest in or becomes the holder of, 50% or more of the Shares provided that where a Third Party acquires a relevant interest in 50% or more of the Shares by way of an off market takeover bid in accordance with Chapter 6 of the Corporations Act, the Change of Control will not occur until such time as that bid is declared free from all conditions;

(b) acquires an interest in all or a substantial part of the assets of the Company;

(c) otherwise acquires control (within the meaning of section 50AA of the Corporations Act) of the Company; or

(d) otherwise directly or indirectly acquires, merges or amalgamates with the Company or a substantial part of its assets or business, whether by way of takeover offer, scheme of arrangement, shareholder approval acquisition, capital reduction, share buy-back or repurchase, sale or purchase of assets, joint venture, reverse takeover, dual-listed company structure, recapitalisation, establishment of a new holding company for the Company or other synthetic merger or any other similar transaction or arrangement which for the avoidance of doubt does not include where the Third Party is a new holding company and the shares or common stock in the new holding company are held by the holders of Shares in substantially the same proportion as they hold Shares in the Company immediately before the transaction,

but does not include:

(a) a Redomiciling Event;

(b) a Public Stock Merger; or

(c) a Small Public Stock Merger.

Company means:

(a) Boart Longyear Limited (ACN 123 052 728); or

(b) if there is a Redomiciling Event, a Successor Company.

Corporations Act means the Corporations Act 2001 (Cth).

2

Distribution has the meaning given by clause 6.6.

Exercise Date means, in respect of a 7% Warrant, the date on which the exercise of that 7% Warrant becomes effective in accordance with the terms of this Deed Poll.

Exercise Notice means a notice substantially in the form set out in Attachment 1.

Exercise Period means the period commencing on the date of issue of the 7% Warrants and ending at 5.00pm (Sydney time) on the 7th anniversary of that date.

Exercise Price means, in respect of a 7% Warrant, A$[insert] (as adjusted in accordance with clause 6).

Fair Value of:

(a) a Share means on any day:

(i) if the Shares are quoted on a Securities Exchange on that day, the VWAP of Shares during the 10 Trading Days ending on, but excluding that day;

(ii) if the Shares are not quoted on any Securities Exchange on that day, the fair value as of a date not earlier than 10 Business Days preceding that day as determined by the Independent Expert;

(b) of cash on any day means the amount of that cash;

(c) of any other property means on any day, the fair market value of that property as determined by an Independent Expert appointed for such purpose, using one or more valuation methods that the Independent Expert in its best professional judgement determines to be the most appropriate, assuming such property is to be sold in an arm's- length transaction and there was no compulsion on the part of any party to such sale to buy or sell and taking into account all relevant factors

Independent Expert means an independent expert selected by the board of the Company with the supporting vote of at least one director nominated by Ares or Ascribe

Listing Rules means the official listing rules of ASX as waived or modified by ASX in respect of the Company or the 7% Warrants in any particular case.

pro rata issue has the meaning given to that expression in the Listing Rules at the date of this Deed Poll.

Public Stock means common stock or shares of a company listed on ASX or an Alternative Exchange with an aggregate market capitalisation in excess of US$500 million.

Public Stock Merger means an event described in any of paragraphs (a) to (d) of the definition of a Change of Control pursuant to which all of the Shares held by shareholders who are not affiliated with the Company or any entity acquiring the Company are exchanged for, converted into or constitute solely (except to the extent of applicable appraisal rights or cash received in lieu of fractional shares) the right to receive as consideration Public Stock.

Redomiciling Event means completion of the implementation of the redomiciling of the place of incorporation or organisation of the Company to a jurisdiction outside of Australia.

relevant interest has the meaning given to that expression in the Corporations Act at the date of this Deed Poll.

3

Representation Letter means a letter to be delivered with the Exercise Notice where the 7% Warrant is exercised for cash in substantially the form set out in Attachment 2.

Restructuring Support Agreement means the agreement of the same name between the Company, Boart Longyear Management Pty Limited (ACN 123 283 545), Ares, Ascribe and others on 3 April 2017.

Securities Act means the U.S. Securities Act of 1933, as amended.

Securities Exchange means:

(a) for so long as the Company is listed on ASX, ASX; or

(b) if the Company ceases to be listed on ASX and the Company, or a Successor Company, is listed on an Alternative Exchange, the Alternative Exchange.

Share means:

(a) one (1) fully paid ordinary share in the capital of the Boart Longyear Limited (ACN 123 052 728); or

(b) if there is a Redomiciling Event, the Substitute Property received in place of one (1) fully paid ordinary share in the capital of Boart Longyear Limited (ACN 123 052 728) as a result of the Redomiciling Event.

Shareholder means the registered holder of a Share.

Small Public Stock means common stock or shares of a company listed on ASX or an Alternative Exchange with an aggregate market capitalisation less than or equal to US$500 million.

Small Public Stock Merger means an event described in any of clauses (a) to (d) of the definition of Change of Control pursuant to which all of the Shares held by shareholders who are not affiliated with the Company or any entity acquiring the Company are exchanged for, converted into or constitute solely (except to the extent of applicable appraisal rights or cash received in lieu of fractional shares) the right to receive as consideration Small Public Stock.

Substitute Property has the meaning given by clause 6.4.

Successor Company means, if there is a Redomiciling Event, such other company which becomes the parent company of the corporate group of which the Company is currently the parent company.

Third Party means a person other than a person who at the day after the date that the 7% Warrants are issued:

(a) has an interest in, or a relevant interest in or holds, 20% or more of the Shares; or

(b) controls (within the meaning of section 50AA of the Corporations Act) the Company.

Trading Day means:

(a) for so long as the Company is listed on ASX, has the meaning given to that term in the Listing Rules; or

(b) if the Company or a Successor Company is admitted to an Alternative Exchange, means a day on which that Alternative Exchange is open for the trading of Shares.

4

VWAP means, for any period, the arithmetic average (rounded to the nearest cent) of the daily volume weighted average sale price of Shares (rounded to four decimal places) sold on the Securities Exchange on which Shares are quoted during that period excluding any trades the board of the Company, in good faith and acting reasonably, with the supporting vote of at least one director nominated by Ares or Ascribe determines are not fairly reflective of natural supply or demand.

Warrant Holder means a person whose name appears in the Warrants Register as the holder of any one or more 7% Warrants from time to time.

Warrants Register means the register of 7% Warrants evidencing the Warrant Holder in respect of each 7% Warrant.

Warrant Value at any time means the value of the 7% Warrant in cash at that time determined by an Independent Expert using the calculation methods and making the assumptions set out in Exhibit A.

1.2 Rules for interpreting this Deed Poll

Headings are for convenience only, and do not affect interpretation. The following rules also apply in interpreting this Deed Poll, except where the context makes it clear that a rule is not intended to apply.

(a) A reference to:

(i) a legislative provision or legislation (including subordinate legislation) is to that provision or legislation as amended, re-enacted or replaced, and includes any subordinate legislation issued under it;

(ii) a document (including this Deed Poll) or agreement, or a provision of a document (including this Deed Poll) or agreement, is to that document, agreement or provision as amended, supplemented, replaced or novated;

(iii) a party to this Deed Poll or to any other document or agreement includes a successor in title, permitted substitute or a permitted assign of that party;

(iv) a person includes any type of entity or body of persons, whether or not it is incorporated or has a separate legal identity, and any executor, administrator or successor in law of the person;

(v) anything (including a right, obligation or concept) includes each part of it;

(vi) dollars and $ is to Australian currency; and

(vii) time is to the time in Sydney Australia.

(b) A singular word includes the plural, and vice versa.

(c) A word which suggests one gender includes the other genders.

(d) If a word or phrase is defined, any other grammatical form of that word or phrase has a corresponding meaning.

(e) If an example is given of anything (including a right, obligation or concept), such as by saying it includes something else, the example does not limit the scope of that thing.

5

1.3 Adjustments to VWAP

For the purposes of calculating the VWAP for a period (Pricing Period) in this Deed Poll:

(a) where, on some or all of the Trading Days in the Pricing Period, the Shares have been quoted on the Securities Exchange as cum dividend or cum any other distribution or entitlement and a 7% Warrant will convert:

(i) into the Shares after the date those Shares no longer carry that entitlement (ex date), then the daily volume weighted average sale price of Shares on the Trading Days on which those Shares have been quoted cum dividend or cum entitlement shall be reduced by an amount (cum value) equal to:

(A) (in the case of a dividend or other distribution), the amount of that dividend or distribution including, if the dividend is franked the amount that would be included in the assessable income of a recipient of the dividend or distribution who is a natural person under the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997, jointly as applicable;

(B) (in the case of an entitlement which is traded on a Securities Exchange on any of those Trading Days), the daily volume weighted average sale price of all such entitlements sold on the Securities Exchange during the Pricing Period on the Trading Days on which those entitlements were traded; or

(C) (in the case of an entitlement not traded on a Securities Exchange during the Pricing Period), the value of the entitlement as reasonably determined by the board of the Company with the supporting vote of at least one director nominated by Ares or Ascribe; and

(b) where, on some or all of the Trading Days in the Pricing Period, the Shares have been quoted ex dividend, ex distribution or ex entitlement, and the 7% Warrants will convert into Shares which would be entitled to receive the relevant dividend, distribution or entitlement, then the daily volume weighted average sale price of Shares on the Trading Days on which those Shares have been quoted ex dividend, ex distribution or ex entitlement shall be increased by the cum value.

2. Title and Rights

2.1 Constitution and Form of 7% Warrants

(a) The 7% Warrants are issued on the terms and conditions of this Deed Poll, which are binding on the Company in favour of each Warrant Holder and all persons claiming through or under them respectively.

(b) Each 7% Warrant confers the right (but not the obligation) on the Warrant Holder to subscribe for a Share on the terms and subject to the conditions set out in this Deed Poll.

(c) The Company undertakes to comply with the terms and conditions of this Deed Poll and specifically, but without limitation, to give effect to the exercise rights in accordance with the terms of this Deed Poll.

(d) The Company undertakes to provide to each Warrant Holder (upon request by that Warrant Holder) a certified copy of this Deed Poll.

6

2.2 Benefit and Enforcement

(a) This Deed Poll is a deed poll. Each Warrant Holder from time to time has the benefit of this Deed Poll and can enforce it even though they may not be in existence or their name does not appear in the Warrants Register as the holder or any one or more 7% Warrants at the time this Deed Poll is executed.

(b) A Warrant Holder may enforce its rights under this Deed Poll independently from any other Warrant Holder.

(c) Each Warrant Holder, and any person claiming through a Warrant Holder, who asserts an interest in a 7% Warrant is bound by this Deed Poll.

2.3 Warrants Register and Warrant Certificates

(a) The Company must create and maintain the Warrants Register in accordance with the Corporations Act, and must update the Warrants Register on the exercise or transfer of a 7% Warrant in accordance with this Deed Poll.

(b) Title to the 7% Warrants passes by registration of a transfer in the Warrants Register.

(c) The 7% Warrants may be evidenced by 7% Warrant Certificates.

2.4 Subscription Rights

(a) Each 7% Warrant gives the holder of that 7% Warrant the right to subscribe for one Share subject to clause 3.4 and subject to adjustment in accordance with clause 6.

(b) Each 7% Warrant has an Exercise Price of [     ] subject to adjustment in accordance with clause 6.

3. Exercise of the 7% Warrants

3.1 Exercise by Notice

(a) Subject to clause 3.1(b), a Warrant Holder may exercise any or all of its 7% Warrants by giving a duly completed Exercise Notice (accompanied, if 7% Warrant Certificates have been issued, by the 7% Warrant Certificate(s) for the 7% Warrants exercised) and, if the 7% Warrant is exercised for cash, a Representation Letter, to the Company, at any time during the Exercise Period.

(b) A Warrant Holder may only give an Exercise Notice in respect of:

(i) a minimum of at least 1,000 7% Warrants, except that where a Warrant Holder holds less than 1,000 7% Warrants, an Exercise Notice given by that Warrant Holder must be given in respect of all 7% Warrants held by that Warrant Holder;

(ii) a multiple of 1,000 7% Warrants or the number which equals the entire holding of 7% Warrants of that Warrant Holder.

(c) The exercise of a 7% Warrant does not prevent the Warrant Holder from exercising at any later time any other 7% Warrants it may hold.

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3.2 Manner of exercise

(a) To exercise a 7% Warrant, the Warrant Holder must give an Exercise Notice to the Company, accompanied by:

(i) if 7% Warrant Certificates have been issued, the 7% Warrant Certificate(s) for the 7% Warrants exercised; and

(ii) payment in full of the Exercise Price unless the Warrant Holder elects cashless exercise in accordance with clause 3.3.

(b) Exercise of a 7% Warrant is only effective when the Company receives:

(i) if 7% Warrant Certificates have been issued, the 7% Warrant Certificate(s) for the 7% Warrants exercised; and

(ii) the Exercise Price in cleared funds unless the Warrant Holder elects cashless exercise in accordance with clause 3.3, in which case, exercise of the 7% Warrant will be effective on receipt by the Company of a duly completed Exercise Notice and, if 7% Warrant Certificates have been issued, the 7% Warrant Certificate(s) for the 7% Warrants exercised.

3.3 Option to elect cashless exercise

If the Fair Value of a Share exceeds the Exercise Price of a 7% Warrant on the day a Warrant Holder gives the Company an Exercise Notice for that 7% Warrant, the Warrant Holder may elect cashless exercise in respect of that 7% Warrant in the Exercise Notice.

3.4 Consequences of cashless exercise

If a Warrant Holder elects cashless exercise of a 7% Warrant pursuant to clause 3.3 then:

(a) the Warrant Holder is not required to pay to the Company the Exercise Price for that 7% Warrant; and

(b) the net number of Shares to be issued on exercise of that 7% Warrant, subject to clause 4.2, will be calculated using the following formula:

N = (A-B) A

Where:

N = the net number of Shares to be issued on exercise of the 7% Warrant which number can be a fraction of a Share

A = the Fair Value of a Share as at the Exercise Date

B = the Exercise Price for the 7% Warrant as at the Exercise Date]

3.5 Lapse of 7% Warrants

Any 7% Warrant in respect of which an Exercise Notice has not been given to the Company during the Exercise Period will automatically lapse on the expiry of the Exercise Period.

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4. ALLOTMENT

4.1 Allotment of Shares on exercise of 7% Warrants

(a) The Company must issue to the Warrant Holder the Shares to be issued on exercise of a 7% Warrant no later than the 5th Business Day after the Exercise Date.

(b) The Company must enter the Warrant Holder into the register of members of the Company as the registered holder of the Shares issued on exercise of the 7% Warrant.

(c) If a Warrant Holder exercises only part of its holding of 7% Warrants and 7% Warrant Certificates have been issued, , the Company shall issue to the Warrant Holder a new 7% Warrant Certificate in respect of the remaining 7% Warrants.

4.2 Fractions of Shares

No fractions of a Share will be issued on the exercise of any 7% Warrant including on cashless exercise in accordance with clause 3.3 and no refund will be made to a Warrant Holder exercising their rights in respect of that part of the Exercise Price which represent such a fraction (if any), provided that if more than one 7% Warrant is exercised at the same time by the same Warrant Holder then, for the purposes of determining the number of Shares to be issued upon the exercise of such 7% Warrants including in the case of cashless exercise in accordance with clause 3.3 and whether (and, if so, what) fraction of Shares arises, the number of Shares arising on the exercise of each 7% Warrant is to first be aggregated and if the number of Shares to be issued in aggregate includes a fraction of a Share, the fraction will be rounded-up to the nearest whole number.

4.3 Ranking

Shares issued on exercise of a 7% Warrant will be fully paid, will rank pari passu with existing issued Shares (including in relation to dividend rights) and will be immediately transferable (subject only to the restrictions required or imposed under applicable laws and the Company's constituent or governing documents).

4.4 Quotation

The Company will, in accordance with the rules of the Securities Exchange on which it is listed at the time, apply for Shares issued on exercise of a 7% Warrant to be listed for quotation on the Securities Exchange and cause to be issued to the Warrant Holder a holding statement (or other applicable documentation) for the Shares issued on exercise of the 7% Warrant.

5. New Issues of Shares

5.1 Participation in new issues

A Warrant Holder does not have a right to participate in new issues of Shares without exercising the 7% Warrant and becoming the holder of Shares before the record date for the new issue of Shares.

6. Adjustments

6.1 Pro rata issues

If there is a pro rata issue (except a bonus issue) of Shares during the Exercise Period, the Exercise Price reduces according to the formula in the Listing Rules.

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6.2 Bonus issues

If there is a bonus issue of Shares during the Exercise Period, the number of Shares over which the 7% Warrants are exercisable increases by the number of Shares which the Holder would have received if the 7% Warrants had been exercised before the record date for the bonus issue.

6.3 7% Warrants to be reorganised on reorganisation of capital

Subject to clause 6.4:

(a) in a consolidation of the Shares, the number of 7% Warrants must be consolidated in the same ratio as the Shares and the Exercise Price must be amended in inverse proportion to that ratio;

(b) in a subdivision of the Shares, the number of 7% Warrants must be sub-divided in the same ratio as the Shares and the Exercise Price must be amended in inverse proportion to that ratio;

(c) in a return of capital to Shareholders, the number of 7% Warrants must remain the same, and the Exercise Price of each 7% Warrant must be reduced by the same amount as the amount returned in relation to each Share;

(d) in a reduction of capital by cancellation of capital paid up on Shares that is lost or not represented by available assets where no Shares are cancelled, the number of 7% Warrants and the Exercise Price of each 7% Warrant must remain unaltered;

(e) in a pro rata cancellation of Shares, the number of 7% Warrants must be reduced in the same ratio as the Shares and Exercise Price of each 7% Warrant must be amended in inverse proportion to that ratio; and

(f) in any other case where the Shares are reorganised, the number of 7% Warrants or the Exercise Price, or both, must be reorganised so that the Warrant Holder will not receive a benefit that holders of Shares do not receive.

6.4 Change in Capital

(a) Except where clause 6.3 applies, where there is a Change in Capital and the holder of a Share will be issued or receive shares, stock, securities, other equity interests or assets in respect of that Share (Substitute Property) pursuant to that Change in Capital then prior to the consummation of that Change in Capital, the Company must make appropriate provision to ensure that each 7% Warrant gives the holder of the 7% Warrant the right to acquire and receive the Substitute Property at the Exercise Price in effect immediately prior to such Change in Capital, in lieu of or in addition to (as the case may be) each Share that the Warrant Holder would have received if the 7% Warrant had been exercised prior to the record date for that Change in Capital.

(b) In any such case, the Company must make appropriate provision to ensure that the terms of the 7% Warrants shall thereafter be applicable to such Substitute Property.

(c) The Company must not effect any Change in Capital where the obligations of the Company under the 7% Warrants will be assumed by a successor entity, unless prior to such transaction, the successor entity (if other than the Company) resulting from the Change in Capital assumes by written instrument the obligation to deliver to each such Warrant Holder upon exercise of a 7% Warrant the Substitute Property as, in accordance with this clause 6, such Warrant Holder may be entitled to acquire.

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6.5 Redomiciling Event

(a) Where there is a Redomiciling Event and the holder of a Share will be issued or receive Substitute Property pursuant to that Redomiciling Event then prior to the consummation of that Redomiciling Event, the Company must make appropriate provision to ensure that each 7% Warrant gives the holder of the 7% Warrant the right to acquire and receive the Substitute Property at the Exercise Price in effect immediately prior to such Redomiciling Event, in lieu of or in addition to (as the case may be) each Share that the Warrant Holder would have received if the 7% Warrant had been exercised prior to the record date for that Redomiciling Event.

(b) For any such Redomiciling Event, the Company must make appropriate provision to ensure that the terms of the 7% Warrants shall thereafter be applicable to such Substitute Property.

(c) The Company must not effect any Redomiciling Event where the obligations of the Company under the 7% Warrants will be assumed by a successor entity, unless prior to such transaction, the successor entity (if other than the Company) resulting from the Redomiciling Event assumes by written instrument the obligation to deliver to each such Warrant Holder upon exercise of a 7% Warrant the Substitute Property as, in accordance with this clause 6, such Warrant Holder may be entitled to acquire.

6.6 Undertaking not to make a Distribution whilst listed on ASX

(a) For so long as the Company is admitted to the official list of ASX or is otherwise prohibited by contract to which the Company is a party to or to which it is bound, the terms of its constituent documents, applicable law, regulation, Listing Rule or any listing rule of any Alternative Exchange in any way from effectuating the adjustments set forth in clause 6.7 (collectively, a Distribution Anti-Dilution Prohibition), the Company must not during the Exercise Period fix a record date for the payment of a dividend or the making of any other distribution of:

(i) any evidences of its indebtedness, any shares of its capital stock or any other securities or property of any nature whatsoever (including cash); or

(ii) any options, warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of its capital stock or any other securities or property of any nature whatsoever,

to the holders of Shares (other than a pro rata issue covered by clause 6.1, a bonus issue covered by clause 6.2 or a corporate action covered by clause 6.3) (collectively, a Distribution), unless such Distribution is consented to in writing by Warrant Holders holding more than 50% of the total number of 7% Warrants outstanding on the record date for the payment of the Distribution.

(b) During the Exercise Period, the Company shall not take any action to subject itself to a Distribution Anti-Dilution Prohibition.

6.7 Adjustment for Distribution if not listed on ASX

(a) If, at any time during the Exercise Period, the Company ceases to be subject to a Distribution Anti-Dilution Prohibition, and the Company fixes a record date for the payment of a Distribution, then the Exercise Price of the 7% Warrant will be adjusted in accordance with the following formula:

EP² = EP¹ x FV – D
FV

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EP² is the new Exercise Price

EP¹ is the Exercise Price in effect immediately prior to the close of trading on the Securities Exchange on which Shares are quoted on the record date for the Distribution

FV is the Fair Value of a Share on the last Trading Day immediately preceding the first date on which the Shares trade "ex" Distribution on the Securities Exchange.

D is the amount of the cash and/or Fair Value of the securities, evidences of indebtedness, assets, rights or warrants to be distributed in respect of one Share,

and the number of Shares the subject of the 7% Warrant will be adjusted in accordance with the following formula:

N² = N¹ x EP¹
EP²

N² is the new number of Shares

N¹ is the number of Shares that would have been issued upon the exercise of each 7% Warrant immediately prior to the close of trading on the Securities Exchange on which Shares are quoted on the record date for the Distribution

(b) If the Distribution referred to in clause (a), includes Shares as well as other property, then instead of adjusting for the entire Distribution under clause 6.7(a) the Share portion shall be treated as a bonus issue that triggers an adjustment to the number of Shares obtainable upon exercise of each 7% Warrant under clause 6.2 and the other items in the Distribution shall trigger a further adjustment to such adjusted Exercise Price and Shares under clause 6.7(a).

6.8 Compliance with Listing Rules

For so long as the Company is admitted to the official list of ASX, each adjustment contemplated by clause 6 is subject to being consistent with the Listing Rules and may be amended to ensure compliance with the Listing Rules.

6.9 Compliance with rules of an Alternative Exchange

If the Company is no longer listed on ASX, each adjustment contemplated by clause 6 may be amended by the Company without prior approval of the Warrant Holders but only to the extent necessary and for the sole purpose of ensuring compliance, in the opinion of a law firm recognized in the jurisdiction of such Alternative Exchange in advising on the rules of such Alternative Exchange, with the rules of the Alternative Exchange or any waiver or other relief from compliance with such rules.

7. change of control

7.1 Change of Control

If a Change of Control occurs, the Company must, within 10 Business Days of the Change of Control occurring, cancel each 7% Warrant and pay to each Warrant Holder the Warrant Value as of the date the Change of Control occurs.

7.2 Public Stock Merger

If a Public Stock Merger occurs the Company shall (as a condition to such Public Stock Merger occurring) procure that the acquirer or the successor entity (if applicable in such

12

Public Stock Merger) shall assume the obligations of the Company under this Deed Poll mutatis mutandis and to the extent applicable, such that each 7% Warrant shall give the holder of that 7 %Warrant the right to subscribe at the Exercise Price for the Public Stock which that Warrant Holder would have received if it had exercised the 7% Warrant and held a Share on the record date for the Public Stock Merger.

7.3 Small Public Stock Merger

Not less than 10 Business Days prior to the effective date of a Small Public Stock Merger, each Warrant Holder may elect by notice delivered to the Company that the Company shall (as a condition to such Small Public Stock Merger occurring) procure that the acquirer or the successor entity (if applicable in such Small Public Stock Merger) assume the obligations of the Company under this Deed Poll mutatis mutandis and to the extent applicable, such that each 7% Warrant shall give the holder of that 7% Warrant the right to subscribe at the Exercise Price for the Small Public Stock which that Warrant Holder would have received if it had exercised the 7% Warrant and held a Share on the record date for the Small Public Stock Merger. If a Warrant Holder does not make such election in respect of a 7% Warrant by notice, then that 7% Warrant shall be cancelled and the Company must pay to the holder of that 7% Warrant within 10 Business Days prior to or on the effective date of the Small Public Stock Merger, the Warrant Value as at the date of that Small Public Stock Merger.

8. Miscellaneous

8.1 Governing Law

The 7% Warrants are governed by, and are to be construed in accordance with, the laws of New South Wales or, following a Redomiciling Event, the jurisdiction of the place of incorporation or organisation of the Successor Company.

8.2 Notices

The provisions of the Company's constituent or other governing documents as to notices to shareholders apply mutatis mutandis to notices to Warrant Holders.

8.3 Authorisation

The Company is entitled to rely on the signatures on any form of transfer and any Exercise Notice, and shall have no duty to verify any signature on such documents.

8.4 7% Warrants not registered under the Securities Act

The 7% Warrants have not been registered with the U.S. Securities and Exchange Commission under the Securities Act or the securities laws of any state or other jurisdiction. Consequently, neither the 7% Warrants nor any interest or participation in the 7% Warrants, may be offered, sold, assigned, transferred, pledged, encumbered or otherwise disposed of in the U.S. or to a U.S. Person, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state or local securities laws.

8.5 Replacement 7% Warrant Certificates

If a 7% Warrant Certificate is lost, stolen, worn out, defaced or destroyed, it may be renewed on such terms as to evidence, identity, indemnity and expense incurred by the Company in investigating or verifying title as the directors of the Company may reasonably think fit, provided that in the case of defacement or being worn out the 7% Warrant Certificate must be surrendered before a new 7% Warrant Certificate is issued.

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9. Transfer of 7% Warrants

9.1 Transfer by the Warrant Holder

(a) Subject to clause 8.4, 7% Warrants may only be transferred in lots of not less than 100,000 7% Warrants (except in the case of a transfer by a Warrant Holder of all 7% Warrants held by that Warrant Holder or as otherwise permitted by the Company in its discretion) and otherwise in accordance with this Deed Poll and all applicable laws and regulations of each relevant jurisdiction.

(b) Subject to compliance with this Deed Poll, 7% Warrants are transferable without the prior written consent of the Company.

9.2 Effecting a transfer

Any transfer of a 7% Warrant pursuant to clause 9.1 may be effected upon the delivery to the Company of the 7% Warrant Certificate, if any, in respect of the 7% Warrants transferred together with a duly executed instrument of transfer in any usual or common form or such other form approved by the Company, and at which time the Company will reflect the transfer in the Warrants Register and, if 7% Warrant Certificates have been issued, issue a new 7% Warrant Certificate in respect of the 7% Warrants in the name of the transferee (and, if applicable, in the name of the transferor if the transferor will retain 7% Warrants in its own name) in accordance with clause 2.3.

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Executed as a Deed Poll.

signed, sealed and delivered as a deed poll in accordance with section 127 of the Corporations Act 2001 by Boart Longyear Limited:
Director Signature	Director/Secretary Signature
Print Name	Print Name

15

Attachment 1

7% Warrant Exercise Notice

To: The Company Secretary

Boart Longyear Limited (the Company)

This Notice is given pursuant to clause 3.1 of the deed poll entered into by the Company relating to the 7% Warrants to subscribe for Shares dated [*insert date] (the Deed Poll). Terms defined in the Deed Poll have the same meanings when used in this Warrant Exercise Notice.

TAKE NOTICE that [*insert name of Warrant Holder] exercises [*insert number] 7% Warrants in accordance with the Deed Poll.

The exercise of [*insert number] 7% Warrants is on a [cash]/[cashless] basis.

If the exercise is on a cash basis, the undersigned also confirms the representations, warranties and undertakings in the accompanying Representation Letter.

Dated: [*insert date]

SIGNED for and on behalf of [*INSERT NAME OF WARRANT HOLDER] by its authorised officer:
Authorised Officer's Signature	Print Name

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Attachment 2

Form of Representation Letter

LETTER OF REPRESENTATION

Ladies and Gentlemen:

This letter is delivered to the Company Secretary of Boart Longyear Limited (the “Company”) in connection with the Shares to be issued by the Company as a result of the exercise for cash of the 7% Warrant that is the subject of the Warrant Exercise Notice delivered at the same time as this letter. The undersigned represents and warrants to you that:

1. We are either (a) an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3), (7) or (8) under the U.S. Securities Act of 1933, as amended (the “Securities Act”)) and will receive the Shares the subject of the Warrant Exercise Notice in reliance on Rule 506(c) of Regulation D, or (b) outside the United States and will receive the Shares the subject of the Warrant Exercise Notice in and “offshore transaction” in reliance on Regulation S under the Securities Act.

2. We are acquiring the Shares not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Shares, and we invest in or purchase securities similar to the Shares in the normal course of our business. We, and any accounts for which we are acting, each understand and are each able to bear the economic risk of our or its investment (including the necessity of holding such shares for an indefinite period of time).

3. We understand and acknowledge that the Shares issuable upon the exercise of the 7% Warrants the subject of the Warrant Exercise Notice being delivered in connection with this letter have not been registered under the Securities Act and, unless so registered, may not be sold, offered or transferred, directly or indirectly, except as permitted in accordance with paragraph 4 below.

4. We agree on our own behalf and on behalf of any investor account for which we are purchasing Shares to offer, sell or otherwise transfer such Shares prior to the date that is one year after the later of the date of original issue and the last date on which either the Company or any affiliate of the Company was the owner of such Shares (or any predecessor thereto) (the “Resale Restriction Termination Date”) only (a) in the United States to a person that is an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3), (7) or (8) under the Securities Act in a transaction exempt from registration under the Securities Act, (b) outside the United States in an “offshore transaction” in accordance with Rule 904 of Regulation S under the Securities Act, (c) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if applicable) or (d) pursuant to an effective registration statement under the Securities Act, in each of cases (a) through (d) in accordance with any applicable securities laws of any state of the United States.

5. If at any time an offer, sale, or transfer of Shares is made other than in the ordinary course on ASX where the seller has no reason to know the sale has been prearranged with a person in the United States or a U.S. Person, we will, and each subsequent holder is required to, notify any purchaser of the Shares evidenced hereby of the resale restrictions set forth above. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Shares is

17

proposed to be made to an institutional “accredited investor” prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company, which shall provide, among other things, that the transferee is an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3), (7) or (8) under the Securities Act and that it is acquiring such Shares for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company reserves the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Shares pursuant to Section 4 above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Company.

6. We acknowledge that you, the Company and others will rely upon our acknowledgments, representations and agreements set forth herein, and we agree to notify you promptly in writing if any of our acknowledgements, representations and agreements herein cease to be accurate and complete.

Terms not defined herein are defined in the Warrant Deed Poll dated [●] 2017.

Dated: [●]

[Insert name of Purchaser]

By:
	Name:
	Title:
[Insert name of Purchaser]
By:
	Name:
	Title:

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Attachment 3

7% Warrant Certificate

Boart Longyear Limited (the Company)

7% Warrant Certificate

Certificate No.:	[*insert number]
Date of issue:	[*insert date]
Name and address of Warrant Holder:	[*insert number]
Number of 7% Warrants:	[*insert number]

THIS IS TO CERTIFY THAT [*insert name] of [*insert address] is/are the registered holder(s) of the above number of 7% Warrants, which 7% Warrants are issued pursuant to the 7% Warrant Deed Poll dated [*insert date] executed by the Company (Deed Poll). Terms defined in the Deed Poll have the same meaning when used in this 7% Warrant Certificate.

Dated: [*insert date]

EXECUTED by Boart Longyear Limited:
Director Signature	Director/Secretary Signature
Print Name	Print Name

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EXHIBIT A

For the purpose of this Exhibit A:

“Acquiror” means (A) the Third Party that has entered into definitive document for a Change of Control transaction, or (B) the offeror in the event of a tender or exchange offer in connection with a Change of Control transaction.

“Reference Date” means the date of consummation of a Change of Control.

“Preliminary Change of Control Event” means with respect to the Company, the first public announcement that describes the economic terms of a transaction that is intended to result in a Change of Control.

The Warrant Value of the 7% Warrants shall be determined using the Black-Scholes Model as applied to third party options (i.e., options issued by a third party that is not affiliated with the issuer of the underlying stock). For purposes of the Black-Scholes Model, the following terms shall have the respective meanings set forth below:

Underlying Share Price: ·     In the event of a merger or other acquisition,   (A) that is an “all cash” deal, the cash per Share to be paid to the Shareholders in the transaction;   (B)    that is an “all Public Stock” deal,   (1) that is a “fixed exchange ratio” transaction, a “fixed value” transaction where as a result of a cap, floor, collar or similar mechanism the number of Acquiror’s shares to be paid per Share to the Shareholders in the transaction is greater or less than it would otherwise have been or a transaction that is not otherwise described in this clause (B)(1) or clause (B)(2) below, the product of (i) the Fair Market Value of the Acquiror’s shares on the day preceding the date of the Preliminary Change of Control Event and (ii) the number of Acquiror’s shares per Share to be paid to the Shareholders in the Change of Control transaction (provided that the Independent Expert shall make appropriate adjustments to the Fair Value of the Acquiror’s shares referred to above as may be necessary or appropriate to effectuate the intent of this Exhibit A and to avoid unjust or inequitable results as determined in its reasonable good faith judgment, in each case to account for any event impacting the Acquiror’s shares that is analogous to any of the events described in clause 6 of this Deed Poll if the record date, ex date or effective date of that event occurs during or after the 10 Trading Day period over which such Fair Value is measured); and   (2) that is a “fixed value” transaction not covered by clause (B)(1) above, the value per Share to be paid to the Shareholders in the transaction;   (C)    that is a transaction contemplating various forms of consideration for each Share,   (1) the cash portion, if any, shall be valued as described in clause (A) above,

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	(2) the Public Stock portion shall be valued as described in clause (B) above and (3) any other forms of consideration shall be valued by the Independent Expert valuing the 7% Warrants, using one or more valuation methods that the Independent Expert in its best professional judgment determines to be most appropriate, assuming such consideration (if securities) is fully distributed and is to be sold in an arm’s-length transaction and there was no compulsion on the part of any party to such sale to buy or sell and taking into account all relevant factors and without applying any discounts to such consideration.
	·      In the event of all other Change of Control events, the Fair Value per Share on the last trading day preceding the date of the Change of Control.
Exercise Price:	The Exercise Price as adjusted and then in effect for the 7% Warrant.
Dividend Rate:	0 (which reflects the fact that the anti-dilution adjustment provisions cover all dividends).
Interest Rate:	The annual yield as of the Reference Date (expressed on a semi-annual basis in the manner in which U.S. treasury notes are ordinarily quoted) of the 7-year U.S. treasury note, or if no such note is on issue, the 10-year U.S. treasury note.
Put or Call:	Call
Time to Expiration	The number of days from end date of the Exercise Period to the Reference Date divided by 365.
Settlement Date:	The scheduled date of payment of the Warrant Value.
Volatility:	For calculation of Warrant Value in connection with a Change of Control with respect to the 7% Warrants, 40%; provided, however, that if the 7% Warrants are adjusted as a result of a Change of Control, volatility for purposes of calculating Warrant Value in connection with succeeding Change of Control events with respect to such 7% Warrants (or their successors) shall be as determined by an Independent Expert engaged to make the calculation, who shall be instructed to assume for purposes of the calculation that such succeeding Change of Control had not occurred.

Such valuation of the 7% Warrant shall not be discounted in any way.

For illustrative purposes only, an example Black-Scholes model calculation with respect to a hypothetical Warrant appears on the following page.

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Illustrative Example

Inputs:

S = Underlying Share Price

X = Exercise Price

PV(X) = Present value of the Exercise Price, discounted at a rate of R = X * (e^-(R * T))

V = Volatility

R = continuously compounded risk free rate = 2 * [ ln (1 + Interest Rate / 2) ]

T = Time to Expiration

W = Warrant value per underlying Share

Z = number of Shares underlying 7% Warrants

Value = total Warrant value

Formulaic inputs:

D1 = [ ln [ S / X ] + (R + (V^2 / 2)) * T)] ÷ (V * √T)

D2 = [ ln [ S / X ] + (R - (V^2 / 2)) * T)] ÷ (V * √T)

Black-Scholes Formula

W = [N(D1) * S] – [N(D2) * PV(X)]

Where “N” is the cumulative normal probability function

Value = W * Z

Example of a Hypothetical Warrant (assuming V = 25¹):²

Inputs:

Interest Rate = 4.00%

S = $50.00

X = $60.00

PV(X) = $55.43

¹ Consider amending hypothetical to reflect V=40.

² Note: Amounts calculated herein may not foot due to rounding error. For precise calculations, decimal points should not be rounded.

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V = 25%

R = 3.96%

T = 2

Z = 100

Formulaic inputs:

D1 = [ ln [ S / X ] + (R + (V^2 / 2)) * T)] ÷ (V * √T)

= (-0.1149)

D2 = [ ln [ S / X ] + (R - (V^2 / 2)) * T)] ÷ (V * √T)

= (-0.4684)

Black-Scholes Formula

W = [N(D1) * S] – [N(D2) * PV(X)]

= $4.99

Total Warrant Value

Value = W * Z

= $499]

-

23

Annexure B

KordaMentha Report

Annex B

 

Boart Longyear Limited

Independent experts’ report in relation to the proposed
schemes of arrangement

1 May 2017

  Chifley Tower
Level 5, 2 Chifley Square Sydney NSW 2000   GPO Box 2523
Sydney NSW 2001   +61 2 8257 3000
info@kordamentha.com   kordamentha.com

Mr James Marshall
Partner

Ashurst Australia
Level 11
5 Martin Place
Sydney NSW 2000

1 May 2017

Dear Mr Marshall

Independent Experts’ Report in relation to the proposed Schemes of Arrangement (‘the Schemes’) for Boart Longyear Limited (‘BLY’)

We refer to your letter of instruction dated 1 May 2017, in which you requested we prepare an Independent Experts’ Report for the Schemes.

This report addresses the matters which we were instructed to address in the letter of instruction.

Our comments and findings assume that the factual information provided to us by the Group is materially accurate. We understand you have shown a draft of the report to senior personnel of BLY, and to advisors to BLY, and that they have confirmed to you that, to the best of their knowledge, the factual information in the report does not contain any omissions or errors and the report accurately sets out the recent results, state of affairs and prospects of the Group.

This report has been prepared solely for the recipients and purposes stated in the letter of instruction (included at Appendix A to the report) and should not be used for any other purpose.

Thank you for your instructions on this matter.

Yours sincerely

/s/ Scott Kershaw	/s/ Jenny Nettleton
Scott Kershaw	Jenny Nettleton
Partner	Executive Director

restructuring | forensic | real estate | corporate | investments | 333

KordaMentha Pty Ltd | ACN 100 169 391

Liability limited by a scheme approved under Professional Standards Legislation

 

Contents

1	Introduction		1
	1.1	Scope of work	1
	1.2	Limitations and restrictions	4
	1.3	Pre-existing relationships	4
	1.4	Reliance	5
	1.5	Assistance by colleagues	5
	1.6	Statement regarding expert witness code	6
2	Proposed restructure		7
	2.1	The Group	7
	2.2	Current capital structure	7
	2.3	Overview of proposed restructure	9
	2.4	Amendment to debt capital structure	9
3	Valuation of the Group		13
	3.1	Summary	13
	3.2	Methodology	13
	3.3	Earnings multiple valuation	14
	3.4	Cross-check based on discounted cash flow	20
4	Solvency review		24
	4.1	Summary	24
	4.2	Solvency approach	24
	4.3	Source data	25
	4.4	Key assumptions	25
	4.5	Primary evidence of solvency: cash flow test	25
	4.6	Indicative test: balance sheet review	29
	4.7	Indicative test: profit and loss	31
	4.8	Other solvency considerations	32
	4.9	Conclusion on solvency	33
5	Comparison of outcomes for Beneficiaries under the Schemes versus a winding up		34
	5.1	Findings	34
	5.2	Implied Value if the Schemes are implemented	34
	5.3	Estimated dividend to Beneficiaries if Scheme Companies wound up	38
6	Outcome if Schemes are not implemented		42
	6.1	Solvency of the Group	42

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Appendix A – Letter of Engagement	44
Appendix B – Curriculum vitae	75
Appendix C – Information list	77
Appendix D – Glossary	78
Appendix E – Valuation approach	80
Appendix F – Comparable companies	87
Appendix G – Comparable company multiples	90
Appendix H – DCF discount rate and terminal value	91
Appendix I – DCF summary	96
Appendix J – Solvency definition and common law principals	98
Appendix K – Balance sheet reconciliation	99
Appendix L – Schedule of tables	101
Appendix M – Schedule of figures	103

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1 Introduction

On 2 April 2017, Boart Longyear Limited (‘ListCo’) and Boart Longyear Management Pty Limited (‘FinCo’) entered into a Restructuring Support Agreement (‘RSA’) in relation to a proposed restructure of financing facilities provided to FinCo, which are guaranteed by other companies in the Group. It is proposed that ListCo, FinCo, Boart Longyear Australia Pty Limited and Votraint No. 1609 Pty Limited (together, the ’Scheme Companies’) enter into two creditors’ schemes of arrangement, plus other associated documents, to implement the proposed restructure.

This report considers the current valuation of ListCo and its subsidiaries (which includes the Scheme Companies) and the outcomes for Beneficiaries of the proposed creditors’ schemes of arrangements (‘the Schemes’) if the Schemes are approved or, alternatively, if the Scheme Companies were wound up within six months of the hearing date for orders under section 411(1) and (1A) of the Corporations Act 2001 (‘the Act’).

All amounts in this report are expressed in United States dollars (USD) unless otherwise indicated.

1.1 Scope of work

Included at Appendix A is our Letter of Engagement dated 1 May 2017. We have been instructed to address the following matters in this report:

1. The solvency of the Group following the implementation of the proposed Schemes.

a. solvency is to be determined following completion of the Schemes

b. solvency is to be determined with reference to section 95A of the Act.

2. The value of the assets of the Group generally relative to the debts owing under the Finance Facilities.

3. The expected dividend that would be respectively available to the:

a. Secured Scheme Creditors

b. Unsecured Scheme Creditors

c. holders of Subordinate Claims against the Scheme Companies

if the Scheme Companies were to be wound up within six months of the hearing of the application for an order under section 411(1) and (1A) of the Act.

4. The expected dividend that would be respectively paid to the:

a. Secured Scheme Creditors

b. Unsecured Scheme Creditors

c. holders of Subordinate Claims against the Scheme Companies

if the Schemes were put into effect as proposed.

We are instructed that the requirement to calculate the expected dividend that would be paid to scheme creditors if the schemes were to be put into effect as proposed is drawn from Section 8201(b) in Part 2 of Schedule 8 of the Corporations Regulations 2001 (Cth). We are instructed that if, in response to point 1 above, we conclude that the Scheme Companies will be solvent following the implementation of the Schemes, the Scheme Companies would not be wound up following the implementation of the Schemes and based on the terms of the Schemes, despite the calculation required by the Regulations, no dividend would actually be paid to the Secured Scheme Creditors and Unsecured Scheme Creditors. In these circumstances, we are instructed that point 4 above still requires us to calculate the dividend that would be paid to Secured Scheme Creditors and Unsecured Scheme Creditors if the Scheme were implemented, which dividend must be calculated as if a winding up follows the implementation of the Schemes even though it would not do so in our opinion. We are instructed that if we conclude in response to point 1 above that the Scheme Companies would be solvent following the implementation of the Schemes, in order to reduce the risk that a reader of our report might be confused by the use of the term “expected dividend” in circumstances where the Scheme Companies are not being wound up, we have been requested that where we are addressing the calculation described in point 4 above in our

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report we refer to implied value of the interests of the Secured Scheme Creditors and the Unsecured Scheme Creditors (Implied Value) instead of “expected dividend”.

5. The likely outcome for the Group should the Schemes not be implemented:

a. having regard to the Scheme Companies’ existing financial position, and projections, and

b. for the purposes of considering this matter only, assuming that there is no standstill in place in respect of the interest payments due to the Secured Scheme Creditors and the Unsecured Scheme Creditors on 1 April 2017.

The outcome of our work is summarised in Table 1.

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Table 1 - Scope of work, section guide and conclusions

Item	Scope	Section	Conclusion
1	The solvency of the Group following the implementation of the proposed Schemes	4	In our opinion, the Group will be solvent after implementation of the Schemes. However, if the payment of April 2017 interest is required to be made, our opinion would change.
2	The value of the assets of the Group generally relative to the debts owing under the Finance Facilities	3	We have determined the Enterprise value of the Group to be $266.6 million, which is less than the amount owing under its Finance Facilities of $779.6 million.
3	The expected dividend which would be paid to Beneficiaries if the Scheme Companies were to be wound up within six months of the hearing date	5	The expected dividend to Beneficiaries in a winding up of the Scheme companies is as follows1:

	Return (cents in $)
Secured Scheme Creditors
Secured Notes		22.1
TLB		35.4
TLA		32.6
Unsecured Scheme Creditors
Unsecured Notes		Nil
Subordinate Claims		Nil

4 The Implied Value of the interests of the Beneficiaries if the Schemes were put into effect as proposed, after implementation of the Schemes 5 The Implied Value of the interests of the Beneficiaries if the Schemes were put into effect as proposed, after implementation of the Schemes is as follows²:

	Implied Value (cents in $)
Secured Scheme Creditors
Secured Notes		61.0
TLB		64.3
TLA		47.2
Unsecured Scheme Creditors
Subordinated Notes		Nil
Subordinate Claims		Nil

5 The likely outcome for the Group should the Schemes not be implemented 6 In our opinion, if the Schemes are not implemented, the Australian Group companies would likely be placed into external administration and other Group companies may seek protection from their creditors in their respective jurisdictions.

Our relevant experience is outlined in our curricula vitae which are attached at Appendix B.

A glossary of abbreviations used throughout this report is included at Appendix D.

¹ The above returns are calculated based on the secured claims as at 28 February 2017.

² The above Implied Values are calculated based on secured claims as at 28 February 2017, adjusted on a pro-forma basis to calculate interest at the amended rates pursuant to the terms of the Restructuring Support Agreement. We are instructed that accrued PIK interest on the TLA and TLB loans does not form part of the secured claims amount.

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1.2 Limitations and restrictions

There are no specific limitations and restrictions within the scope of work we have been instructed to perform. In preparation of this independent expert report, we were provided with information from the Group as set out in Appendix C and footnotes to this report, and obtained additional information from public sources. The documents we have utilised to support our opinions in this report are identified throughout the report by way of footnote or by reference to the information included in Appendix C. In the preparation of this report, we have relied upon the accuracy and completion of information provided by the Group and its advisors.

Neither KordaMentha nor we warrant the accuracy of the information supplied to us and we are not responsible in any way whatsoever to any person in respect of errors in this report arising from incorrect information supplied to us.

The statements and opinions given in this report are wholly based on our own specialised knowledge, given in good faith and in the belief that such statements are not false or misleading. Except where otherwise stated, we reserve the right to alter any conclusions reached on the basis of any changed or additional information which may be provided to us between the date of this report and the date of the meetings called pursuant to section 411(1) of the Act. We have no responsibility to update this report for events or circumstances occurring after the date of this report, apart from any subsequent arrangement.

We note that our statements and opinions are based on a number of assumptions detailed throughout the report, along with the rationale for these assumptions. Unless otherwise noted, we have not been instructed to make these specific assumptions. In considering the outcomes to the Beneficiaries of the Schemes, we have necessarily relied on forecast financial statements provided by the Group.

The forecast information and the assumptions upon which the forecasts are based are solely the responsibility of management and, insofar as the assumptions relate to the future or may be affected by unforeseen events, we can express no opinion on how closely the forecasts will correspond to actual results. While we have reviewed the high level assumptions underlying the forecast information, we do not express an audit opinion or any other form of assurance on these forecasts or assumptions and our comments are based on our evaluation.

We have complied with the requirements of APES 215 - Forensic Accounting Services and APES 225 -Valuation Services, the professional code of practice of CPA Australia and the Chartered Accountants Australia and New Zealand. The valuation included in this report is a limited scope valuation engagement for the purposes of complying with APES 225 - Valuation Services. The reasons for the limitations are set out in Appendix E.

1.3 Pre-existing relationships

We have read ASIC Regulatory Guide 112 on independence and are of the opinion that there is no:

· actual, or perceived, conflict of interest

· actual, or perceived, threat to independence

· other reason for which the engagement could not be accepted.

In accordance with RG112.23 and RG112.28 to RG112.36, the below provides a summary of our prior engagement with the Group and its legal advisors:

2013 engagement

333 Group Pty Limited (’333’), an associated entity of KordaMentha, was engaged by the Group pursuant to a letter of engagement dated 11 November 2013 and undertook the following tasks:

· Reviewed the Group’s financial forecasts.

· Assessed the impact of a proposed refinance on the Group and its compliance with existing covenants.

· Assisted the Group to consider recapitalisation options.

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2014 engagement

333 was further engaged by the Group pursuant to a letter of engagement dated 10 March 2014 and undertook scenario and deleveraging analysis.

All work under the engagements was completed by September 2014, prior to the TLA and TLB financing structure being implemented. In our opinion, these engagements do not impair our independence, on the basis that:

· 333 did not provide any advice in relation to the financial structure as it now exists.

· The engagements were completed in excess of two years prior to receiving instruction to prepare this report.

· KordaMentha has not undertaken any engagements for any of the Secured Scheme Creditors or the Unsecured Scheme Creditors in relation to the Group.

KordaMentha has been instructed by Ashurst, legal advisors to the Group, to prepare this report. We have not undertaken any other engagements under instruction from Ashurst in relation to the Group. KordaMentha has instructed Ashurst on other matters in which KordaMentha partners and/or staff are involved, in their capacities as receivers, administrators, deed administrators or liquidators of certain companies. In our opinion, these other engagements involving Ashurst do not impair our independence.

In our opinion, there are no other previous relationships, nor other considerations that impair our independence.

1.4 Reliance

This report has been prepared, and may be relied on, solely for the purpose contemplated in the letter of engagement included at Appendix A. This report, or any part of it, may only be published or distributed:

· as an annexure to the explanatory statements to be provided to the Beneficiaries and any relevant authority (including ASIC and the ASX) in relation to the Schemes

· as an annexure to a notice of meeting to the shareholders of the Scheme Companies

· as an annexure to any prospectus issued in connection with the Scheme Companies

· in accordance with any law or by order of a court of competent jurisdiction.

The express written consent of us and KordaMentha must be obtained prior to relying upon, publishing or distributing this report, or part of it, for any purpose other than that detailed above. Neither KordaMentha nor we accept responsibility to anyone if this report is used for some other purpose.

1.5 Assistance by colleagues

In order to arrive at our opinions in this matter, we have selected colleagues to assist us. Our colleagues carried out the work that we decided they should perform. We have reviewed their work and original documents to the extent we considered necessary to form our opinions. The opinions expressed in this report are ours.

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1.6 Statement regarding expert witness code

We have read, understood and complied with the Expert Witness Code of Conduct from the Uniform Civil Procedure Rules 2005 (NSW).

As expert witnesses, we have also complied with our general duties to the Court, which include:

· We have a paramount duty to the Court which overrides any duty to any party to the proceedings including our clients.

· We have an overriding duty to assist the Court on matters relevant to our area of expertise in an objective and unbiased manner.

· We have a duty not to be an advocate to any party to the proceedings including our clients.

· We have a duty to make it clear to the Court when a particular question or issue falls outside our area of expertise.

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2 Proposed restructure

2.1 The Group

The Group is headquartered in Salt Lake City, in the state of Utah, USA with the ultimate parent company, ListCo, being an Australian company listed on the Australian Securities Exchange (‘ASX’).

The Group operates two global businesses, Products and Drilling Services:

· The Products division manufactures drill rigs and drill rig components for sale to third parties and its own Drilling Services division

· The Drilling Services division provides aboveground and underground drilling services predominately to mining and resource companies in key markets across North America, Latin America, Australasia and South East Asia as well as Africa and the Middle East

The Group’s customers are predominately large mining houses and drilling services companies. The Group’s Drilling Services division primarily services the mineral sector, and has a fleet biased towards exploration rather than extraction. The Group has minimal exposure to the oil and gas sectors.

2.2 Current capital structure

As at 28 February 2017, the Group had total finance debt of $779.6 million (‘Total Debt’), pursuant to the following facilities (‘the Finance Facilities’).

Table 2 - Group debt structure as at 28 February 2017

Facility	Maturity	Interest rate (p.a.)			Total due $million3
10% Senior Secured Notes (‘Secured Notes’)	1 October 2018		10.0	%		203.0
Term Loan A4 (‘TLA’) and accreted Interest	3 January 2021		12.0	%		112.3
Term Loan B5 (‘TLB’) and accreted Interest	3 January 2021		12.0	%		135.7
Secured revolving working capital facility (‘ABL’)6	29 May 20207		Variable			16.5
Delay Draw Loan Facility (‘DDL’)	31 December 2020		12.0%/10.0	%8		20.0
7% Unsecured Secured Notes (‘Unsecured Notes’)	1 April 2021		7.0	%		292.1
Total9						779.6

FinCo is the Group’s sole borrower under the Finance Facilities, except for the DDL for which BLY IP Inc is borrower. Several companies in the Group have provided guarantees and security to support the Finance Facilities.

The limit of the ABL is $40.0 million, of which $5.0 million is subject to an availability block (the Group is not currently meeting certain criteria to enable this amount to be utilised). The drawn balance as at 28 February 2017 was $16.5 million, excluding letters of credit issued against facility limit of $11.9 million. In March 2017, a further $1.7 million was drawn on the ABL.

³ Total due includes interest accrued for the two months ended 28 February 2017. Prepaid Australian withholding tax has been excluded from the debt due under the TLA and TLB.

⁴ Debt Balance excludes Australian withholding tax

⁵ Ibid

⁶ Drawn balance as at 28 February 2017 excluding letters of credit of $11.9 million (i.e. total of $28.4 million).

⁷ Maturity is the earlier of 29 May 2020, or 90 days prior to the expiration of the Secured Notes, TLA or TLB

⁸ 12.0% p.a. applicable if interest elected to be paid in kind, or 10.0% p.a. if paid in cash

⁹ Exclusive of debt issuance costs and finance lease liabilities

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The Group also entered into an agreement on 2 April 2017 for an additional interim funding facility (‘Interim Facility’) from Centerbridge, Ares and Ascribe in the amount of $15.0 million. The initial funding under the Interim Facility was $7.5 million and the Interim Facility is forecast to be fully drawn prior to the implementation of the Schemes.

A summary of the Group corporate and financing structure is set out below.

Figure 1 - Simplified corporate and financing structure¹⁰

 

¹⁰ Source: Group records

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2.3 Overview of proposed restructure

On 2 April 2017, the Group signed a Restructuring Support Agreement with a number of its lenders.

It is proposed the Scheme Companies enter two creditors’ schemes of arrangement as follows:

1. Secured Scheme - for the lenders under the TLA and TLB and holders of the Secured Notes (together the ’Secured Scheme Creditors’)

2. Unsecured Scheme - for the holders of the Unsecured Notes (the ‘Unsecured Scheme Creditors’) (together, ‘the Schemes’).

A suite of associated transactions is also proposed, which together with the Schemes, are referred to as the ‘Recapitalisation Transactions’.

The purpose of the Recapitalisation Transactions is to reduce the level of indebtedness and amend the terms of the Finance Facilities, having regard to the Group’s forecast and sector outlook.

The details of the proposed Schemes and the implementation steps are set out in the Scheme Documents, including:

· The Explanatory Statements

· The schemes of arrangement

(together, ‘the Scheme Documents’)

This report should be read in conjunction with the Scheme Documents.

If implemented, the Recapitalisation Transactions will alter the current capital structure through:

· Converting to equity a proportion of the Unsecured Notes

· Amending both the maturity and interest terms on Senior Notes, TLA and TLB. The maturity dates of the current debt obligations (excluding the ABL, DDL and Interim Facility) will be extended to 31 December 2022

· The issue of new shares to the TLA and TLB lenders

· The issue of new shares and warrants to holders of the Unsecured Notes.

As a result of the issues of new shares, existing shareholder holdings (excluding Centerbridge) will be diluted to 2.0%, before the option to participate in a share purchase plan for up to AUD $9.0 million and further dilution from warrants being exercised.

2.4 Amendment to debt capital structure

The amendments to each of the Finance Facilities is detailed below.

2.4.1 Amendment to Term Loan A and Term Loan B

The Secured Scheme proposes, in relation to TLA and TLB, that the maturity date of TLA and TLB will be extended to 31 December 2022.

Pursuant to Other Recapitalisation Transactions:

· The interest rate will be reduced from 12.0% to 10.0% through to 31 December 2018 and thereafter, 8.0%. Interest on both TLA and TLB will continue to be paid in kind (‘PIK’) through the issuance of additional notes at each coupon payment date.

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· As consideration for the amendments and resulting interest saving, Centerbridge (as holder of the TLA and TLB) will receive 52.3% of the Company’s ordinary equity post-implementation. This is in addition to ListCo’s ordinary shares currently held by Centerbridge entities or shares issued on conversion of preference shares held by Centerbridge which together will total 3.7% of the ordinary shares on a diluted basis.

2.4.2 Amendment to Secured Notes

The Secured Scheme will extend the maturity date of the Secured Notes from 1 October 2018 to 31 December 2022. The Group will have the option to pay the first four coupon payments post-restructure in cash at the rate of 10.0% p.a. or in-kind at the rate of 12.0% p.a. Thereafter, the Group must pay interest in cash at the rate of 10.0% p.a. The Group’s ability to transfer assets outside the Secured Note guarantor group will also be limited for the benefit of Secured Noteholders.

The coupon payment date will also be amended from April and October to June and December. BLY IP Inc. (the IP Obligor) will also provide a junior unsecured guarantee to holders of the Secured Notes.

2.4.3 Amendment to Unsecured Notes

The Unsecured Scheme proposes that the Unsecured Notes be amended such that the Unsecured Notes balance in excess of $88.2 million¹¹ will be converted into ordinary shares. The terms of the remaining $88.2 million in Unsecured Notes (‘the Subordinated Notes’)¹² will be amended as follows:

· expiry of 31 December 2022

· interest rate of 1.5% p.a. (with interest payable in kind).

New ordinary shares will be issued such that the Subordinated Note holders hold 42.0% of the shares on issue in ListCo immediately after implementation of the Schemes but before warrant dilution.

In addition:

· Equity warrants equivalent to 5.0% of the ordinary shares in ListCo will be issued to the holders of the Subordinated Notes, with a seven-year exercise period and a strike price equal to the share value implied by an Enterprise Value of $750.0 million.¹³

· Equity warrants equivalent to 2.5% of the ordinary shares in ListCo will be issued to the holders of the Subordinated Notes, with a seven-year exercise period and a strike price equal to the share value implied by an Enterprise Value of $850.0 million.¹⁴

The conversion to equity of some of the Unsecured Notes will reduce the Group’s cash interest payments by approximately $19.9 million p.a. through to April 2021.

2.4.4 Repayment of DDL and Interim Facility and upsizing of ABL

In January 2017, Centerbridge provided the Group (through BLY IP Inc.) with a new facility of $20.0 million (the ‘DDL’). Drilling equipment with a net book value of $50.0 million was transferred to new entities within the Group structure to allow the DDL Obligors to provide security for the DDL.

Centerbridge, Ares and Ascribe have also undertaken to make available the Interim Facility of $15.0 million, which is expected to be fully drawn by the time the Schemes are implemented.

¹¹ The amount of Unsecured Notes to remain is $88.2 million, comprised of $88.0 million plus accreted interest from 1 January 2017 to 28 February 2017 at 1.5% p.a.

¹² Payments on the Subordinated Notes will be subordinated to payments, to the extent unsecured, on the TLA and TLB

¹³ Enterprise Value to be calculated with reference to the net debt balance that exists immediately after implementation of the Schemes.

¹⁴ Ibid

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Both the DDL and the Interim Facility are proposed to be repaid immediately after implementation of the Schemes from the Upsized ABL, which will increase from $40.0 million to $75.0 million. The Upsized ABL will be underwritten by Centerbridge and other major shareholders, and will have the same security as the existing ABL. The transfer of assets and provision of security in relation to the DDL noted above will be unwound following the repayment of the DDL as agreed by the Group in the RSA.

We have been advised that the $5.0 million availability block under the ABL will not be a term of the Upsized ABL such that the full $75.0 million will be available to the Group.

The debt of the Group is detailed in Table 3.

Table 3 - Group debt pre and post-restructure (balances as at 28 February 2017)

	Pre-restructure						Post-restructure
Debt facility	Maturity date	Balance ($’million)		Adjustment			Balance ($’million)		Maturity
Secured Notes and Accreted Interest	1 October 2018		203.0		0.6			203.6	31 December 2022
TLA and Accreted Interest	3 January 2021		112.3		(0.4	)		111.9	31 December 2022
TLB and Accreted Interest	3 January 2021		135.7		(0.4	)		135.3	31 December 2022
ABL/Upsized ABL15	29 May 2020		16.5		20.0			36.5	29 May 2020
DDL Facility	31 December 2020		20.0		(20.0	)		-	N/A
Unsecured Notes	1 April 2012		292.1		(292.1	)		-	N/A
Subordinated Notes and Accreted Interest	N/A		-		88.2			88.2	31 December 2022
Total			779.6		(204.1	)		575.5

Adjustments

The adjustments noted above take into account both the resizing of the debts, as well as proposed amendments to the interest rates which will apply retrospectively to the debt balances as at 31 December 2016. The interest rate applicable to TLA and TLB will be reduced from 12.0% to 10.0% effective 1 January 2017 and the interest on the Secured Notes increases to 12.0% from 10.0%. The pro-forma balance of the new Subordinated Notes includes accrued interest on the $88.0 million face value calculated at the facility interest rate of 1.5% effective from 1 January 2017.

The Interim Facility of $15.0 million has not been included in the above table as it had not been drawn down at 28 February 2017 (but has subsequently been partially drawn). The Interim Facility balance as at Scheme implementation will increase the Upsized ABL by a corresponding amount.

¹⁵ The Upsized ABL includes the refinance of the DDL and Interim Facility balances of $20.0 million and $15.0 million respectively, which are assumed to be fully drawn at Scheme implementation. The increased limit of $75.0 million under the Upsized ABL will be utilised to repay these facilities and the existing ABL. The DDL was fully drawn but the Interim Facility had a nil balance as at 28 February 2017

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Shareholding changes

The composition of the shareholder register pre and post the Recapitalisation Transactions being implemented is show in Table 4 below.

Table 4 - Pro-forma shareholder register pre and post-restructure (pre-dilution)¹⁶

Shareholder class	Shares outstanding pre-restructure ’000		% interest voting rights			Adjustment ’000			Shares outstanding post-restructure ’000		% interest voting rights
Convertible preference shares17		434,002		-			(434,002	)		-		-
Ordinary shares - Centerbridge		464,502		48.9	%		434,002			898,504		3.7	%
Ordinary shares - other shareholders		485,270		51.1	%		-			485,270		2.0	%
Subordinated Noteholders18		-		-			10,190,660			10,190,660		42.0	%
TLA and TLB		-		-			12,689,044			12,689,044		52.3	%
Total preference and ordinary shares outstanding		1,383,774					22,879,704			24,263,478		100.0	%

In addition to issuing new ordinary shares to the holders of the Subordinated Notes and the TLA and TLB lenders, ListCo will also issue equity warrants to the holders of the Subordinated Notes as detailed at paragraph 2.4.3.

The issuance of new shares will require the approval of current shareholders. If shareholders do not approve the issuance of new shares, the Recapitalisation Transactions will not be implemented.

¹⁶ Pro-forma shareholdings calculated immediately after the Recapitalisation Transactions have been implemented and before any dilution from instruments not considered in Table 4.

¹⁷ These shares are converted into ordinary shares as part of the implementation of the proposed restructuring (albeit not as part of the Schemes), such that the equity outcome set out in Table 4 is achieved.

¹⁸ Does not include any shares already held by holders of the 7% Unsecured Notes.

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3 Valuation of the Group

3.1 Summary

We have been asked to assess the value of the assets of the Group generally relative to the debts owing under the Finance Facilities.

We have undertaken a limited scope valuation engagement (‘Valuation’) of the Group, as that term is defined in APES 225 - Valuation Services. Our valuation is limited in scope because of the limitations outlined in Appendix E of this report. Any references to our Valuation of the enterprise of the Group is a reference to our assessed indicative valuation of the enterprise of the Group.

We have assessed the Enterprise Value of the Group (including surplus assets) to be in the range of $246.5 million to $286.6 million, as set out in Table 5 below.

Further details of the valuation methodology and approach that we have adopted are set out in the section below and in Appendices E to I.

Table 5 - Summary of estimated Enterprise Value of the Group

		Low		High
Valuation methodology	Section reference	($’million)		($’million)
Primary methodology
Earnings capitalisation valuation	3.3		246.5		286.6
Valuation cross-check
DCF valuation	3.4		210.6		274.1
Net tangible business assets	3.4		250.1		250.1

As detailed in Table 3, as at 28 February 2017, Total Debt was $779.6 million, which exceeds the assessment of Enterprise Value by circa $500 million.

3.2 Methodology

In forming our view of the Enterprise Value of the Group, we have assessed relevant available information, including the Group’s Budget Model, audited historic financial results, budget for the year ending 31 December 2017 and other available relevant information (including publicly available information).

We have considered the valuation methodologies outlined in ASIC RG 111 and it is our view that, given the nature of the assets, the capitalisation of future maintainable earnings approach is the most appropriate valuation methodology and we have adopted it as our primary valuation approach. We have cross checked the valuation outcomes under our primary approach:

· using a DCF valuation approach

· with reference to the net tangible business assets of the Group as at 28 February 2017.

A more detailed discussion of the valuation methodologies adopted is set out in Appendix E.

We have also considered a market-based valuation approach, however we deemed this not to be an appropriate reflection of value, for the reasons outlined in Appendix E.

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Tax losses carried forward and Canadian tax dispute

Various entities within the Group had available carried forward income tax losses as at 31 December 2016. Forecasts show that the Group overall will continue to incur losses for several more years. We have attributed no value to these carried forward tax losses because:

· The recoverability of the tax losses to a potential purchaser of the Group is subject to certain tests under Australian taxation law (continuity of ownership test, same business test and debt forgiveness) and there is no certainty that those tests will be passed.

· Based on the current circumstances facing the Group and its future prospects, it is uncertain whether the Group will generate sufficient future assessable income to utilise the losses.

· We have not been provided with the necessary information to allow us to review the availability of the tax losses for offset against any future taxable income.

Our assessment of the tax losses is consistent with the accounting treatment of the tax losses adopted by the Group in its financial statements.¹⁹

The Group is currently in a dispute with the Canadian tax authorities in relation to the 2007 to 2012 tax years and anticipates that similar disputes will arise in relation to the 2013 to 2014 tax years. The Group believes it is too early to forecast an outcome of the disputes and to the extent it is relevant, we have not adjusted our valuation for these items.²⁰

3.3 Earnings multiple valuation

Our earnings based valuation is based on the audited financial results for the year ended 31 December 2016 (‘FY16 Accounts’) and management’s budget included in the Budget Model for the year ending 31 December 2017 (‘FY17 Budget’).

The FY16 accounts were audited by Deloitte and the FY17 Budget was prepared by Management and approved by the Board on 15 December 2016.

We have considered the historic and one year forward EV/EBITDA multiples of comparable listed companies and the earnings multiples implied by recent acquisitions of businesses similar to the Group in assessing the Enterprise Value of the Group. We have assessed an appropriate EBITDA multiple range for the Group to be 6.0x to 7.0x one year forward forecast EBITDA (as shown at Appendix G).

A description of each comparable listed company and the details of the earnings multiples implied by the current market capitalisation of each comparable listed company is set out in Appendices F and G.

3.3.1 FY17 budget review

A memorandum prepared for the Group’s Executive Committee sets out the following key comments in relation to the FY17 budgeting process:²¹

· While key mining performance indicators are showing signs of improvement, volatility remains in the Group’s underlying markets.

· Metal prices will remain depressed and cost pressures in the mining industry are expected to continue in 2017.

· Global exploration spend is estimated to be $9.0 billion in 2017 which is an increase on previous years (see Figure 2).

· Cash generation continues to be a priority to de-lever the business.

¹⁹ The Group did not recognise a tax asset arising from the current year losses in its audited financial statements for the year ended 31 December 2016

²⁰ Boart Longyear Canadian tax update

²¹ 2017 Budgeting Process Context Memo.V2

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· Cash flow from operations will improve through process enhancements, continued reduction in inventory levels and other operational efficiencies and improvements.

· The Group developed three main business improvement initiatives in late 2015 which were implemented in 2016. The ongoing process efficiencies and cash cost savings arising from these initiatives will be realised in 2017.

Figure 2 shows the quarterly private resources and energy exploration expenditure index for Australia, which indicates a year-on-year recovery in in Australia; one of the Group’s key markets. This, in part, supports the forecast revenue increase for FY17.

Figure 2 - Private mineral exploration expenditure (Australia)²²

Quarter-on-quarter moving average growth rate (rebase to 100 at December 2010)

 

We have also reviewed a presentation detailing the FY17 budget process and underlying key assumptions. That presentation noted that the FY17 budget included the following key assumptions:²³

· The cost savings initiatives which commenced in 2016 are expected to result in cash flow benefits of $57 million²⁴ being realised throughout 2017.

· Capital expenditure for the Group will not exceed $27.0 million in 2017²⁵.

²² Quarterly private resources and energy exploration expenditure, Australia statistics published by the Office of the Chief Economist, Department of Industry, Innovation and Science dated February 2017

²³ Prelim. 2017 Op Plan.V11_ext

²⁴ Risk Hedge of $5 million is included in liquidity forecast, so adjusted cash benefit is $52 million

²⁵ The Group has forecast $35.2 million in capital expenditure including $6.0 million related to the consolidation of sites in Salt Lake City, and $1.9 million in relation to a proposed investment in a supplier.

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Table 6 summarises the FY16 actual and FY17 budget, and the variances are discussed below.

Table 6 Comparison of the FY16 actual and FY17 budget²⁶

($’000)	FY16 actual			FY17 budget			Variance
Revenue		642,404			681,909			39,505
Cost of sales		(556,569	)		(573,349	)		(16,780	)
Gross profit		85,835			108,560			22,725
Gross margin		13.8	%		15.9	%		2.1	%
SG&A		(137,236	)		(119,644	)		17,592
Other expenses		(18,360	)		(59,331	)		(40,971	)
Total other expenses		(155,596	)		(178,975	)		(23,379	)
Other income*		8,939			-			(8,939	)
EBIT		(60,822	)		(70,415	)		(9,593	)
Depreciation and amortisation		62,470			61,924			(546	)
EBITDA		1,648			(8,491	)		(10,139	)
Restructuring expense		30,400			48,573			18,173
Adjusted EBITDA		32,048			40,082			8,034

* The budget does not separately record other income and it may be recorded under revenue for budget purposes.

Overall, EBITDA is budgeted to be ($8.5) million in FY17 which includes $48.6 million of restructuring expenses. Adjusted EBITDA (before restructuring expenses) is budgeted to improve from $32.0 million in FY16 to $40.1 million in FY17. This represents an increase of $8.0 million in underlying earnings for FY17.

The increase in FY17 adjusted EBITDA compared to FY16 is due to the following key assumptions: ²⁷

· improvements in volume, productivity and cost control

· fixed costs will remain flat in each geographic region

· the gross margin will improve due to higher productivity and continuation of business improvement initiatives.

The budgeted revenue of the Products division in FY17 assumes:²⁸

· prices will remain constant

· an expected increase in sales volumes driven by an increase in drilling activity in the mining services industry.

The budgeted revenues of the Drilling Services division in FY17 assumes:²⁹

· increased drilling rig activity due to expected increasing demand for drilling services

· minimal foreign exchange impact on revenues in foreign jurisdictions

· pricing pressures (primarily in the EMEA region) offsetting some of the above benefits.

²⁶ Project Phoenix 2017 Budget Model Reconciliation_External_v34 and Annual Financial Report 2016

²⁷ Prelim. 2017 Op Plan.V11_Ext

²⁸ Prelim. 2017 Op Plan.V11_Ext

²⁹ Ibid

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The budget process for Drilling Services makes assumptions in relation to contract renewals and work to be won. Contracts and the resulting revenue are classified as either:³⁰

· Under Contract: identified customers and works under contract

· Probable: identified customers where management has assessed there is more than an 80% chance that works will commence

· Blue Sky: unidentified customers where management has assessed a 50% to 80% chance that works will commence.

3.3.2 January and February 2017 performance against budget

We have been provided with the actual financial results of the Group for January and February 2017. The table below compares the actual and budgeted financial results for the period.

Table 7 - Comparison of actual and budgeted financial results for the two months ended February 2017³¹

Two months ended February 2017 ($’000)	Actual			Budget			Variance			Variance %
Revenue		101,660			94,322			7,338			7.8	%
Cost of sales		(93,461	)		(88,524	)		(4,937	)		(5.6	)%
Gross profit		8,199			5,797			2,402			41.4	%
SG&A		(16,958	)		(19,630	)		2,672			13.6	%
Other expenses		(7,980	)		(18,125	)		10,145			56.0	%
Total other expenses		(24,938	)		(37,755	)		12,817			33.9	%
Other income*		1,408			-			1,408			0.0	%
EBIT/operating loss		(15,331	)		(31,958	)		16,627			52.0	%
Depreciation and amortisation		11,738			13,218			(1,480	)		11.2	%
EBITDA		(3,593	)		(18,740	)		15,147			80.8	%
Restructuring expense		5,731			14,205			(8,474	)		59.7	%
Adjusted EBITDA		2,138			(4,535	)		6,673			147.1	%

*The budget does not separately record other income and it may be recorded under revenue for budget purposes.

A comparison of the actual results to budget for January and February 2017 shows that the Adjusted EBITDA is higher than budgeted by $6.7 million. The improved result is a consequence of:

· significantly higher actual revenues ($101.6 million) than budget ($94.3 million)

· an overall reduction in actual SG&A and other expenses relative to budget

· considerably lower restructuring expenses than budgeted due to timing.

3.3.3 Measure of earnings

The choice between EBITDA, EBITA and EBIT as a measure of earnings to be capitalised is usually not critical in the valuation process and should provide similar valuation results. All are commonly used in the valuation of businesses with similar business activities and operating risks to the Group (‘Peer Group’). Although it is difficult to include companies with businesses directly comparable to the business of ListCo, the Peer Group we have selected includes a number of listed companies which provide a range of different services to the mining sector in Australia and overseas.

³⁰ Ibid

³¹ 2017 Financial Statements - Feb v1 BL and Annual financial report 2016 and Project Phoenix 2017 Budget Model Reconciliation_External_v34

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In our opinion, EBITDA is preferred where depreciation or non-cash charges distort earnings or make comparisons with other companies difficult. Therefore, in determining the Enterprise Value of the Group, we have placed reliance on the EBITDA multiples implied by the current market capitalisation of the Peer Group and recent acquisitions of businesses similar in nature to the Group.

3.3.4 Earnings

We have assessed the current Enterprise Value of the Group on the basis of the FY17 EBITDA forecast in the Budget Model. The Budget Model forecasts a loss of $8.5 million at EBITDA level. The forecast loss of $8.5 million includes $48.6 million of restructuring expenses, which are considered to be once-off expenses that should be excluded from an assessment of the maintainable earnings of the Group.

Despite recent substantial losses, the Group has generated substantial earnings in prior years when the exploration and resource development activity was substantially higher. Before its decline in FY13, the Group generated EBITDA of $350 million in FY12. While we have considered whether the maintainable EBITDA should be based on an average EBITDA throughout the business cycle, given the historical volatility and recent trends, we have determined that the recent earnings are the most appropriate basis on which to value the Group.

We consider the Group’s forecast FY17 adjusted EBITDA of $40.1 million as being representative of the future maintainable earnings of the enterprise for valuation purposes as it excludes items that are one-off in nature. We note that the budgeted FY17 EBITDA of $40.1 million is only $8.0 million higher than the adjusted actual FY16 EBITDA of $32.1 million.

3.3.5 Earnings multiple range

In assessing an appropriate earnings (EBITDA) multiple to apply in valuing the enterprise of the Group, we have analysed the earnings multiples implied by:

· The current market capitalisation of the Peer Group (including a 25% increase for an assumed control premium which is discussed further in Appendix E). We have analysed both the implied historic and forecast multiples (FY+1) of the Peer Group at Appendix G. Our analysis of the Peer Group at that Appendix implies forecast FY+1 EBITDA multiples in the range of approximately 5.0x to 12.4x with a median of 8.8x. We have used a Peer Group analysis of both Australian and international companies, including companies that operate in the US and Canada.

· Acquisitions of businesses similar in nature to the Group based on transactions occurring over the past 36 months. Many of those transactions did not involve businesses which were comparable either in size, industry or operations to the Group and therefore we have excluded them from our analysis.

Table 8 is a summary of the transactions that we analysed:

Table 8 - Transaction multiples³²

Date	Description of transaction	Implied EBITDA Multiple
February 2014	Skilled Group agreed to acquire T & C Services Pty Ltd from Thomas & Coffey Limited.	4.7 x EBITDA (LTM)
December 2015	Kingfish Limited (NZSE:KFL) managed by Fisher Funds Management Limited completed the sale of its stake in Opus International Consultants Ltd. (NZSE:OIC) in the second quarter of 2015.	6.9 x EBITDA (FY+1)
January 2016	Dar Al-Handasah Consultants (Shair & Partners) (U.K.) Limited acquired WorleyParsons Limited (ASX:WOR)	5.1 x EBITDA (FY+1)
March 2016	CIMIC Group offer to acquire Macmahon Holdings Limited	5.9 x EBITDA (FY+1)
May 2016	Hitachi Construction Machinery Co., Ltd. (TSE:6305) acquired Bradken Limited (ASX:BKN)	6.3 x EBITDA (FY+1)
February 2017	Resource Capital Fund IV acquired Ausenco Limited	5.9 x EBITDA (FY+1)
February 2017	CIMIC Group acquired Sedgman Limited	10.4 x EBITDA (FY+1)

³² S&P Capital IQ

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The table above shows that the prices exchanged in almost all of the transactions analysed implied EBITDA multiples in the range of 5.1x to 10.4x (FY+1).

Summary - EBITDA multiple range

Based on our analysis of the Peer Group multiples and the earnings multiples implied in recent transactions of similar businesses, and taking into account the characteristics of the Group, we have assessed an appropriate EBITDA multiple range to be 6.0x to 7.0x EBITDA for the one year forward forecast period.

We have considered the companies in the Peer Group and the level of capital required in each business. The Group has a more capital intensive business than the majority of its peers and our determination of an EBITDA multiple range takes this into account.

We have selected EBITDA multiples that are towards the mid to low end of the Peer Group range, as several of the Peer Group companies have operations which are either larger and more diversified than the Group or less capital intensive. Our low multiple of 6.0x is slightly above the first quartile EV/EBITDA multiples of the Peer Group for the FY+1 period and our high multiple of 7.0x is in the middle of the first quartile and average EV/EBITDA multiples of the Peer Group for the FY+1 period.

3.3.6 Surplus assets

The FY16 financial statements of the Group identified ’Assets classified as held for sale’ with a value of $5.9 million³³ as at 31 December 2016. These assets consist primarily of excess rigs and ancillary equipment which are not expected to generate any part of the budgeted FY17 earnings of the Group.

The Group has identified an opportunity to benefit from the disposal of these assets by eliminating the ongoing costs associated with maintaining these assets. We have therefore included the book value of these ’surplus’ assets in our assessed Enterprise Value.

We have not adopted any additional value for cash. The Group has advised it requires a minimum cash holding of approximately $25.0 million, and this holding is assumed in the Enterprise Value. Once Scheme costs are paid, there is unlikely to be any surplus cash in the Group.

3.3.7 Enterprise valuation summary

The Enterprise Value range of the Group including surplus assets using the comparable company multiples approach is set out below:

Table 9 - Enterprise valuation range

Multiple	EBITDA ($’million)		EV (excluding surplus assets) ($’million)			Surplus assets ($’million)		EV (including surplus assets) ($’million)
6.0 x Multiple (Low)		40.1		240.6	34		5.9		246.5
7.0 x Multiple (High)		40.1		280.7	35		5.9		286.6
Mid-point		40.1		260.7					266.6

Based on the outcomes shown in the table above, we have assessed the current Enterprise Value of the Group to be in the range of $246.5 million to $286.6 million, with a preferred value of $266.6 million based on the mid-point of the valuation range.

³³ Annual financial report 2016

³⁴ Calculated as EBITDA of $40.1 million multiplied by a Multiple of 6.0

³⁵ Calculated as EBITDA of $40.1 million multiplied by a Multiple of 7.0

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Our assessed valuation range implies a historic earnings multiple in the range of 8.4 to 9.7 actual FY16 adjusted EBITDA of the Group³⁶. We note that the implied historical earnings multiple range is broadly consistent with the historic earnings multiples implied by the current market capitalisation of the Peer Group (adjusted for control³⁷).

3.4 Cross-check based on discounted cash flow

3.4.1 Overview

As a cross-check to our primary valuation approach, we have undertaken a DCF valuation to determine the Enterprise Value of the Group.

We were provided with a Budget Model prepared in October 2016 and updated in March 2017 which included financial information for the following periods:

· monthly historic financial results for July 2015 to December 2016

· monthly FY17 forecast financial results which were in line with the FY17 budget

· monthly FY18 to FY21 forecast financial results based on various growth and margin assumptions.

The Budget Model makes assumptions in relation to contract renewals, new work to be won and future margins. As with all contracting businesses, forecasting for long periods of time with any certainty is challenging.

3.4.2 Budget Model review

We have reviewed the long-term forecasts in the Budget Model. The model assumes a significant increase in earnings over the five-year forecast period.

The annual revenue growth rates assumed in the Budget Model are set out in Table 10 below.

Table 10 - FY16A to FY21F Revenue growth³⁸

	FY16		FY17			FY18			FY19			FY20			FY21
Revenue ($’million)		642.4		681.9			750.0			830.0			890.0			940.0
Revenue growth percentage				6.1	%		10.0	%		10.7	%		7.2	%		5.6	%

Profitability

Gross profit contributions are forecast to increase both in line with forecast revenue and due to margin growth. Gross margins are forecast to increase from 15.9% in FY17 to 26.6% in FY21.

Table 11 - FY16A to FY21F gross margin³⁹

	FY16		FY17			FY18			FY19			FY20			FY21
Gross margin ($’million)		88.8		108.6			136.8			178.2			213.8			250.2
Gross margin percentage				15.9	%		18.2	%		21.5	%		24.0	%		26.6	%

³⁶ Annual Financial Report 2016 adjusted EBITDA of $32.0 million

³⁷ See further explanation in Appendix E

³⁸ Project Phoenix 2017 Budget Model Reconciliation_External_v34 and Annual Financial Report 2016

³⁹ Project Phoenix 2017 Budget Model Reconciliation_External_v34 and Annual Financial Report 2016

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Adjusted EBITDA

Adjusted EBITDA is forecast to increase from $32.0 million in FY16 to $201.4 million in FY21⁴⁰. Much of the forecast improvement is assumed to result from an increase in revenues and gross margins. Whilst the forecast increase in EBITDA appears reasonable in the short term (FY17F), we have been unable to verify the assumptions that underpin the forecast increase in revenues and margins after FY17.

3.4.3 Cash flows for DCF analysis

As stated above, we have not been able to verify the assumptions that underpin the revenue and gross margin growth in the Budget Model beyond FY17.

For the purposes of our DCF analysis, we have adopted the FY17 budget of the Group and modelled the results of the business for the FY18 period onwards based on the assumptions set out below:

Table 12 - Key DCF valuation assumptions

Assumption	Value	Comments
Revenue growth	1.0 - 3.0% per annum	IBISWorld has forecast that industry revenues will increase at 0.6% per annum in nominal terms over the next five years. Price competition will play a part in that subdued growth as competition increases. We have adopted revenue growth rate assumptions of 1% to 3% per annum based on IBISWorld’s representation that the Group tends to outperform industry trends on an upswing cycle.41
Gross margin percentage	15.9 % to 17.9%	We have assumed that the FY17 budgeted margins improved at 0.5% per year over the balance of the forecast period.
Effective tax rate	31%	Estimated having regard to existing Australian (30%), Canadian (28%) and USA (38%) tax rates as well as regional average rates for NAM (35%), LAM (28%) APAC (30%) and EMEA (28%).
Working capital balance	32.4% of forecast revenues	FY17 forecasts shows an investment in working capital of 32.4% of revenues for the year as at 31 December 2017. We have forecast working capital on the same basis and calculated annual movements in working capital balances accordingly.
Terminal CAPEX assumption	$40 million	We have adopted the annual capital expenditure costs in the Budget Model over the period to FY21 and a higher capital expenditure cost in the terminal year on the basis consistent with the long-term growth rate in earnings.

The EBITDA forecast based on these assumptions are summarised in the table below⁴².

Table 13 - EBITDA FY17F-FY21F

Scenario EBITDA $million	FY17F			FY18F		FY19F		FY20F		FY21F
Base case		(8.5	)		68.0		68.8		74.9		82.2

⁴⁰ Project Phoenix 2017 Budget Model Reconciliation_External_v34

⁴¹ IBISWorld Industry Report OD5427 - Oil and Mineral Exploration Drilling in Australia.

⁴² The FY17 forecast is after restructuring costs

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3.4.4 Key DCF valuation assumptions

A summary of the key valuation assumptions is set out in the table below.

Table 14 - Additional DCF valuation assumptions

Assumption	Value	Comments
WACC (nominal)	10% to 12.0% per annum	As the cash flows in our forecast model are expressed in nominal terms, the discount rate adopted is a nominal WACC. Refer to Appendix H for the assumptions and inputs adopted in calculating the WACC.
Valuation date	Date of this report
Terminal growth rate	3.0% per annum (nominal)	We have adopted a nominal growth rate in perpetuity broadly consistent with long term drilling industry forecasts.

For further detail on the DCF valuation assumptions and outputs, refer to Appendix H.

3.4.5 DCF valuation range (including surplus assets)

A summary of the various DCF valuations is set out below.

Table 15 - DCF Enterprise Value range

	12.0% WACC
$million	(low)		10.0% WACC (high)
DCF Enterprise Value (excluding surplus assets)		204.7		274.1
Surplus assets - see Section 3.3.6		5.9		5.9
DCF Enterprise Value (including surplus assets)		210.6		280.0

3.4.6 DCF valuation summary

Our assessment of the Enterprise Value of the Group using the DCF valuation approach supports our primary valuation approach as the value outcome under the DCF approach in the range of $210.6 million to $280.0 million is broadly consistent with the values assessed under the capitalisation of maintainable earnings approach of $246.5 million to $286.6 million.

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3.4.7 Net tangible business assets

We have undertaken a reconciliation of our assessed Enterprise Value (including the surplus assets of $5.9 million being held for sale) with the net tangible business assets of the Group as at 28 February 2017.

We have calculated the net tangible business assets of the Group to be $250.1 million at 28 February 2017 as set out in the following table:

Table 16 - Net tangible business assets at 28 February 2017

	$’000
Net liabilities at 28 February 2017		(359,853	)
Add:
Loans and borrowings (current)		120
Loans and borrowings (non-current)		753,584
Less:
Goodwill		(100,535	)
Other intangibles		(43,190	)
Net tangible business assets		250,126

Source: 2017 Financial Statements - Feb v1 BL

For the purposes of calculating the net tangible business assets, we have adopted the book values of all business assets and liabilities of the Group (excluding debt and intangible asset balances). We have assumed that there was no material difference between the book values of assets and liabilities and their respective fair market values.

The net tangible business assets of the Group of $250.1 million is within the range of the values assessed under the capitalisation of maintainable earnings approach of $246.5 million to $286.6 million.

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4 Solvency review

We have been asked to determine the solvency of the Group following the implementation of the Schemes.

4.1 Summary

In our opinion the Group will be solvent after the implementation of the Schemes.

4.1.1 Qualification of opinion

As at the date of this report, the Group has not paid accrued interest of approximately $19.7 million on the Secured Notes and Unsecured Notes, which was due on 1 April 2017. It is proposed under the terms of the Recapitalisation Transactions that this interest be deferred in the case of the Secured Notes and equitized in the case of the Unsecured Notes. The Group has obtained agreement to the non-payment from a majority of the holders of each of the Secured Notes and Unsecured Notes as a term of the RSA. The Scheme Companies obtained an order of the Supreme Court of NSW on 27 April 2017 pursuant to section 411(16) of the Act, restraining all further proceedings in any action or other civil proceeding against any or all of the Scheme Companies (whether or not such action or proceeding has already been commenced), except by leave of the Court and subject to such terms as the Court imposes.

If the payment of interest is required to be made in relation to some or all of the Secured Notes or Unsecured Notes, our opinion on the solvency of the Group is withdrawn.

4.2 Solvency approach

In determining solvency, the financial position of the Group as a whole has been examined to determine its ability to pay its debts as and when they fall due. The examination of the financial position has been undertaken having taken into account the definition of solvency under Section 95A of the Act and the common law principals described in Appendix J – Solvency definition and common law principals.

The conclusions have been reached after application of the following primary and secondary tests.

Cash flow test (primary test of solvency)

This involves the review of a company’s cash flows to determine if the company is able to pay its debts as and when they fall due. This is the primary test of solvency. In line with case law, we have focused our analysis on the 12 months’ post anticipated implementation of the Schemes, being the period 1 July 2017 to 30 June 2018.

Balance sheet review (indicative test)

This involves the review of a company’s statement of financial position to determine if the company’s assets exceed its liabilities.

Analysis of a company’s statement of financial position does not ordinarily by itself determine whether the company would be able to meet its debts as and when they became due. However, such an analysis does indicate by how much (if any) assets of a company exceed its liabilities, as well as the various types of assets and liabilities of the company. The statement of financial position can also be viewed as providing a running balance ’score card’ of an entity’s trading results for both past and current trading periods.

Profitability (indicative test)

This involves reviewing the historic and forecast statement of comprehensive income to determine the Group’s profitability.

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Other considerations

In forming conclusions regarding solvency, we have considered the following additional matters:

1. Drawn debt facilities, key terms and covenants.

2. Access to additional debt facilities and/or equity and/or other liquidity support.

3. The ability of the Group to refinance the outstanding secured debt facilities upon maturity.

4. The adequacy of the books and records of the Group.

4.3 Source data

The cash flow, balance sheet and profitability analyses have been based on the Group’s consolidated Budget Model, historical financial accounts and the Group’s pro-forma balance sheet as at 28 February 2017.

The Group’s Budget Model shows the Group’s base case forecast, as well as a downside and upside case. We have relied on the following outputs from the Budget Model in our analysis:

· actual results up to 31 December 2016

· forecast profit and loss results for FY17 to FY18

· the forecast indirect cash flow statement for FY17 and FY18.

For the purposes of our analysis, we have considered the base case and downside case scenarios only as the upside case is, in our opinion, optimistic and is not a reasonable basis on which to assess the Group’s solvency.

4.4 Key assumptions

We have adopted the following assumptions for our analysis:

· The Schemes are implemented on or before 1 July 2017 as proposed

· The Other Recapitalisation Transactions all occur

· Holders of the Secured Notes and the Unsecured Notes have their rights to be paid the cash coupon payments due on 1 April 2017 varied in accordance with the terms of the Recapitalisation Transactions (refer to Section 4.1.1 above).

4.5 Primary evidence of solvency: cash flow test

4.5.1 Overview

In considering the ability of the Group to meet its commitments as they fall due, we have analysed the consolidated cash flow forecast included in the Group’s Budget Model. The Budget Model includes:

· the Group’s FY17 budget (monthly) which was built using a bottom-up approach

· a high-level forecast of some balance sheet items including cash, working capital and debt finance

· management’s forecast capital expenditure estimates.

The Budget Model also includes the Group’s estimate of performance through to 31 December 2021 on a monthly basis. The forecasts for FY18 onwards are based on the FY17 budget and includes a number of growth and profitability improvement assumptions as discussed in Section 3.

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In our opinion, the FY17 forecast included in the Budget Model has been prepared on a reasonable basis, having regard to historical trends in the business. The Group reported EBITDA of $1.6 million in its FY16 Financial Report ($32.0 million excluding non-recurring items)⁴³ and has forecast a EBITDA loss of $8.5 million for FY17 (including non-recurring expenses of $48.6 million) resulting in a forecast adjusted EBITDA of $40.1 million. On an adjusted basis, the Group is forecasting an improvement in EBITDA of $8.0 million.

While there is significant uncertainty on the outlook for the mining sector globally, the profit and loss forecast for FY17 does not appear unreasonable taking into consideration:

· Year to date 28 February 2017, the Group is ahead of budget, with Gross Profit 41.4% ahead of budget and adjusted EBITDA of $2.1 million comparing favourably to budget of a loss of $4.5 million.

· As detailed in Section 3.3.1 there are indications that the year-on-year decline in exploration expenditure is slowing in Australia; one of the Group’s key markets.

· The Group has identified EBITDA improvement initiatives of c. $21.0 million which have been included in the forecast for FY17. While several of the initiatives are difficult to measure, optimisation of the organisation structure has already netted significant go-forward savings. Together with other measures, the cost and overhead savings achieved since the FY17 budget was approved in December 2016 largely bridge the gap between FY16 results and the FY17 forecast.

4.5.2 Significant cash flow items

In addition to the forecast EBITDA improvements, the Budget Model includes several material assumptions regarding the Group’s cash flows:

· no cash interest payments are made in FY17 or FY18, as it is assumed that the Group will elect to pay the first four post-restructure coupon payments on the Secured Notes in kind. The first cash interest payment on the Secured Notes is forecast to be made in June 2019.

· the Group is forecasting significant cash inflows from the realisation of slow moving and obsolete inventory. The net cash receipt in FY17 from movement in inventory is forecast to be $25.0 million. We have been provided with the Group’s internal reports which show that, as at February 2017, the Group is ahead of its FY17 stock reduction target. On the information provided, the cash benefit forecast from the sale of slow and obsolete inventory appears reasonable. However, it is likely that achieving the target will get progressively harder over FY17 as the more in-demand items are sold first.

· The Group has included $5.0 million from the sale of a property in Peru in January 2018. The timing of this sale is an estimate and subject to change.

· The Group has also included a $4.0 million receipt in February 2018, being funds held in a collateral account to secure an insurance policy. The collectability and timing of this receipt is unknown.

4.5.3 Findings

The forecast cash flow statement from the Group’s Budget Model for both the Base Case and Downside Case are shown below.

The base case forecast included in the Budget Model shows the Group will have sufficient cash and headroom available under the ABL to meet its obligations as and when they fall due through to 31 December 2018.

The downside case assumes a further decline in revenue and margins, and shows the Group’s liquidity position would be difficult to manage. Considering recent performance, the downside case appears conservative.

⁴³ The Adjusted EBITDA is determined by management and is not presented in accordance with accounting standards. Non-recurring items included recapitalisation costs, impairment, restructuring costs and employee and related costs.

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Table 17 - Base case indirect cash flow forecast

$’000	Q1FY17			Q2FY17			Q3FY17			Q4FY17			FY17 Total			Q1FY18			Q2FY18			Q3FY18			Q4FY18			FY18 Total
EBITDA		(19,038	)		6,052			794			3,700			(8,491	)		13,560			35,245			28,187			14,676			91,668
Change in net working capital		(35,802	)		4,229			9,076			39,785			17,289			(23,688	)		(17,743	)		1,181			50,654			10,403
Other non-cash items		(12,110	)		1,152			3,871			5,271			(1,816	)		(3,964	)		(2,293	)		3,707			3,707			1,158
Interest payments		(211	)		(211	)		(428	)		(371	)		(1,220	)		(196	)		(393	)		(331	)		(148	)		(1,068	)
Taxes paid		(1,679	)		(1,682	)		(11,179	)		(11,179	)		(25,719	)		(3,081	)		(4,283	)		(5,110	)		(13,245	)		(25,719	)
Cash from operations		(68,841	)		9,540			2,135			37,207			(19,958	)		(17,368	)		10,533			27,633			55,644			76,443
Capital expenditure		(4,295	)		(4,918	)		(10,155	)		(10,155	)		(29,523	)		(8,174	)		(8,174	)		(8,174	)		(8,174	)		(32,695	)
Financing cash flows
Draw-down of debt facilities		35,000			-			-			-			35,000			-			-			-			-			-
Repayment of debt facilities		-			(36,274	)		-			-			(36,274	)		-			-			-			-			-
Cash from financing		35,000			(36,274	)		-			-			(1,274	)		-			-			-			-			-
Opening cash		60,114												60,114															0
Opening ABL headroom		5,508												5,508															0
Opening available liquidity		65,622			27,486			35,834			27,814			65,622			54,866			29,325			31,684			51,144			54,866
Net cash flow		(38,136	)		(31,652	)		(8,020	)		27,052			(50,756	)		(25,542	)		2,359			19,460			47,471			43,748
Increase in ABL limit		-			40,000			-			-			40,000			-			-			-			-			-
Closing available liquidity		27,486			35,834			27,814			54,866			54,866			29,325			31,684			51,144			98,615			98,615

Observations

· The Group’s base case forecast shows that the Group will have positive liquidity (cash plus available headroom in the Upsized ABL) through to 31 December 2018, including the 12 month period immediately following implementation of the Schemes.

· However, total liquidity is forecast to fall below the Group’s minimum liquidity balance in July 2017. Liquidity is also forecast to be very tight in Q2 FY18. The Group’s cash flow cycles are largely driven by increasing receivables over the peak drilling periods.

Figure 3 - Base case monthly liquidity profile FY17-FY18

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Table 18 - Downside case indirect cash flow forecast

$’000	Q1FY17			Q2FY17			Q3FY17			Q4FY17			FY17 Total			Q1FY18			Q2FY18			Q3FY18			Q4FY18			FY18 Total
EBITDA		(20,194	)		(6,624	)		(4,076	)		(3,385	)		(34,280	)		9,280			14,501			11,735			6,251			41,767
Change in net working capital		(30,570	)		(633	)		10,393			48,868			28,058			(22,045	)		(14,334	)		5,074			57,682			26,377
Other non-cash items		(12,110	)		1,152			3,871			5,271			(1,816	)		(3,964	)		(2,293	)		3,707			3,707			1,158
Interest payments		(211	)		(211	)		(596	)		(546	)		(1,563	)		(299	)		(599	)		(669	)		(596	)		(2,163	)
Taxes paid		(1,679	)		(1,682	)		(11,179	)		(11,179	)		(25,719	)		(3,081	)		(4,283	)		(5,110	)		(13,245	)		(25,719	)
Cash from operations		(64,765	)		(7,999	)		(1,587	)		39,030			(35,321	)		(20,108	)		(7,009	)		14,738			53,799			41,420
Capital expenditure		(6,675	)		(7,050	)		(6,675	)		(6,675	)		(27,075	)		(7,196	)		(7,196	)		(7,196	)		(7,196	)		(28,784	)
Financing cash flows
Draw -down of debt facilities		35,000			-			-			-			35,000			-			-			-			-			-
Repayment of debt facilities		-			(36,274	)		-			-			(36,274	)		-			-			-			-			-
Cash from financing		35,000			(36,274	)		-			-			(1,274	)		-			-			-			-			-
Opening cash		60,114												60,114															0
Opening ABL headroom		5,508												5,508															0
Opening available liquidity		65,622			29,183			17,860			9,597			65,622			41,952			14,648			443			7,985			41,952
Net cash flow		(36,439	)		(51,323	)		(8,262	)		32,355			(63,670	)		(27,304	)		(14,205	)		7,542			46,603			12,636
Increase in ABL limit		-			40,000			-			-			40,000			-			-			-			-			-
Closing available liquidity		29,183			17,860			9,597			41,952			41,952			14,648			443			7,985			54,588			54,588

Observations

· The downside case included in the Group’s Budget Model assumes substantially lower earnings ($25.8 million in FY17 and $49.9 million in FY18) than the base case. This is driven by lower revenues and lower gross profit margins in both the Drilling Services business and Products business. The gross margin in the downside case is 12.5% in FY17 and 12.3% in FY18 compared to FY16 actual reported results of 13.4%.

· As shown in Figure 4, in the downside case, Group liquidity declines substantially from February in each year, reaching a low point in July and August, because of the build-up of working capital through the peak drilling periods.

· The downside case shows the Group would need substantial additional liquidity funding in the order of $25.0 million to fund operations.

Figure 4 - Downside case monthly liquidity profile FY17-FY18

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4.5.4 Conclusion

The downside case shows that further liquidity support would be required to provide sufficient headroom to fund the Group. However, the downside case appears conservative given FY16 results and YTD performance against budget. Accordingly, we have adopted the Group’s base case forecast which shows it will continue to maintain an available liquidity balance throughout FY17 and FY18, including the 12-month period immediately following the implementation of the Schemes.

The scope of our engagement has not allowed us time to undertake a detailed review and interrogation of the Group’s cash flow forecast. Accordingly, while the Group’s base case forecast shows it to have an available liquidity balance of not less than $23.0 million over the course of FY17 and FY18, we note that the ability of the Group to meet its debts as and when they fall due, and remain solvent, is very much tied to its ability to:

· Achieve the EBITDA forecast.

· Realise its surplus and obsolete stock in line with its forecast, which will likely prove more challenging as faster moving items are sold first.

· Realise the estimated net proceeds from the sale of the Peru land as well as obtain the $4.0 million of collateral currently securing the insurance policy (together totalling $9.0 million).

· Manage the collection of its debts across the global operation and not suffer any deterioration in terms (which has from time to time been unilaterally imposed on suppliers by major mining houses).

· Manage the payment of its trade suppliers month-to-month to match its liquidity position.

· Fund the capital expenditure required to sustain the existing drilling fleet in line with forecast.

· Manage unexpected material interruptions to its business owing to weather, adverse movements in underlying commodity prices or other unforeseen events.

Any material adverse outcome in relation to the Canadian tax dispute detailed in section 3.2 that would require payment to be made prior to 30 June 2018 or shortly thereafter, would impact upon the Group’s solvency.

From discussions with the Group’s management, we note that they are of the opinion that the base case forecast is conservative taking into account performance for the two months ended 28 February 2017 as well as the Group outperforming budget in Q4 of FY16.

The Group is also of the view that post-restructure, it will be in a better position to manage its working capital including obtaining more favourable trade terms from its suppliers.

4.6 Indicative test: balance sheet review

Another method by which to assess solvency is to consider the net asset or liability position of an entity. This test is only to be viewed as indicative of solvency as it represents the position of a company at a point in time, and doesn’t take into account the future profitability or cash flows available to service debt obligations.

We have used the Group’s balance sheet as at 28 February 2017 to consider if assets exceed liabilities immediately post-implementation of the Schemes. We have adjusted the balance sheet with pro-forma adjustment to reflect the outcome of the Schemes. The pro-forma adjustments are indicative only.

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Table 19 - Pro forma post-restructure balance sheet as at 28 February 2017

							Post-
	Pre-restructure44			Adjustments			restructure
	$’000			$’000			$’000
Current assets
Cash		47,846						47,846
Receivables		122,220						122,220
Inventory		170,339						170,339
Other current assets		18,370						18,370
Assets held for sale		5,923						5,923
Total current assets		364,698			-			364,698
Property, plant and equipment		123,922			-			123,922
Goodwill		100,535			-			100,535
Intellectual property		43,190			-			43,190
Other non-current assets		50,440			-			50,440
Total assets		682,785			-			682,785
Current liabilities45		222,970			-			222,970
Non-current liabilities
Unsecured Notes		292,118			(292,118	)		-
Subordinated Notes (including accrued interest)		-			88,209			88,209
10% Notes (including accrued interest)		202,963			617			203,580
TLA (including accrued interest)		112,252			(370	)		111,882
TLB (including accrued interest)		135,714			(445	)		135,268
DDL		20,000			(20,000	)		-
ABL/Upsized ABL		16,500			20,000			36,500
Issuance costs		(5,506	)		-			(5,506	)
Finance lease liabilities		635			-			635
Other borrowings and costs		(120	)		-			(120	)
Total borrowings
Deferred tax liabilities		19,646			-			19,646
Provisions		25,466			-			25,466
Total non-current liabilities		798,696			(204,107	)		594,589
Total liabilities		1,042,638			(204,107	)		838,531
Net assets/(liabilities)		(359,853	)		204,107			(155,746	)

Liquidity and net asset position

As at 28 February 2017, the Group had a current ratio of 1.5. Although not illiquid, given much of the current asset value was held as inventory ($170.3 million), the Group’s short-term asset position is indicative of liquidity concerns.

Despite the Unsecured Note debt being cancelled as part of the restructure, the Group’s post restructure pro-forma balance sheet shows a net liability position of $155.7 million.

⁴⁴ The pre-restructure debt balances shown have been taken from the Group’s balance sheet and do not include accrued interest on the debts through to 28 February 2017. Accrued but unpaid interest (including PIK) is included in current liabilities.

⁴⁵ Current liabilities have been reduced for accrued but unpaid interest which has been included in the balances non-current Finance Facilities.

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The Group will likely fully draw the Interim Facility of $15.0 million prior to implementation of the proposed restructure. It is proposed that the DDL and Interim Facility will be repaid from a refinance of the ABL (via the Upsized ABL), with funding increasing from $35.0 million to $75.0 million. However, only the fully drawn DDL has been included in the post-restructure of the ABL shown in the table, as the Interim Facility had not been drawn as at 28 February 2017.

If the Schemes are implemented, the Group will continue to carry a significant debt load with the pro-forma net debt at 28 February 2017 being greater than 10.0 times FY17 forecast adjusted EBITDA.

Notwithstanding the above, we are of the opinion that the Group will be solvent immediately after the Schemes are implemented due to the forecast liquidity position detailed in Section 4.5, and the extended maturity dates of the debt facilities providing the Group time to improve earnings or further restructure its balance sheet.

4.7 Indicative test: profit and loss

Profitability is only an indicative test of solvency as it does not take into account:

· The resulting cash flow arising from profitable trading.

· The impact of accounting policies, including depreciation.

· Ongoing investment required to maintain profitable operations.

· The liability position which needs to be serviced from profits.

4.7.1 Profit and loss forecast

The Group’s Budget Model includes a profit and loss forecast for FY17 through to FY21 for earnings before interest and tax (EBIT).

Table 20 - Base case profit and loss FY17-FY21

$’000	FY17			FY18			FY19			FY20			FY21
Revenue
Total revenue		681,909.0			750,000.0			830,000.0			890,000.0			940,000.0
Total cost of sales		(573,349.2	)		(613,250.0	)		(651,840.0	)		(676,200.0	)		(689,800.0	)
Total gross profit		108,559.8			136,750.0			178,160.0			213,800.0			250,200.0
Gross margin		16	%		18	%		21	%		24	%		27	%
Overhead expenses		(117,051.3	)		(45,081.7	)		(49,445.4	)		(49,339.5	)		(48,812.8	)
EBITDA		(8,491.5	)		91,668.3			128,714.6			164,460.5			201,387.2
Depreciation and amortisation		(61,923.6	)		(66,829.6	)		(66,037.5	)		(49,058.0	)		(49,058.0	)
EBIT		(70,415.1	)		24,838.7			62,677.1			115,402.5			152,329.2
Adjusted EBITDA
Restructuring costs		48,573.0			(4,000.0	)		-			-			-
Adjusted EBITDA		40,081.5			87,668.3			128,714.6			164,460.5			201,387.2
Adj. EBITDA margin		5.9	%		11.7	%		15.5	%		18.5	%		21.4	%

Table 21 - Downside case profit and loss forecast FY17-FY21

$’000	FY17			FY18			FY19			FY20			FY21
Revenue
Total revenue		650,000.0			685,000.0			715,000.0			750,000.0			750,000.0
Total cost of sales		(568,693.8	)		(600,784.3	)		(626,950.0	)		(659,450.0	)		(659,450.0	)
Total gross profit		81,306.2			84,215.7			88,050.0			90,550.0			90,550.0
Gross margin		13	%		12	%		12	%		12	%		12	%
Overhead expenses		(115,585.9	)		(42,448.3	)		(47,082.6	)		(46,410.1	)		(45,793.0	)
EBITDA		(34,279.7	)		41,767.4			40,967.4			44,139.9			44,757.0
Depreciation and amortisation		(61,923.6	)		(66,829.6	)		(66,037.5	)		(49,058.0	)		(49,058.0	)
EBIT		(96,203.3	)		(25,062.2	)		(25,070.1	)		(4,918.1	)		(4,301.0	)
Adjusted EBITDA
Restructuring costs		48,573.0			(4,000.0	)		-			-			-
Adjusted EBITDA		14,293.3			37,767.4			40,967.4			44,139.9			44,757.0
Adj. EBITDA margin		2.2	%		5.5	%		5.7	%		5.9	%		6.0	%

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The Group has forecast positive EBITDA in FY17 in both the base case and downside cases (after adjusting for restructuring costs). The outlook for FY17-FY21 shows:

· In the base case, the Group is forecasting a material increase in revenue and margin growth, with EBITDA (adjusted) increasing from $40.1 million in FY17 to $201.4 million in FY21.

· the downside case forecast assumes lower revenue growth rates and tighter gross margins over the forecast period compared to the base case, with EBITDA increasing from $14.3 million in FY17 to $44.8 million in FY21.

We have calculated notional NPAT for the Group using the base case forecast and have adopted forecast cash tax payments as a proxy for forecast tax expense.

Table 22 - Notional NPAT FY17-FY21

$’000	FY17			FY18			FY19			FY20			FY21
EBIT		(70,415.1	)		24,838.7			62,677.1			115,402.5			152,329.2
Cash taxes		(25,719.0	)		(25,719.4	)		(20,000.0	)		(20,000.0	)		(20,000.0	)
Cash interest		(1,220.5	)		(1,067.5	)		(25,460.1	)		(25,078.4	)		(25,070.8	)
PIK interest		(52,462.7	)		(55,286.5	)		(26,968.3	)		(29,210.6	)		(31,474.3	)
NPAT		(149,817.3	)		(57,234.7	)		(9,751.3	)		41,113.5			75,784.1

Using the base case forecast, the Group is forecast to record a cumulative loss after tax of $99.9 million for FY17 through FY21 which will increase the net liability position of the Group (before any impairment writebacks or other adjustments).

Based on the Group’s base case forecast, it is highly unlikely that it would be able to repay its debts from cash at the end of the forecast period (FY21) and refinancing will be entirely dependent upon a substantial increase in earnings. However, if the Group does perform in line with its base case forecast, then there may be justification to write-back some of the impaired value of assets (other than goodwill) which would improve the net asset position. Further, if the business performs in line with forecast, the enterprise value of the Group may likely exceed its debt balance at the end of the forecast period.

4.8 Other solvency considerations

4.8.1 Covenants

We have been provided with a summary document of the Group’s covenants. The Group’s covenants are not performance related and, as such, no forecast covenant testing has been included in the Budget Model. The covenants relate to maintaining certain asset values within the various obligor groups, debt limits and other non-performance related items.

4.8.2 Adequacy of books and records

Section 286(1) of the Act requires a company to keep books and records recording its financial position. This section provides:

A company, registered scheme or disclosing entity must keep written financial records that:

a. Correctly record and explain transaction and financial position and performance

b. Would enable true and fair financial statements to be prepared and audited.

The obligation to keep financial records of transactions extends to transactions undertaken as trustee.

Section 588E(4)(a) of the Act states that in the event of recovery proceedings, a failure by the company to comply with section 286(1) carries a presumption that the company was insolvent for the relevant period.

This report was produced from records made available by the Group. Furthermore, the Group is audited by Deloitte and the audit report does not note any deficiency in the Group’s records. Therefore, there are no grounds for presumption of insolvency pursuant to section 588E(4)(a).

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4.9 Conclusion on solvency

In our opinion, the Group will be solvent after implementation of the Schemes. However, the Group’s ability to continue as a going concern is highly reliant on its ability to closely manage its working capital, the realisation of excess inventory in line with or better than forecast and there being no adverse external impacts on the business.

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5 Comparison of outcomes for Beneficiaries under the Schemes versus a winding up

We have been asked to determine:

1. the Implied Value of the interests of the Beneficiaries in the Scheme Companies if the Schemes were to be put into effect as proposed

2. the expected dividend to the Beneficiaries from the Scheme Companies if the Scheme Companies were to be wound-up within six months of the hearing of the application for an order under section 411(1) and 411(1A) of the Act.

Given ListCo is a Scheme Company and also the ultimate holding company of the Group, our analysis of the Implied Value and expected dividend has been calculated based on the Enterprise Value of the Group as determined in Section 3.

5.1 Findings

The Implied Value of the interests of Beneficiaries under the Schemes (assuming all the Recapitalisation Transaction have been completed), and expected dividend on the basis the Scheme Companies were wound up, are detailed in below.

Table 23 - Summary of Beneficiary outcomes

			Schemes				Liquidation
	Scheme claim as at						Return to
	28 February 2017		Implied Value		Implied Value		creditor		Return
Beneficiary	$’000		$’000		(cents in $)		$’000		(cents in $)
Secured Scheme Creditors
Secured Notes		203,580.0		124,195.6		61.0		44,889.5		22.1
TLB46		105,000.0		67,534.4		64.3		37,220.1		35.4
TLA47		85,000.0		40,154.0		47.2		27,734.3		32.6
Unsecured Scheme Creditors
Subordinated Notes		88,209.0		Nil		Nil		N/A		N/A
Unsecured Notes		292,117.7		N/A		N/A		Nil		Nil

There is no Implied Value or expected dividend attributable to Subordinate Claims either under the Schemes or in a liquidation scenario, noting that we are not aware of any such claims having been made against ListCo.

We note it is possible to trade Secured Notes and Unsecured Notes in the secondary debt market. The current quoted prices, which we understand to be based on trade activity, broker dealer quotes, and valuation models, is 70 cents in the dollar for Secured Notes and 10 cents in the dollar for Unsecured Notes.

5.2 Implied Value if the Schemes are implemented

As detailed in Section 3, we have assessed the Enterprise Value of the Group to be in the range $246.5 million to $286.6 million. We have adopted a mid-point of $266.6 million for the purposes of determining the Implied Value of the interests of Beneficiaries (‘the Transaction Value’).

⁴⁶ We are instructed that the accrued PIK interest on TLA and TLB does not form part of the secured claim amount against the relevant obligors. As such, the accrued PIK interest has not been included in our workings.

⁴⁷ Ibid

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Table 24 - Transaction Value

Item	Value S’million
Enterprise value high		286.6
Enterprise value low		246.5
Mid-point		266.6

As noted in Section 2.4.4, the DDL and Interim Facility are to be repaid on implementation of the Schemes. Accordingly, the analysis of the Implied Value on the basis the Schemes are implemented assumes the Upsized ABL has been affected, to a total value equivalent to the drawn balance of the existing ABL, DDL and Interim Facility.

The Transaction Value is less than the outstanding secured debts owing under the Upsized ABL, Secured Notes, TLA and TLB (‘the Secured Lenders’), which is estimated to total $445.1 million⁴⁸ (excluding accreted PIK interest on TLA and TLB) at scheme implementation (‘the Secured Debts’). The outstanding debt as at 28 February 2017 has been calculated using the interest which will apply upon implementation of the Schemes (as agreed in the Restructuring Support Agreement).

The security provided by the Group in relation to the Secured Debts is complex, and there is no individual Secured Lender who has first ranking security over all assets. There are a number of separate guarantee groups and underlying security packages, with each Secured Lender having guarantees from specific groups of companies, plus differing priorities in respect of different asset types (split generally between working capital assets and other assets). Accordingly, any sale of the Group’s business and assets which did not result in repayment of all the Secured Debts would require allocating proceeds between Secured Lenders on a basis agreed between the Secured Lenders. It is likely the allocation would be contentious and subject to considerable analysis and expert review.

We have made a number of assumptions in order to allocate the Transaction Value between the Secured Lenders. These assumptions are set out in the following sections.

5.2.1 Allocation of transaction value

We have adopted the following approach to allocate the Transaction Value:

Step one

The net book value of balance sheet assets and liabilities was allocated between the obligor groups, being the ABL Obligors, Other Obligors, IP Obligor, and the Non-Obligors, with reference to the balance sheet of each of the companies which comprise each obligor group.

We have determined underlying net asset and liability values on the following basis:

· Net book values have been taken from the Group’s consolidation workings for FY16, which includes trial balances for each entity as at 31 December 2016

· Consolidation adjustments have been allocated to each asset on a proportional value-weighted basis across all Group entities.

Step two

The book value was allocated between working capital assets and non-working capital assets, as is required to effect the priorities agreed between the Secured Lenders. In this regard, certain assets and liabilities were excluded from these calculations, as detailed in Appendix K.

⁴⁸ The Upsized ABL balance includes the current balances of the existing ABL balance as at 28 February 2017 of $16.5 million, the DDL balance as at 28 February 2017 of $20.0 million and the Interim Facility on a fully-drawn basis of $15.0 million.

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Step three

The Transaction Value was allocated between the ABL Obligors, IP Obligor and Other Obligors as follows:

· Net working capital (excluding cash) was ascribed full net book value, from which accrued employee liabilities (current and non-current) were deducted. In relation to the assumption that employee entitlements would be offset against working capital, we note:

– It is usually not possible to sell a business as a going concern without adjusting for accrued entitlements, and it is more likely these will be a deduction from working capital balances rather than fixed assets.

– The Secured Lenders have a lien over the working capital assets only and do not have any direct ownership of the working capital assets.

· To the extent there was remaining Transaction Value, it was assumed to represent, on a pro rata basis, the value of property, plant and equipment and intellectual property.

· To the extent there was remaining Transaction Value, it was then assumed to represent consideration for goodwill.⁴⁹

For the purposes of the analysis, no value was apportioned to the Non-obligors. In our view:

· The Non-obligors, being non-key trading entities, are unlikely to be valued on the same basis as the key trading entities, and therefore a proportional allocation of consideration would be misleading

· The sale of these entities at a Group level would be by way of a share sale, and hence the ultimate value of the shares would be attributable to obligor entities, either by way of repayment of intercompany loans or by equity distributions into obligor companies.

Step four

The priorities pursuant to the security agreements were applied to determine the return to each of the Secured Lenders. For the purposes of our analysis, we are instructed that the security priorities are as set out in Table 25.

Table 25 - Security and priority structure

Debt obligation	Working capital assets – ABL Obligors	Working capital assets – Other Obligors	IP assets IP Obligor	Other assets – ABL Obligors	Other assets – Other Obligors
Upsized ABL	First ranking	N/A	N/A	Third ranking	N/A
Secured Notes	Third ranking	Second ranking	(Second ranking)50	First ranking	First ranking
Term Loan B	Third ranking	Second ranking	(First ranking)51	First ranking	First ranking
Term Loan A	Second ranking	First ranking	(First ranking)52	Second ranking	Second ranking
Subordinated Notes	Unsecured

⁴⁹ Goodwill is recorded on the balance sheets of the US and Canadian operating entities, both of which are ABL Obligors. Note 18 of the December 2016 Financial Statements notes the impairment test recoverable value of this goodwill exceeds the carrying value.

⁵⁰ BLY IP Inc will grant a junior unsecured guarantee to Secured Notes if the Schemes are approved. It will rank junior to the TLA/TLB guarantee.

⁵¹ BLY IP Inc has provided an unsecured guarantee to TLA and TLB. BLY IP Inc has no other creditors and hence this security, albeit unsecured, is effectively first ranking.

⁵² Ibid

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5.2.2 Value of assets

From the records provided to us, we have determined the value of net working capital and other assets as between the obligor groups is as summarised below.

Table 26 – Net book value of assets adopted for apportionment of Transaction Value

	ABL Obligors			Other Obligors			IP Obligor		Non-Obligors			Total
Asset	$’000			$’000			$’00		$’000			$’000
Net working capital
Cash		-			-			-		-			-
Trade receivables		50,313.6			14,794.7			-		27,834.4			92,942.6
Inventory		64,589.7			49,263.0			-		51,167.5			165,020.2
Less: Trade payables		(47,048.6	)		(19,672.0	)		-		(33,503.7	)		(100,224.3	)
Less: Employee provisions		(33,165.7	)		(7,047.4	)		-		(17,716.6	)		(57,929.7	)
Net working capital		34,688.9			37,338.2			-		27,781.6			99,808.8
Other assets
Property, plant and equipment		61,492.2			27,614.0			-		38,557.5			127,663.8
Intellectual property		36,244.0			1,214.9			6,294.2		167.2			43,920.3
Goodwill		100,035.8			-			-		-			100,035.8
Total other assets		197,772.1			28,829.0			6,294.2		38,724.7			271,619.9
Total assets		232,461.0			66,167.2			6,294.2		66,506.3			371,428.7

The Group’s management has advised that while the net book value of the IP assets held within the IP Obligor entity (BLY IP, Inc.) is $6.3 million, it has obtained an independent third party appraisal of the value of the IP which has valued the assets at $44.0 million.

We have adopted net book value for property, plant and equipment and intellectual property assets (which in some cases includes impairments) as the Group does not have (except as noted above) independent appraisals for these assets. To do otherwise would apply an inconsistent approach in allocating value between the various asset groups.

A reconciliation between this table and the Consolidated Statement of Financial Position is included at Appendix K together with reasons for the exclusion of some items from our calculations.

5.2.3 Apportionment of value

The allocation of the Transaction Value between the securities and obligor groups is shown in Table 27.

Table 27 – Apportionment of Transaction Value to obligor groups

$’000	ABL Obligors		Other Obligors		IP Obligor		Total
Enterprise Value								260,650.0
Add: assets held for sale								5,923.0
Transaction Value								266,573.0
Apportionment
Net working capital		34,688.9		37,338.2		-		72,027.2
Other assets (PPE,IP)		97,736.3		28,829.0		6,294.2		132,859.4
Goodwill		61,686.5		-		-		61,686.5
Total allocated		194,111.7		66,167.2		6,294.2		266,573.0

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5.2.4 Implied Value attributable to Secured Lenders

Based on the allocation of the Transaction Value to the various obligor groups, we have allocated value between the Secured Lenders per the priorities detailed in Table 25, as detailed in the table below.

Table 28 – Allocation of Transaction Value to Secured Lenders⁵³

Debt ($’000)	Debt as at 28 Feb 17		WC ABL Obligors		WC Other Obligors		IP Obligor		Other assets ABL Obligors		Other assets Other Obligors		Total Implied Value		Implied Value (cents in $)
Upsized ABL		51,500.0		34,688.9		-		-		-		-		34,688.9		67.4
Secured Notes		203,580.0		-		-		-		105,176.2		19,019.4		124,195.6		61.0
TLB		105,000.0		-		-		3,478.3		54,246.5		9,809.6		67,534.4		64.3
TLA		85,000.0		-		37,338.2		2,815.8		-		-		40,154.0		47.2
Subordinated Notes		88,209.0		-		-		-		-		-		-		-
Total		533,289.0		34,688.9		37,338.2		6,294.2		159,422.7		28,829.0		266,573.0

5.3 Estimated dividend to Beneficiaries if Scheme Companies wound up

In our collective experience, the returns from complex, multi-jurisdictional insolvency are highly uncertain owing to several factors, including:

· insolvency laws across jurisdictions vary greatly

· enforceability of security is often difficult in under-developed and developing countries

· priority structures differ greatly across jurisdictions as does the enforceability of debts and claims

· the value of assets is not readily determinable in smaller, less established markets

· insolvency processes are often expensive, litigious and time consuming processes, often involving court oversight.

In our opinion, if the Group was to be placed into an insolvency process, there are two primary ways in which the assets of the Group could be realised for Beneficiaries:

1. in an orderly and coordinated process, with the appointment of external controllers made only to a limited number of key entities in the Group, leaving much of the Group’s operations outside of the formal insolvency process, or

2. in an uncontrolled manner, whereby most if not all Group entities fall into insolvency proceedings in their respective jurisdictions.

For the purposes of determining the expected dividend to the Beneficiaries from the Scheme Companies if the Scheme Companies were to be wound-up, we have assumed a controlled insolvency process could be achieved, by way of a limited insolvency.

In our view, an uncontrolled insolvency process would result in lower realisations and hence a lower expected dividend to Beneficiaries than in a controlled insolvency scenario.

⁵³ Debt due to the Upsized ABL is the drawn balance of the ABL as at 28 February 2017, being $16.5 million, plus the $20.0 million drawn on the DDL, plus the $15.0 million to be drawn on the Interim Facility. Debt balances include post-restructure adjustments.

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The comments made in Section 5.2 regarding the complexity of securities continues to apply in a liquidation scenario. However, if the Schemes were not implemented:

· the Upsized ABL will not come into effect

· the ABL, DDL and Interim Facility will remain in place

· the ABL debt would increase relative to the ABL debt under a Scheme scenario, as guarantee documents drawn against the ABL of $11.9 million are more likely to be called upon by the beneficiaries when an insolvency event occurs

· the full value of the Unsecured Notes would remain, as the conversion to equity of some of the Unsecured Notes would not have occurred

· the claims by lenders would include interest accrued at pre-RSA interest rates

· the priority structures which were put in place for the DDL and Interim Facility will remain. The priorities as between lenders will be as set out in Table 29.

Table 29 – Security and priority structure in liquidation scenario

Debt obligation	Working capital assets – ABL Obligors	Working capital assets – Other Obligors	Certain drill rig assets – DLL Obligors	IP assets – IP Obligor	Other assets – ABL Obligors	Other assets – Other Obligors
ABL (existing)	First ranking	N/A	N/A	N/A	Fourth ranking	N/A
Interim facility	Second ranking	N/A	N/A	N/A	Third ranking	N/A
DDL	N/A	N/A	First Ranking	First ranking	N/A	N/A
Secured Notes	Fourth ranking	Second ranking	N/A	N/A	First ranking	First ranking
Term Loan B	Fourth ranking	Second ranking	(Second ranking)54	(Second ranking)55	First ranking	First ranking
Term Loan A	Third ranking	First ranking	(Second ranking)56	(Second ranking)57	Second ranking	Second ranking
Unsecured Notes	Unsecured

5.3.1 Value of the Group in limited insolvency scenario

We have assumed that the Group would be valued at a lower multiple in a controlled insolvency. Accordingly, we have (based on our experience of liquidation scenarios) adopted an earnings multiple of 4 times FY17 EBITDA, being a lower multiple than that value adopted in Section 3. We have also excluded the value of assets classified as held for sale, as a buyer would be unlikely to attach any additional value to those assets in a distressed sale scenario.

We have assumed that the limited insolvency would extend to key operating and holding entities in each of Australia, the United States of America and Canada, all of which guarantee the ABL facility. In placing these entities into an insolvency or a court supervised restructuring process, we have assumed that a portion (50%) of trade and other liabilities would be avoided or compromised, resulting in increased value to the ABL security holders.

⁵⁴ The assets which secure the DDL are held in entities that have no other guarantor obligations. The DDL Obligors have provided an unsecured guarantee in respect to the TLA and TLB debts.

⁵⁵ Ibid

⁵⁶ Ibid

⁵⁷ Ibid

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The Transaction Value (limited insolvency) is $153.9 million as detailed below:

Table 30 – Transaction Value (limited insolvency)

Item	Value $’000
Enterprise value		160,400.0
Assets classified as available for sale		-
Add: creditor claims not paid in limited insolvency		23,524.3
Less: realisation costs58		(30,000.0	)
Transaction Value (limited insolvency)		153,924.3

5.3.2 Allocation of Transaction Value (limited insolvency)

In allocating the Transaction Value (limited insolvency) between asset types, we have followed the steps set out in Section 5.2.1, and used the asset values in Section 5.2.2, except that:

· we have assumed a purchaser would only pay 80% of the book value for accounts receivable, due to the risk that some customers may seek to withhold payment or make other claims such that the full book value could not be realised

· we have assumed a purchaser would only pay 70% of the book value for inventory, due to the risk that some inventory may not be realised at book value.

Realisation costs have been applied proportionately to realisations.

5.3.3 Apportionment of value

Based on the assumptions detailed above, Transaction Value (limited insolvency) is applied to the obligor groups as set out in Table 31.

Table 31 – Apportionment of Transaction Value (limited insolvency) to obligor groups

$’000	DDL Obligors			ABL Obligors			Other Obligors			IP Obligor			Total
Enterprise Value														160,400.0
Add: assets held for sale														-
Add: creditors claims not paid in insolvency														23,524.3
Less: realisation costs														(30,000.0	)
Transaction Value														153,924.3
Apportionment to working capital assets
Net working capital		-			5,249.3			19,600.4			-			24,849.7
Add: creditors claims not paid in insolvency		-			23,524.3			-			-			23,524.3
Less: realisation costs		-			(4,693.3	)		(3,197.0	)		-			(7,890.3	)
Net realisations		-			24,080.4			16,403.4			-			40,483.7
Apportionment to non-working capital assets
DDL security		48,038.1			-			-			-			48,038.1
Other assets (PPE.IP)		-			57,829.1			23,558.6			6,124.4			87,512.1
Goodwill		-			-			-			-			-
Subtotal		48,038.1			57,829.1			23,558.6			6,124.4			135,550.3
Less: realisation costs		(7,835.5	)		(9,432.5	)		(3,842.7	)		(999.0	)		(22,109.7	)
Net realisations		40,202.6			48,396.5			19,716.0			5,125.5			113,440.6
Total net realisations		40,202.6			72,476.9			36,119.3			5,125.5			153,924.3

⁵⁸ Realisation costs include insolvency professionals, legal counsel, valuation firms, investment banks and other professional costs.

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5.3.4 Estimated dividend attributable to financiers

Based on the allocation of the Transaction Value (limited insolvency) to the various obligor groups, we have allocated value between the financiers per the priorities detailed in Table 26, as detailed in the table below.

Table 32 – Estimated dividend to financiers in a limited insolvency

Debt ($’000)	Debt as at 28 Feb 17		DDL Obligors		WC ABL Obligors		WC Other Obligors		IP Obligor		Other assets ABL Obligors		Other assets Other Obligors		Total return		Return (cents in $)
ABL		28,371.6		-		24,080.4		-		-		-		-		24,080.4		84.9
Interim Facility		15,000.0		-		-		-		-		-		-		-		-
DDL		20,000.0		17,738.5		-		-		2,261.5		-		-		20,000.0		100.0
Secured Notes		202,962.5		-		-		-		-		31,895.7		12,993.8		44,889.5		22.1
TLB		105,000.0		12,414.4		-		-		1,582.7		16,500.8		6,722.2		37,220.1		35.4
TLA		85,000.0		10,049.7		-		16,403.4		1,281.3		-		-		27,734.3		32.6
Unsecured Notes		292,117.7		-		-		-		-		-		-		-		-
Total		748,451.8		40,202.6		24,080.4		16,403.4		5,125.5		48,396.5		19,716.0		153,924.3

There would be nil return to Subordinate Claims.

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6 Outcome if Schemes are not implemented

We have been instructed to assess the likely outcome for the Group should the Schemes not be implemented:

1. having regard to the Scheme Companies’ existing financial position, and projections, and

2. for the purposes of considering this matter only, assuming that there is no standstill in place in respect of the interest payments due to the Secured Scheme Creditors and the Unsecured Scheme Creditors on 1 April 2017.

Our analysis considers:

1. The solvency of the Group assuming all current debt obligations remain unchanged

2. The longer-term outlook for the business, including its ability to refinance its debts as and when they fall due, including the Secured Notes which mature in October 2018.

6.1 Solvency of the Group

We have used the base case forecast contained within the Budget Model to assess the Group’s solvency, adjusted as follows:

· Cash interest payments on the Secured Notes and Unsecured Notes have been reinstated from April 2017, resulting in a cash outlay of $19.7 million in April and October each year.

· The PIK interest rate for the TLA and TLB facilities has been re-instated at 12.0% p.a.

· The repayment date for the Secured Notes is assumed to be the existing date of October 2018.

Assuming the above, the base case scenario shows that:

· Group liquidity will decrease considerable in Q2 FY17 to $5.9 million in April 2017, which is below the liquidity headroom of $25.0 million required by the Group, and all cash and liquidity headroom would be fully exhausted by July 2017.

· The available Finance Facilities (assuming the Interim Facility is drawn but no additional facilities are available to the Group) will be insufficient to meet the Group’s cash flow requirements by the end of April 2017.

Table 33 - Status quo base case cash flow forecast

$’000	Q1FY17			Q2FY17			Q3FY17			Q4FY17			FY17 Total			Q1FY18			Q2FY18			Q3FY18			Q4FY18			FY18 Total
EBITDA		(19,038	)		6,052			794			3,700			(8,491	)		13,560			35,245			28,187			14,676			91,668
Change in net working capital		(35,802	)		4,229			9,076			39,785			17,289			(23,688	)		(17,743	)		1,181			50,654			10,403
Other non-cash items		(12,110	)		1,152			3,871			5,271			(1,816	)		(3,964	)		(2,293	)		3,707			3,707			1,158
Interest payments		(378	)		(20,401	)		(726	)		(20,442	)		(41,947	)		(690	)		(20,453	)		(763	)		(20,453	)		(42,359	)
Taxes paid		(1,679	)		(1,682	)		(11,179	)		(11,179	)		(25,719	)		(3,081	)		(4,283	)		(5,110	)		(13,245	)		(25,719	)
Cash from operations		(69,007	)		(10,650	)		1,837			17,136			(60,684	)		(17,862	)		(9,527	)		27,202			35,339			35,151
Capital expenditure		(4,295	)		(4,918	)		(10,155	)		(10,155	)		(29,523	)		(8,174	)		(8,174	)		(8,174	)		(8,174	)		(32,695	)
Financing cash flows
Draw-down of debt facilities		35,000			-			-			-			35,000			-			-			-			-			-
Repayment of debt facilities		-			-			-			-			-			-			-			-			(195,000	)		(195,000	)
Cash from financing		35,000			-			-			-			35,000			-			-			-			(195,000	)		(195,000	)
Opening cash		60,114												60,114
Opening ABL headroom		5,508												5,508
Opening available liquidity		65,622			27,320			11,752			3,434			65,622			10,415			(15,621	)		(33,322	)		(14,294	)		10,415
Net cash flow		(38,302	)		(15,568	)		(8,318	)		6,981			(55,207	)		(26,036	)		(17,701	)		19,028			(167,835	)		(192,544	)
Increase in ABL limit		-			-			-			-			-			-			-			-			-			-
Closing available liquidity		27,320			11,752			3,434			10,415			10,415			(15,621	)		(33,322	)		(14,294	)		(182,129	)		(182,129	)

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The liquidity position on a monthly basis for FY17 and FY18 is shown in the figure below:

Figure 5 - FY17-FY18 liquidity position assuming status quo

In our opinion, if the proposed restructure is not implemented and no alternate restructuring plan was reasonably certain of being advanced, the Group would likely be unable to pay its debts as and when they fall due from April 2017. In these circumstances, it is likely:

· The directors of ListCo would seek to appoint voluntary administrators (or an alternative form of insolvency appointment) to ListCo and other Australian companies.

· The ABL lenders or the Secured Scheme Creditors may seek to appoint receivers to the ABL Obligor and the Other Obligors.

· Without the support of the Group’s lenders, either of the above scenarios would likely result in some form of insolvency appointment to subsidiaries in other jurisdictions.

Our opinion on the outcome to Scheme Beneficiaries should the companies be wound-up is set out in Section 5.3.

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Appendix A - Letter of Engagement

Liability limited by a scheme approved under Professional Standards Legislation Page 67

Our ref:	JKM\CCLE\02 3003 0619	Ashurst Australia
Partner:	James Marshall	Level 11
Direct line:	+61 2 9258 6508	5 Martin Place
Email:	james.marshall@ashurst.com	Sydney NSW 2000
Contact:	Camilla Clemente, Senior Associate	Australia
Direct line:	+61 2 9258 6574
Email:	camilla.clemente@ashurst.com	GPO Box 9938
		Sydney NSW 2001
		Australia
1 May 2017
		Tel +61 2 9258 6000
		Fax +61 2 9258 6999
By email		DX 388 Sydney
		www.ashurst.com

Scott Kershaw
Jenny Nettleton
KordaMentha
Level 5, Chifley Tower
Chifley Square
Sydney NSW 2000

Dear Scott

Engagement for Dividend and Solvency Analysis in relation to the Creditors’ Schemes of Arrangement of Boart Longyear Limited (the Schemes)

We act for Boart Longyear Limited (Listco) and its subsidiaries (Group), which include Boart Longyear Management Pty Ltd (FinCo), Boart Longyear Australia Pty Limited (BLY Australia) and Votraint No. 1609 Pty Limited (Votraint).

1. INTRODUCTION

1.1 The Group’s debt capital structure can be summarised as follows (all $ are USD):

(a) a secured revolving working capital facility (Revolver) provided to FinCo;

(b) a Term Loan A Securities Agreement dated 22 October 2014 issued by FinCo, as amended and restated from time to time (TLA);

(c) a Term Loan B Securities Agreement dated 22 October 2014 issued by FinCo, as amended and restated from time to time (TLB);

(d) 10% Senior Secured Notes paying a 10% coupon in the sum of $195m issued by FinCo, as amended and restated from time to time (10% Notes); and

(e) 7% Unsecured Senior Notes paying a 7% coupon in the sum of $284m, as amended and restated from time to time (7% Notes),

together, the Finance Documents.

1.2 Listco, Finco, BLY Australia and Votraint (together, the Scheme Companies) propose to enter into the following interdependent schemes of arrangement with certain of their creditors under the Finance Documents, being:

(a) the holders of the TLA, TLB and 10% Notes (together, the Secured Scheme Creditors); and

(b) the holders of the 7% Notes (the Unsecured Scheme Creditors).

1.3 We have been instructed by the Scheme Companies to engage KordaMentha to prepare an independent expert report on behalf of the Scheme Companies and the Group addressing financial matters relating to the proposals by the Scheme Companies and certain of their

Australia Belgium China France Germany Hong Kong SAR Indonesia (Associated Office) Italy Japan Papua New Guinea Saudi Arabia (Associated Office) Singapore Spain Sweden United Arab Emirates United Kingdom United States of America

Ashurst Australia (ABN 75 304 286 095) is a general partnership constituted under the laws of the Australian Capital Territory and is part of the Ashurst Group. The Ashurst Group has an office in each of the places listed above.

KordaMenth – Dividend and solvency analysis 1 May 2017 Page 2

creditors to apply for orders under section 411 of the Corporations Act 2001 (Cth) (Act) convening respective meetings of the Secured Scheme Creditors and the Unsecured Scheme Creditors to consider inter-conditional schemes of arrangement. Your independent expert report is also to be prepared for use by the directors of the Scheme Companies in relation to the Schemes.

1.4 The Scheme Companies wish to appoint Scott Kershaw and Jenny Nettleton of your office as expert.

2. INSTRUCTIONS

2.1 For the purpose of this section, the term ’Subordinate Claim’ means:

(a) a claim for a debt owed by Listco to a person in the person’s capacity as a member of Listco (whether by way of dividends, profits or otherwise); or

(b) any other claim that arises from buying, holding, selling or otherwise dealing in shares of Listco.

2.2 You are instructed to prepare an independent expert report (KordaMentha Report) addressing the following matters:

(a) The solvency of the Group following the implementation of the proposed Schemes:

(i) solvency is to be determined following completion of the Schemes; and

(ii) you are to determine “solvency” with reference to section 95A of the Act.

(b) The value of the assets of the Group generally relative to the debts owing under the Finance Documents.

(c) The expected dividend that would be respectively available to the:

(i) Secured Scheme Creditors;

(ii) Unsecured Scheme Creditors; and

(iii) holders of Subordinate Claims against the Scheme Company,

if the Scheme Companies were to be wound up within 6 months of the hearing of the application for an order under section 411(1) and (1A) of the Act.

(d) The expected dividend that would be respectively paid to the:

(i) Secured Scheme Creditors;

(ii) Unsecured Scheme Creditors; and

(iii) holders of Subordinate Claims against the Scheme Companies,

if the Schemes were put into effect as proposed.

The requirement to calculate the expected dividend that would be paid to scheme creditors if the scheme were to be put into effect as proposed is drawn from S 8201(b) in Part 2 of Schedule 8 of the Corporations Regulations 2001 (Cth). If, in response to (a) above, you conclude that the Scheme Companies will be solvent following the implementation of the Schemes, the Scheme Companies would not be wound up following the implementation of the Schemes and based on the terms of the Schemes, despite the calculation required by the Regulations, no dividend would actually be paid to the Secured Scheme Creditors and Unsecured Scheme

 

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Creditors. In these circumstances, the instruction in (d) above still requires you to calculate the dividend that would be paid to Secured Scheme Creditors and Unsecured Scheme Creditors if the Scheme were implemented, which dividend must be calculated as if a winding up follows the implementation of the Schemes even though it would not do so in your opinion. If you conclude in response to (a) above that the Scheme Companies would be solvent following the implementation of the Schemes, in order to reduce the risk that a reader of your report might be confused by the use of the term “expected dividend” in circumstances where the Scheme Companies are not being wound up, we request that where you are addressing the calculation described in (d) above in your report you refer to implied value of the interests of the Secured Scheme Creditors and the Unsecured Scheme Creditors (Implied Value) instead of “expected dividend”.

(e) The likely outcome for the Group should the Schemes not be implemented:

(i) having regard to the Scheme Companies’ existing financial position, and projections; and

(ii) for the purposes of considering this matter only, assuming that there is no standstill in place in respect of the interest payments due to the Secured Scheme Creditors and the Unsecured Scheme Creditors on 1 April 2017.

2.3 The KordaMentha Report should include a schedule listing the data, reports and other information (to the extent this material is not set out in the body of the KordaMentha Report) which has been used to prepare the KordaMentha Report.

2.4 You are also instructed to read the following enclosed documents:

(a) Expert Witness Code of Conduct from the Uniform Civil Procedure Rules 2005 (NSW) and to acknowledge in the KordaMentha Report that you have done so and agree to comply with it; and

(b) Regulatory Guide 112 issued by ASIC on 30 March 2011 and to acknowledge in the KordaMentha Report that you have done so and consider that you are independent in accordance with the requirements of Regulatory Guide 112 and that you consider that you have complied with the terms of that document.

2.5 You are also instructed to disclose in the KordaMentha Report the existence of any engagements you have had with the Group.

3. COURT PROCEEDINGS AND THE USE OF THE KORDAMENTHA REPORT

3.1 You agree that the directors of the Scheme Companies may rely on the KordaMentha Report for, amongst other things, considering whether the Scheme Companies would be solvent (within the meaning of section 95A of the Act) following implementation of the Schemes.

3.2 You agree to the inclusion of the KordaMentha Report as:

(a) an annexure to the Explanatory Statements to be provided by the Scheme Companies to the Secured Scheme Creditors, Unsecured Scheme Creditors and others (including ASIC and the ASX) in relation to the Schemes;

(b) an annexure to a notice of meeting to the shareholders of the Scheme Companies; and

(c) an annexure to any prospectus issued in connection with the Scheme Companies.

 

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3.3 Schemes of arrangement are subject to Court approval. Any applications by the Scheme Companies will require the following documents to be included in the applications to the Court:

(b) the KordaMentha Report; and

(d) an affidavit from Scott Kershaw / Jenny Nettleton introducing and annexing or exhibiting the KordaMentha Report and verifying the opinions contained therein.

3.4 You agree to the KordaMentha Report being used in the proceedings before the Court relating to the Schemes, and to the provision of affidavits by Scott Kershaw / Jenny Nettleton in relation to the KordaMentha Report in the Court proceedings.

4. CONFIDENTIALITY

4.1 Your services as independent expert may require you to receive confidential and/or proprietary information or property of the Scheme Companies. You agree to maintain all documents, information and things obtained in connection with this matter in strict confidence. You agree to maintain any reports, work papers, memoranda or summaries which may be prepared in connection with the engagement by you or personnel assisting you in strict confidence. You agree not to disclose these things to any person or use them for any purpose apart from assisting Ashurst and the Scheme Companies in relation to this matter, and you agree to ensure your personnel are obliged to do the same. You agree to retain all such material, subject to our instructions.

4.2 Apart from engaging with us, the Scheme Companies and its authorised personnel or consultants, and the giving of evidence in the Court proceedings:

(a) you must keep all communications between us confidential (including the contents of this letter). It is a condition of this engagement that you take all reasonable measures to protect the confidentiality of, and any privilege attaching to, these communications;

(b) you must not disclose to anyone the content of any confidential oral or written communication relating to this engagement;

(c) no other use, disclosure or dissemination of such materials or information gained in connection with this engagement is to be made without prior written consent, except as may be required by law; and

(d) you must not discuss any aspect of this matter with any other person, or inform them of your involvement in this matter, without our prior written consent.

4.3 There may be specific confidentiality orders applying to the Court proceedings described above. We will advise you if and when such orders apply to you. If you are ever in doubt about what may be discussed with others, please contact us to ensure there is no inadvertent breach of this agreement or any Court orders.

4.4 Please mark any written communications (including emails) and reports involving this matter “Privileged and Confidential”. Please address all letters and faxes in connection with your services to:

Privileged and Confidential

Attention: James Marshall

Ashurst Australia

Level 11, 5 Martin Place

Sydney NSW 2000

4.5 All documents obtained in the course of this engagement must be returned to us upon request. The obligations in this letter expressly apply to both you and any personnel

 

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providing assistance to you. The obligations in this letter survive expiration or termination of this engagement.

5. YOUR FEES

We confirm that the Scheme Companies will ultimately be responsible for your fees for the preparation of the independent expert report.

6. CONFIRMATION

Please confirm whether KordaMentha agrees to the terms of this engagement, including the confidentiality requirements, by return letter.

Please contact James Marshall or Camilla Clemente should you require any further information or confirmation, or if you have any questions or issues in relation to this letter or otherwise.

Yours faithfully

/s/ Ashurst Australia

Ashurst Australia

 

Uniform Civil Procedure Rules 2005

Current version for 7 April 2017 to date (accessed 1 May 2017 at 09:33)

Schedule 7

Schedule 7 Expert witness code of conduct

(Rule 31.23)

1 Application of code

This code of conduct applies to any expert witness engaged or appointed:

(a) to provide an expert’s report for use as evidence in proceedings or proposed proceedings, or

(b) to give opinion evidence in proceedings or proposed proceedings.

2 General duties to the Court

An expert witness is not an advocate for a party and has a paramount duty, overriding any duty to the party to the proceedings or other person retaining the expert witness, to assist the court impartially on matters relevant to the area of expertise of the witness.

3 Content of report

Every report prepared by an expert witness for use in court must clearly state the opinion or opinions of the expert and must state, specify or provide:

(a) the name and address of the expert, and

(b) an acknowledgement that the expert has read this code and agrees to be bound by it, and

(c) the qualifications of the expert to prepare the report, and

(d) the assumptions and material facts on which each opinion expressed in the report is based (a letter of instructions may be annexed), and

(e) the reasons for and any literature or other materials utilised in support of each such opinion, and

(f) (if applicable) that a particular question, issue or matter falls outside the expert’s field of expertise, and

(g) any examinations, tests or other investigations on which the expert has relied, identifying the person who carried them out and that person’s qualifications, and

(h) the extent to which any opinion which the expert has expressed involves the acceptance of another person’s opinion, the identification of that other person and the opinion expressed by that other person, and

(i) a declaration that the expert has made all the inquiries which the expert believes are desirable and appropriate (save for any matters identified explicitly in the report), and that no matters of significance which the expert regards as relevant have, to the knowledge of the expert, been withheld from the court, and

(j) any qualification of an opinion expressed in the report without which the report is or may be incomplete or inaccurate, and

(k) whether any opinion expressed in the report is not a concluded opinion because of insufficient research or insufficient data or for any other reason, and

Published by NSW Parliamentary Counsel’s Office on www.legislation.nsw.gov.au Page 1 of 2

Uniform Civil Procedure Rules 2005 [NSW]

(1) where the report is lengthy or complex, a brief summary of the report at the beginning of the report.

4 Supplementary report following change of opinion

(1) Where an expert witness has provided to a party (or that party’s legal representative) a report for use in court, and the expert thereafter changes his or her opinion on a material matter, the expert must forthwith provide to the party (or that party’s legal representative) a supplementary report which must state, specify or provide the information referred to in clause 3 (a), (d), (e), (g), (h), (i), (j), (k) and (l), and if applicable, clause 3 (f).

(2) In any subsequent report (whether prepared in accordance with subclause (1) or not), the expert may refer to material contained in the earlier report without repeating it.

5 Duty to comply with the court’s directions

If directed to do so by the court, an expert witness must:

(a) confer with any other expert witness, and

(b) provide the court with a joint report specifying (as the case requires) matters agreed and matters not agreed and the reasons for the experts not agreeing, and

(c) abide in a timely way by any direction of the court.

6 Conferences of experts

Each expert witness must:

(a) exercise his or her independent judgment in relation to every conference in which the expert participates pursuant to a direction of the court and in relation to each report thereafter provided, and must not act on any instruction or request to withhold or avoid agreement, and

(b) endeavour to reach agreement with the other expert witness (or witnesses) on any issue in dispute between them, or failing agreement, endeavour to identify and clarify the basis of disagreement on the issues which are in dispute.

Current version for 7 April 2017 to date (accessed 1 May 2017 at 09:33) Page 2 of 2

REGULATORY GUIDE 112 

Independence of experts

March 2011

About this guide

This is a guide for any person who commissions, issues or uses an expert report.

It explains how ASIC interprets the requirement that an expert is independent of the party that commissions the expert report (commissioning party) and other interested parties.

Note: An interested party is a person with an interest in the outcome of the transaction different from the interest of the general body of security holders.

REGULATORY GUIDE 112: Independence of experts

About ASIC regulatory documents

In administering legislation ASIC issues the following types of regulatory documents.

Consultation papers: seek feedback from stakeholders on matters ASIC is considering, such as proposed relief or proposed regulatory guidance.

Regulatory guides: give guidance to regulated entities by:

· explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act)

· explaining how ASIC interprets the law

· describing the principles underlying ASIC’s approach

· giving practical guidance (e.g. describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations).

Information sheets: provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.

Reports: describe ASIC compliance or relief activity or the results of a research project.

Document history

This version was issued on 30 March 2011 and is based on legislation and regulations as at 30 March 2011. The reference to the relief instrument in RG 112.37 was updated in August 2015 because this instrument was reviewed as part of the sunsetting of legislative instruments under the Legislative Instruments Act 2003.

Previous versions:

· Superseded Regulatory Guide 112, issued 30 October 2007

Disclaimer

This guide does not constitute legal advice. We encourage you to seek your own professional advice to find out how the Corporations Act and other applicable laws apply to you, as it is your responsibility to determine your obligations.

Examples in this guide are purely for illustration; they are not exhaustive and are not intended to impose or imply particular rules or requirements.

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REGULATORY GUIDE 112: Independence of experts

Contents

A	Overview	4
	Reports covered by this guide	4
	Underlying principles	4
B	Expert needs to be independent	6
	Independence	6
	Genuine opinion	7
C	Relationship between the expert and the commissioning party	9
	Identifying relationships	9
	Declining the engagement	10
	Disclosing relationships and interests	11
	Other measures	12
	Commissioning an expert	13
D	Expert’s conduct in preparing its report	14
	Interactions with commissioning party	14
	Preparing the report	16
E	Use of specialists	19
	Engagement of specialists	19
	Review of specialist report	20
	Use of specialist report	20
Key terms		22
Related information		23

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Table of Contents  REGULATORY GUIDE 112: Independence of experts

A Overview

Key points

This guide gives ASIC’s view on:

· the need for an expert to be independent (see Section B);

· how previous and existing relationships with commissioning and other interested parties may affect the independence of an expert (see Section C);

· how an expert should deal with the commissioning party and other interested parties to maintain its independence (see Section D); and

· when and how an expert should use a specialist when preparing an expert report (see Section E).

Reports covered by this guide

RG 112.1 This guide focuses on reports prepared for transactions under Chs 2E, 5, 6 and 6A of the Corporations Act 2001 (Corporations Act), whether the reports are required in the Corporations Act or are commissioned voluntarily. The principles in this guide may also be relevant to independent expert reports commissioned for other purposes—for example, specialist reports like geologist reports or traffic forecast reports (see Section E) for inclusion in Ch 6D disclosure documents and Ch 7 Product Disclosure Statements (PDSs).

RG 112.2 We consider that security holders regard an expert report as being prepared by an independent expert irrespective of whether the report has been prepared voluntarily or because it is required under statute.

RG 112.3 This approach is consistent with the obligations on the holder of an Australian financial services licence (AFS licensee) to manage conflicts of interest. An AFS licensee’s obligation to manage conflicts of interest applies to all of its activities as an AFS licensee and, as such, an expert who holds an AFS licence needs to manage conflicts of interest in respect of all expert reports it prepares.

RG 112.4 This guide does not apply to independent or investigating accountant reports.

Underlying principles

RG 112.5 An expert report that is biased frustrates rather than assists informed decision-making. Security holders will assume that an expert report is an independent opinion and will be misled if the opinion is not.

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RG 112.6 Brooking J described the role of an expert in Phosphate Co-operative v Shears (No 3) (1988) 14 ACLR 323 (Pivot) at 339 in the following terms:   Those who prepare experts’ reports in company cases carry a heavy moral responsibility, whatever their legal duties may be. These reports are either required by the [Corporations Act] or provided by way of analogy with those requirements. In either case, they are supposed to be for the protection of individuals who are being invited to enter into some kind of transaction. Unless high [independence] standards are observed by those who prepare these reports, there is a danger that systems established for the protection of the investing public will, in fact, operate to their detriment through reliance on these reports and on the reputations of those who furnish them. In lending his name, the expert will often, as in this case, be lending a name to conjure with ... The expert’s integrity and freedom from baneful influences are essential.

RG 112.7 The Corporations Act indicates the need for an expert to be independent:

(a) an expert must not be associated with certain interested parties, and must disclose certain interests and relationships, when preparing reports required by the Corporations Act for:

(i) a takeover bid under Ch 6 (s648A);

(ii) a scheme of arrangement (reg 5.1.01 and Sch 8, cls 8303 and 8306 of the Corporations Regulations 2001 (Corporations Regulations)); and

(iii) a compulsory acquisition or buy-out under Ch 6A (s667B); and

(b) as an AFS licensee, an expert needs to establish and maintain systems to comply with its obligations to manage conflicts of interest.

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Table of Contents  REGULATORY GUIDE 112: Independence of experts

B Expert needs to be independent

Key Points

An expert should be, and should appear to be, independent: see RG 112.8-RG 112.15.

An expert should give an opinion that is genuinely its own opinion: see RG 112.16-RG 112.20.

Independence

RG 112.8 The Corporations Act contains indicators that an expert must be, and must appear to be, independent in the provisions requiring an expert report for certain takeover bids, schemes of arrangement, for any compulsory acquisition and in the AFS licensee conflicts management provisions.

RG 112.9 The need for an expert to be, and to appear to be, independent is also indicated in case law establishing that the independence of an expert is critical for the protection of security holders. Mullighan J observed in Duke Group v Pilmer (1998) 27 ACSR 1 at 268:

It may be seen that a true state of independence on the part of the expert is crucial to the efficacy of the [takeover] process and for the protection of the public generally and the company and its members in particular.

RG 112.10 We will consider regulatory action if we have concerns about the independence of an expert: see Regulatory Guide 111 Content of expert reports (RG 111) at RG 111.128-RG 111.130.

Note: In addition to the term ‘independence’, language also used by the courts, our policies and commentators include: ‘impartial judgment’; ‘disinterested’; ‘objective’; ‘unbiased’; ‘genuine expression of opinion’; ‘integrity’ and, negatively: ‘conflict of interest’; ‘compromised’; ‘collusion’ and ‘acting in a partisan capacity’.

AFS licensee obligations to manage conflicts

RG 112.11 An expert report typically includes a statement of opinion or recommendation intended to influence investors in making a decision on a financial product: s766B(1). This means the expert report usually constitutes financial product advice, triggering the need for an AFS licence: s766A and 911A(1). Accordingly, in most cases, an expert who prepares an independent expert report that will be made available to retail investors will hold an AFS licence.

RG 112.12 Under s912A(1)(aa), an AFS licensee must:

have in place adequate arrangements for the management of conflicts of interest that may arise wholly, or partially, in relation to activities

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undertaken ... in the provision of financial services as part of the financial services business of the licensee or the representative ...

RG 112.13 This conflicts management obligation applies irrespective of:

(a) whether the expert states that it is independent of the commissioning party;

(b) any requirement that the expert not be an associate of the commissioning party or any other interested party to a transaction (e.g. s648A); or

(c) whether the expert report has been prepared to meet a statutory obligation.

RG 112.14 Whether an expert’s conflicts management arrangements (i.e. measures, processes and procedures) are adequate will depend on the nature, scale and complexity of the expert’s business and the circumstances of the expert’s engagement. The expert should document its conflicts management policies and procedures. The expert should keep records demonstrating how it has complied with those procedures. General guidance on these obligations is provided in Regulatory Guide 181 Licensing: Managing conflicts of interest (RG 181) at RG 181.10-RG 181.11.

RG 112.15 Expert reports are exempt from the licensing regime (reg 7.6.01(u)) when the advice is an opinion on matters other than financial products (e.g. a geologist report) and:

(a) it does not include advice on a financial product;

(b) the document includes a statement that the person is not operating under an AFS licence when giving the advice; and

(c) the expert discloses remuneration, interests and relationships.

Genuine opinion

RG 112.16 The courts have required the opinion of an expert to be genuine and a product of the expert’s professional judgment. An expert’s opinion that is tailored to support the views of the commissioning party or any other interested party is not a genuine opinion. It may also be misleading or deceptive.

RG 112.17 A court found that a commissioning party’s active role in shaping an expert report meant that the expert report was not the product of ‘an exercise of judgment’ by the expert ‘uninfluenced by pressure brought to bear by or on behalf of [the commissioning party]’ and was not ‘a genuine expression of opinion ... but was the result of an exercise carried out for the purpose of arriving at a desired result’: Pivot at 340 and 342 per Brooking J.

RG 112.18 An expert is subject to statutory obligations to avoid making misleading or deceptive statements and engaging in misleading or deceptive conduct.

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Note: See, for example, s412(8), 670A(1)(h), 1041E, 1041F and 1041H and s12DA of the Australian Securities and Investments Act 2001 (ASIC Act).

RG 112.19 An expert has been found to have engaged in misleading or deceptive conduct when the expert did not hold the opinions expressed in the expert report: MGICA v Kenny & Good (1996) 140 ALR 313 at 356-357 (a case involving a property valuation).

RG 112.20 Similarly in Reiffel v ACN 075 839 226 (2003) 45 ACSR 67 at 92-93, the court held that the expert report was misleading and deceptive in circumstances when ‘there was no reasonable basis for the [expert’s] statement in the report’ and the expert ‘did not hold the opinion it expressed’. The court held that the expert should have disclosed that it disagreed with the methodology used by a promoter in its forecasts and disclosed the methodology that the expert in fact used.

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C Relationship between the expert and the commissioning party

Key Points

An expert should identify relationships and interests that may affect, or may be perceived to affect, the expert’s ability to prepare an independent report: see RG 112.21-RG 112.24.

The expert should then consider whether, on the basis of that relationship or interest:

· it should decline the engagement (see RG 112.25-RG 112.27); or

· the relationship or interest can be adequately dealt with by way of disclosure in the expert report (see RG 112.28-RG 112.37).

The expert may also need to take other actions to manage a conflict of interest: see RG 112.38.

Before engaging an expert, a commissioning party should be satisfied that the expert is independent and has sufficient expertise and resources to provide a thorough report: see RG 112.39-RG 112.41.

Note: A reference to expert in this guide is to the person or entity that issues the report. In most cases, this will be a corporate entity holding an AFS licence, even though a senior director or employee may sign the report in the name of the corporate entity and be principally responsible for preparing the report.

Identifying relationships

RG 112.21 Previous and existing relationships may threaten, or appear to threaten, the independence of an expert. The objectivity of an expert may also be compromised, or called into question, if the expert has an interest in the outcome of the transaction that is the subject of its report.

RG 112.22 The closer the relationship between the expert and a commissioning party or any other interested party, the greater the onus on the expert to demonstrate the absence of bias.

RG 112.23 In identifying relationships and interests that may affect, or may be perceived to affect, the expert’s ability to prepare an independent report, the expert should not only identify relationships with, and interests of, the expert but also of:

(a) the expert’s associates;

(b) those directors and senior employees who are principally responsible for preparing and issuing the expert report; and

(c) the spouse, children and associates of the directors and senior employees who are principally responsible for preparing and issuing the expert report.

RG 112.24 The need to undertake this identification process also arises from the obligation to manage conflicts of interest if the expert is an AFS licensee.

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Declining the engagement

RG 112.25 An expert should seriously consider declining an engagement when:

(a) a person to be involved in preparing the expert report is an officer of the commissioning party or an interested party;

(b) the expert, a director or a senior employee who is involved in preparing the expert report has a substantial interest in or is a substantial creditor of the commissioning party or has other material financial interests in the relevant transaction;

(c) the expert has participated in strategic planning work for the commissioning party as a lawyer, financial consultant, tax adviser or accountant, whether in connection with the relevant transaction or generally (e.g. advising on possible takeovers or takeover defences); or

(d) the expert has acted as a lawyer, financial consultant, tax adviser or accountant to the commissioning party (other than providing professional services strictly for compliance purposes rather than strategic or operational decisions or planning).

RG 112.26 The Corporations Act specifically states that an expert must decline an engagement for the preparation of an expert report in each of the following circumstances:

(a) when the report is to be cited or included in a target statement if the expert is an ‘associate’ (as defined in s12) of the bidder or the target and the bidder has 30% or more of the voting power in the target entity or there are common directors of the target and the bidder (s640 and 648A(2));

(b) when the report is to be cited or included in a bidder’s statement if the expert is an ‘associate’ (as defined in s12) of the bidder or the target and the consideration for a pre-bid stake acquired in a target was unquoted securities (s636(1)(h)(iii), 636(2) and 648A(2));

(c) when the report is to be cited or included in the explanatory statement for a scheme of arrangement if the expert is an ‘associate’ (as defined in s12) of the parties to the scheme if the other party to a reconstruction in a scheme of arrangement has at least 30% of the voting shares of the scheme company or there are common directors (reg 5.1.01(b) and Sch 8, cls 8303 and 8306 of the Corporations Regulations); and

(d) if the expert is an ‘associate’ (as defined in s12) of the person issuing a compulsory acquisition or buy-out notice (s663B, 664C, 665B and 667B).

RG 112.27 An expert’s AFS licensee obligations to manage conflicts of interest may oblige an expert to decline engagements in some circumstances. Licensee experts may be offered an engagement in which relationships and interests pose such a serious risk of conflict of interest that the threat to the expert’s

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Table of Contents  REGULATORY GUIDE 112: Independence of experts

independence cannot be adequately managed through disclosure or internal controls. The only way an expert can adequately manage these threats is to avoid them and the expert’s conflicts management policies and procedures should give specific guidance on circumstances when it should decline engagements: see RG 181.42–RG 181.43 and RG 181.60.

Disclosing relationships and interests

Requirement

RG 112.28 As security holders rely on an expert report, they should be clearly informed about any relationships or interests (including financial or other interests) that could reasonably be regarded as relevant to the independence of the expert. This requirement arises from the Corporations Act and case law: see ANZNominees v Wormald (1988) 13 ACLR 698 at 707.

RG 112.29 Disclosure of relationships or interests is required under the Corporations Act for an expert report when the report is required to be included in:

(a) a target statement, when the bidder has 30% or more of the voting power in the target entity or there are common directors of the target and the bidder (s648A(3));

(b) a bidder’s statement, when the consideration for a pre-bid stake acquired in a target is unquoted securities (s648A(3)); and

(c) a compulsory acquisition or buy-out notice (s667B(2)).

RG 112.30 Similarly, as an AFS licensee, an expert needs to make appropriate disclosure of conflicts of interest to commissioning parties and to those relying on the report as part of the conflicts management obligation: see RG 181.49–RG 181.63.

Content of disclosure

RG 112.31 An expert should prominently disclose in the report:

(a) the business or professional relationships with a commissioning party or any other interested party;

(b) any financial or other interest that could reasonably be regarded as capable of affecting the expert’s ability to give an unbiased opinion on the matter being reported on; and

(c) any fee or benefit (whether direct or indirect) to be received in connection with the report (s648A(3) and 667B(2)).

RG 112.32 If an expert has, within the previous two years, valued assets representing more than a de minimus (i.e. trivial) proportion by value of the assets that it

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has been engaged to value for the commissioning party, this should also be prominently disclosed in the report.

Note: Disclosure is also required by RG 112.31 if the expert was previously engaged to value the relevant assets by the commissioning party or any other interested party.

RG 112.33 These disclosures should be made in all expert reports irrespective of whether the report is required to be prepared by the Corporations Act or is voluntarily commissioned and supplied to security holders.

RG 112.34 These disclosures should relate to relationships or interests existing at the time of preparation of the report or existing in the previous two years. This two-year period is a minimum period for disclosure and earlier relationships might be so significant that they warrant disclosure as well.

Note: In Duke Group v Pilmer, Mullighan J referred to this benchmark with approval (at 268).

RG 112.35 Disclosures should be timely, prominent, specific and meaningful. An expert should not use ‘boilerplate’ disclosures (e.g. that the expert has been paid ‘a normal professional rate’). An actual amount should be shown for fees paid to an expert for the report.

RG 112.36 When an expert report is cited or included in a bidder’s statement in which any securities in the bidder (or a person who controls the bidder) are offered as consideration under the bid, these disclosures must also meet the specific disclosure obligations that apply to prospectuses under s711(2)–(4), including:

(a) any interests that the expert has in the bidder; and

(b) any fees or benefits given or agreed for the expert’s services (s636(1)(g)).

RG 112.37 As an expert report will usually constitute financial services advice, an expert will need to give retail investors a Financial Services Guide (FSG). We have given relief to allow an expert to include a FSG as a separate and clearly identifiable part of an expert report: see ASIC Corporations (Financial Services Guides) Instrument 2015/541. In view of this relief, we consider that an expert should include all of its disclosure of interests and benefits, whether flowing from the FSG requirements, conflicts management, s648A or case law, in the FSG rather than duplicating that disclosure in another part of the expert report.

Other measures

RG 112.38 In addition to disclosing any conflict of interest, an expert will need to consider whether other measures to properly manage the conflict of interest are appropriate (e.g. implementing information barriers): see RG 181.35–RG 181.37.

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Commissioning an expert

RG 112.39 In commissioning an expert, a commissioning party should consider whether the expert is independent and whether the expert has sufficient expertise and resources to give a thorough opinion on the proposed transaction. The quality of an expert report may be affected if this is not the case. If an expert considers that it is not independent or does not have sufficient expertise or resources to give a thorough opinion, it should decline the engagement.

RG 112.40 In selecting an appropriate expert, we consider that relevant factors are likely to include:

(a) whether the expert has adequate resources (which may include access to appropriate third party specialists) to perform the necessary work;

(b) the qualifications of the expert and whether the expert has the requisite level of technical expertise (including whether the expert meets the requirements of any relevant industry codes);

(c) the experience of the expert. For example, a commissioning party may ask what comparable transactions the expert has given an opinion on and whether that experience is relevant to the current transaction;

(d) whether the expert can meet the timeframe required for the report to be produced; and

(e) whether there are any independence issues.

RG 112.41 While a commissioning party should satisfy itself that an expert is competent, it should ensure that any pre-engagement discussions do not compromise the expert’s independence. For example, these discussions should not deal with how the expert proposes to evaluate the transaction or the merits of the transaction: see RG 112.46–RG 112.48.

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D Expert’s conduct in preparing its report

Key Points

An expert should:

· obtain written terms of engagement from the commissioning party before commencing work;

· take care to avoid any communication with the commissioning party or any other interested party that may undermine, or appear to undermine, independence; and

· consent to the use or incorporation of its report.

Commissioning parties should be careful not to release the conclusions of an expert report in advance of the final report.

Interactions with commissioning party

Terms of engagement

RG 112.42 Before commencing work, an expert should obtain written terms of engagement from the commissioning party that:

(a) set out the scope and purpose of the report;

(b) set out the facts of the proposal and relevant data;

(c) recognise the expert’s right to refuse to give an opinion or report at all if it is not given the information and explanations it requires to prepare the report;

(d) give the expert the same access to the commissioning party’s records as the auditor of the commissioning party; and

(e) set out the fee.

Approval of appointment

RG 112.43 It is possible that some directors of a commissioning party may have a conflict of interest in the proposed transaction, such as cross-directorships held in the target and the bidder. In these circumstances, the expert and commissioning party should ensure that the directors without a conflict select and engage the expert.

RG 112.44 The commissioning party should ensure that the method by which an expert is appointed, and the scope of its engagement, is consistent with the concepts of independence and perceived independence of the expert. For example, it may be appropriate to have a non-executive director oversee the appointment process if management is likely to be perceived to have a strong interest in the outcome of the expert report.

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Expert’s fee

RG 112.45 We will consider that an expert is not independent if the amount it is to receive for the expert report depends in any way on the outcome of the transaction to which the report relates. This is consistent with the requirement that a person who provides financial services must not hold itself out as ‘independent’, ‘impartial’ or ‘unbiased’ if it is paid success fees or has a conflict of interest arising from a relationship with an issuer of financial products that might reasonably be expected to influence the report: s923A.

Manner of communication

RG 112.46 Ensuring security holders receive an objective expression of opinion in an expert report involves more than identifying and dealing with previous or existing relationships or interests. An expert’s objectivity, or the appearance of objectivity, may be undermined by the interactions between the expert and the commissioning and other interested parties.

RG 112.47 We are likely to view the following interactions as indicators of a lack of independence:

(a) the commissioning party having rejected another expert after the expert disclosed its likely approach to evaluating the proposal;

(b) an expert attending discussions on the development of the transaction, the merits of the transaction or on strategies to be adopted by the commissioning party;

(c) an expert taking instructions from, or holding discussions with, a commissioning party, its advisers or any interested party on the choice of methodologies for the report or evaluation of the transaction (including the underlying assumptions or reasoning), although the expert may interrogate those parties for the purpose of the expert’s own analysis;

(d) an expert accepting from a commissioning party, its advisers or any interested party their analysis of the transaction, although the expert may interrogate those parties for the purpose of the expert’s own analysis;

(e) the expert discussing preliminary views or findings with the commissioning party or any other interested party;

(f) the expert entering into a success fee arrangement with the commissioning party or any other interested party;

(g) the expert discussing future business relationships with the commissioning party or any other interested party before finalising the report. This includes refraining from cross-selling other services of the expert; and

(h) the expert changing its opinion at the suggestion of the commissioning party or any other interested party without adequate explanation: see RG 112.56–RG 112.57.

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RG 112.48 We expect that an expert who is an AFS licensee will include in its internal policies and procedures guidelines to address:

(a) communications and interactions with the commissioning party and any other interested party during the commissioning of the expert and the preparation of the report;

(b) remuneration arrangements; and

(c) supervision of the preparation of the report.

Preparing the report

Access to information

RG 112.49 The expert, not the commissioning party, should determine what information will be required for the report. The commissioning party should give the expert all the information it is aware of about the subject of the expert report, in sufficient detail to enable the expert to determine its relevance.

RG 112.50 If the expert is not given access to the records it requires, or is given an unduly short time to complete the report (relative to any applicable statutory time constraints), it should consider refusing to prepare a report at all. An expert should not prepare an unsatisfactory report and attempt to deal with deficiencies in the report by disclaiming responsibility.

Communication

RG 112.51 An expert and its commissioning party may communicate and meet with each other during the preparation of the expert report for the expert to:

(a) discuss the progress of the report;

(b) gain access to information;

(c) ascertain matters of fact or to correct factual errors (Re Matine (1998) 28 ACSR 268 at 288); and

(d) interrogate the commissioning party or another interested party for the purposes of its own analysis.

RG 112.52 To help maintain independence and negate any inference of bias, we consider that an expert should direct and lead all meetings and discussions with the commissioning party, its advisers and any other interested party. The expert should keep appropriate file notes of discussions and retain copies of documents worked on in discussions with the commissioning party, its advisers and any other interested party.

RG 112.53 Brooking J in Pivot at 339 summarised this issue in the following terms:

The guiding principle must be that care should be taken to avoid any communication which may undermine, or appear to undermine, the independence of the expert.

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Drafts of reports

RG 112.54 An expert may give draft copies of parts of its report to a commissioning party or its advisers for factual checking before delivery of a full draft copy of the report. These early drafts should not contain the expert’s analysis of the transaction, the merits of a transaction or the methodologies employed: Pivot at 339.

RG 112.55 The expert should only provide a full draft copy of the report to the commissioning party for factual checking when the expert is reasonably assured that the conclusions in the report are unlikely to change.

RG 112.56 If a commissioning party or an adviser disagrees with the expert’s analysis in a draft of the expert report, the report should only be altered if the expert is persuaded that all or part of the expert’s assessment is based on an error of fact. We would expect an expert, in this situation, to independently reassess the whole or relevant part of the report based on its view of the revised facts.

RG 112.57 After a full draft copy of an expert report has been provided to a commissioning party or its advisers, any alteration of the report made at the suggestion of the commissioning party or its advisers that affects an expert’s analysis of the transaction or the expert’s conclusions should be clearly and prominently disclosed in the report. This disclosure should include an explanation of the changes, the reasons why the expert considered the changes appropriate and the significance of the changes to the expert’s opinion.

RG 112.58 Minor factual corrections made at the suggestion of the commissioning party or its advisers that are immaterial to an expert’s analysis, conclusions or opinion need not be disclosed in the report.

Use and distribution

RG 112.59 If a party commissions two or more reports, a copy of each report should be sent to security holders. This should be done regardless of whether more than one report is prepared by the same expert or by different experts: Pivot at 339. It should also be done regardless of whether the commissioning party is obliged to do so under s648A(1).

RG 112.60 An expert should deliver its final, signed report to the commissioning party even if the commissioning party requests otherwise (unless the transaction is discontinued or varied substantially).

RG 112.61 The directors of a commissioning party should not adopt or recommend that security holders accept the findings of an expert report without critically analysing the report. The directors should satisfy themselves that the information relied on in the report is accurate and that the report has not omitted material information known to the directors but not given to the expert.

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Release of conclusions of expert reports

RG 112.62 An expert report needs to contain sufficient information to assist security holders to make a decision, including providing details of the methodologies and material assumptions on which the report is based, together with any qualifications: see RG 111.64-RG 111.79. The directors of a commissioning party need to ensure that an expert report is not used or referred to in a way that may be misleading or deceptive.

RG 112.63 If a commissioning party releases the conclusions of an expert report in advance of the final report, this is likely to be misleading or deceptive, particularly if the final report contains any ’surprises’ for a person who has only read the conclusions. Releasing conclusions without providing relevant supporting information may cause confusion or uncertainty since security holders and the market will not be able to determine whether those conclusions are reasonable.

Note: In Re Origin Energy Limited 02 [2008] ATP 23, the Takeovers Panel considered that it was potentially misleading to quote the conclusions of a technical expert’s report in a target’s statement without giving shareholders a copy of the report or the underlying assumptions and qualifications.

RG 112.64 Consequently, a commissioning party that releases the conclusions of an expert report in advance of the final report risks regulatory action for contravention of the misleading or deceptive conduct provisions or other regulatory action. For example, if a report is provided in relation to a bid, the commissioning party risks an application by us, or another party, to the Takeovers Panel for a declaration of unacceptable circumstances.

RG 112.65 There may be limited situations in which a commissioning party’s continuous disclosure obligations will require disclosure of the conclusions of an expert report in advance of the final report (e.g. if confidentiality has been lost before the final report is ready for release to the market). Commissioning parties and experts should put in place processes that minimise the risk that preliminary disclosure will be required before the report has been finalised. If preliminary disclosure is required, commissioning parties should ensure that this is done in a way that is not misleading or confusing (e.g. by highlighting the limitations of the preliminary disclosure and providing all available material information about the report).

Consent of expert

RG 112.66 An expert report may only be incorporated or referred to in a bidder’s statement or target statement if the expert has consented to the use of the report in the form and context in which it appears: s636(3) and 638(5). Before consenting, the expert should consider whether the report has been accurately reproduced and used for the purpose for which it was commissioned. The expert should also consider the appropriateness, or otherwise, of express or implied representations about its report, the conclusions or recommendations: see Regulatory Guide 55 Prospectus and PDS: Consent to quote (RG 55), which also applies to the consent obligations in s636(3) and 638(5).

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E Use of specialists

Key Points

If an expert does not have the necessary specialist expertise on a matter that must be determined for the purposes of the report, it should retain an appropriate specialist for that matter who is independent of the commissioning party: see RG 112.67–RG 112.70.

The specialist should report to the expert rather than the commissioning party: see RG 112.71–RG 112.72.

The expert should ensure that the specialist has consented to the use of its report: see RG 112.73–RG 112.77.

Engagement of specialists

RG 112.67 It is the expert’s responsibility to:

(a) determine that a specialist’s assistance is required on a matter that must be determined for the purposes of the report;

(b) select the specialist and ensure that the specialist is competent in the field;

(c) negotiate the scope and purpose of the specialist’s work and ensure that this is clearly documented in an agreement (though the agreement may be with the commissioning party or the expert); and

(d) be satisfied that the specialist is independent of, and is perceived to be independent of, the commissioning party and any other interested party.

RG 112.68 We consider best practice would be for the expert to pay the specialist its fees and recover those fees from the commissioning party.

RG 112.69 We would expect a specialist report to be specifically commissioned and prepared for the transaction the subject of the expert report. We would also expect the expert to make it clear to the specialist that the report is being commissioned for inclusion in the expert report. If the specialist report is not prepared specifically for the current transaction, this should be clearly explained to security holders. The Takeovers Panel in Re Great Mines Limited [2004] ATP 01 expressed the disclosure requirement in the following terms (at [56]):

Wherever a report is re-used in this way, however, shareholders should be advised of the purpose for which the report was prepared. It would be inappropriate to re-use a report in this way to satisfy a requirement for an independent experts report and in general, it would be misleading to describe a report re-used in this way as independent.

RG 112.70 While these comments were made in the context of an independent expert report, we consider they are equally applicable to the use of a specialist report.

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Review of specialist report

RG 112.71 The expert should:

(a) critically review the specialist report, particularly to consider whether the specialist has used assumptions and methodologies which appear to be reasonable and has drawn on source data which appears to be appropriate in the circumstances;

(b) have reasonable grounds for believing the specialist report is not false or misleading;

(c) ensure the specialist signs its report and consents to its use in the form and context in which it will be published; and

(d) ensure that the specialist report is used in a way that will not be misleading or deceptive.

RG 112.72 A specialist report commissioned by the expert should be dated close enough to the date of the expert report to ensure that assumptions applied have not been overtaken by time or events.

Use of specialist report

RG 112.73 The expert should ensure that the specialist consents to the use of its report in the form and context in which it will be published. If a specialist does not take responsibility for, or authorise the use of, its report and the expert considers that the material the subject of the report needs to be included in the expert report, the expert must accept entire responsibility for the statements as the expert’s own and, as such, must have reasonable grounds for believing the statements not to be misleading or deceptive. This is consistent with our approach to directors assuming responsibility for statements in a prospectus or PDS that are not attributed to another person: see RG 55.11–RG 55.12.

RG 112.74 The expert should exercise its judgment to determine whether to include the specialist report in full or include a concise or short form version or cite or extract the specialist report.

RG 112.75 We encourage an expert to consider whether it is appropriate to have the specialist prepare a concise or short form specialist report for inclusion in the expert report with a longer specialist report available on request free of charge or accessible online.

RG 112.76 An expert should only quote or cite the specialist’s work in a way that is fair and representative. Otherwise the expert risks misleading security holders. If the full specialist report contains any ’surprises’ for the security holder who only reads the short form or concise report, this would indicate the short form specialist report was misleading.

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RG 112.77 In the situation when an expert has obtained more than one specialist report on the same matter, we consider that security holders will not be given all material information if the expert merely supplies abridged results of those reports, and states, without comment or analysis, the result is the sum of the values given in each of the specialist reports.

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Key terms

Term	Meaning in this document
AFS licence	An Australian financial services licence under s913B of the Corporations Act that authorises a person who carries out a financial services business to provide financial services
	Note: This is a definition contained in s761A of the Corporations Act.
AFS licensee	A person who holds an Australian financial services licence under s913B of the Corporations Act
	Note: This is a definition contained in s761A of the Corporations Act.
ASIC	Australian Securities and Investments Commission
ASIC Act	Australian Securities and Investments Commission Act 2001
Corporations Act	Corporations Act 2001, including regulations made for the purposes of that Act
Corporations Regulations	Corporations Regulations 2001
expert	The meaning given to that term in s9 of the Corporations Act
Financial Services Guide (FSG)	A document that must be given to a retail client in relation to the provision of a financial service in accordance with Div 2 of Pt 7.7 of the Corporations Act
	Note: See s761A for the exact definition.
Product Disclosure Statement (PDS)	A document that must be given to a retail client in relation to the offer or issue of a financial product in accordance with Div 2 of Pt 7.9 of the Corporations Act
	Note: See s761A for the exact definition.
reg 5.1.01 (for example)	A regulation of the Corporations Regulations (in this example numbered 5.1.01)
RG 181 (for example)	An ASIC regulatory guide (in this example numbered 181)
s648A (for example)	A section of the Corporations Act (in this example, numbered 648A), unless otherwise specified
Sch 4 (for example)	A schedule of the Corporations Act (in this example numbered 4), unless otherwise specified

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Related information

Headnotes

experts, expert reports, independence, genuine opinion, relationships or interests, declining the engagement, disclosing relationships or interests, conduct of experts, use of specialists

Regulatory guides

RG 55 Disclosure documents and PDS: Consent to quote

RG 111 Content of expert reports

RG 181 Licensing: Managing conflicts of interest

Legislative instruments

ASIC Corporations (Financial Services Guides) Instrument 2015/541

Legislation

Corporations Act, Chs 2E, 6 and 6A, s12, 412(8), 636, 638, 640, 648A, 663B, 664C, 665B, 667B, 670A(1)(h), 711, 766A, 766B(1), 911A(1), 912A(1)(aa), 1041E, 1041F and 1041H, Corporations Regulations, regs 5.1.01 and 7.6.01(u), Sch 8, cls 8303 and 8306 

ASIC Act, s12DA

Cases

ANZ Nominees v Wormald (1988) 13 ACLR 698

Re AuIron Energy Limited [2003] ATP 31

Duke Group v Pilmer (1998) 27 ACSR 1

Re Great Mines Limited [2004] ATP 01

Re Matine (1998) 28 ACSR 268

MGICA v Kenny & Good (1996) 140 ALR 313

Re Origin Energy Limited 02 [2008] ATP 23

Phosphate Co-operative Co of Aust Ltd v Shears & Anor (No 3) (1988) 14

ACLR 323

Reiffel v ACN 075 839 226 (2003) 45 ACSR 67

Consultation papers and reports

CP 62 Better experts’ reports

CP 143 Expert reports and independence of experts: Updates to RG 111 and RG 112

REP 234 Response to submissions on CP 143 Expert reports and independence of experts

© Australian Securities and Investments Commission March 2011 Page 23

 

Appendix B - Curriculum vitae

	Scott Kershaw Partner Tel: +61 2 8257 3055 Email: skershaw@kordamentha.com
Experience	Scott has over 25 years’ experience advising Boards and management teams in underperforming businesses which are facing the prospect of a financial restructure.
	The breadth and depth of Scott’s experience in distressed investing, recapitalisation and financial restructuring is unique in the Australian market. Scott has both lead teams investing in recapitalisations as well as advising companies on the recapitalisation options.
	Scott joined KordaMentha in 2009. Prior to that Scott spent 20 years with KPMG in Australia, the UK and Continental Europe in their restructuring and corporate finance groups and 18 months with Helmsman, a special situation fund focusing on investment opportunities in companies facing restructuring.
Qualifications	Bachelor of Business, University of Technology Sydney Registered Liquidator
Memberships	Chartered Accountants Australia and New Zealand Australian Restructuring Insolvency and Turnaround Association

Significant appointments

· Working with the management team of ASX listed global mining services company.

· ASX listed global wholesaler/retailer of sporting goods/apparel

· Chairman of an equipment rental company going through a recapitalisation

· Advice to the Board of Directors of a highly leveraged mining services company.

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	Jenny Nettleton Executive Director Tel: +61 2 8257 3044 Email: jnettleton@kordamentha.com
Experience	Jenny has spent her career in the corporate recovery and insolvency industry, encompassing all facets of formal and consulting engagements, and a stint in the workout area of a major Australian bank. She has worked with clients of all sizes, from public companies to SMEs, and Australian and international financiers.
	In formal engagements, Jenny has acted as receiver, voluntary administrator, administrator of DOCAs and liquidator, trading and selling businesses, and undertaking investigations.
	Prior to joining KordaMentha in 2004, Jenny was a Principal with Ernst & Young’s Corporate Restructuring practice and a Director with Arthur Andersen’s Corporate Recovery Practice.
Qualifications	Bachelor of Commerce Masters of Management Registered Liquidator
Memberships	Chartered Accountants Australia and New Zealand Australian Restructuring Insolvency and Turnaround Association

Significant appointments

· Chassis Brakes

· Aeropack Australia

· REAL Group

· Allco Finance Group

· CrossCity Motorways

· Pure Logistics Group

· Westpoint Constructions

· Amedeo Development Corporation (Brunei)

· Estate Mortgage Trusts

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Appendix C - Information list

Table 34 – Information received from the Group and relied upon for this report

Document Name	Description
31-Dec-16 Consolidation v10 BL	Consolidated Income Statement, Balance sheet by entity and workings as at 31 December 2016
31-Jan-17 Consolidation v2 BL	Consolidated Income Statement, Balance sheet by entity and workings as at 31 January 2017
2015 Financial Statements	Monthly actuals of Profit and Loss, Balance Sheet, Statement of Cashflows for the period January 2015 to December 2015
2016 Financial Statements	Monthly actuals of Profit and Loss, Balance Sheet, Statement of Cashflows for the period January 2016 to December 2016
2017 Financial Statements	Monthly actuals of Profit and Loss, Balance Sheet, Statement of Cashflows for the period January 2017 to February 2017
2017 Budgeting Process Context Memo – V2	Internal Memorandum regarding 2017 budgeting process
Adjusted Group Structure Chart	Group Corporate Structure
Annual Financial Report 2014	Audited Financial Reports for FY14
Annual Financial Report 2015	Audited Financial Reports for FY15
Annual Financial Report 2016	Audited Financial Reports for FY16
Boart Longyear Canadian tax update	Tax information regarding the Canadian tax dispute
Corporate Model v Actuals	Statement of Cashflows - Forecast to Actual for Q3FY16 and Q4FY16 with comments.
Deloitte Report – 14 August 2015	Report from Deloitte to the board of ListCo for the half year ended 30 June 2015
Deloitte Report – 20 February 2016	Report from Deloitte to the board of ListCo for the half year ended 31 December 2015
Deloitte Report – 30 June 2016	Report from Deloitte to the board of ListCo for the half year ended 30 June 2016
Deloitte Report – 17 February 2017	Report from Deloitte to the board of ListCo for the year ended 31 December 2016
Group Structure Chart - 03 Jan 017	Updated Group Corporate Structure
IBISWorld Industry Report OD5427- Oil and Mineral Exploration Drilling in Australia	A report including forecasts and trends for the Oil and Mineral Exploration Drilling in Australia industry
Prelim.2017 Op Plan.v11	Draft 2017 budget presentation
Project Phoenix 2017 Budget Model	Group’s budget model
Reconciliation_External_v34
PVA_Feb_v2 BL	Budget versus actual comparison workings for the two months ending 28 February 2017
S&P Capital IQ	Earnings multiples implied by the market capitalisation of comparable listed companies and asset betas and debt ratios of comparable listed companies
Various emails to and from the Group’s management, its legal and financial advisors

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Appendix D Glossary

Table 35 – Glossary of abbreviations used in report

Abbreviation	Full text
$	United States dollars unless otherwise specified
333	333 Group Pty Limited
ABL	Revolving credit facility provided pursuant to Revolving Credit and Security Agreement dated 29 May 2015
ABL Obligors	Includes Boart Longyear Limited, Boart Longyear Management Pty Ltd, Boart Longyear Australia Pty Ltd, Boart Longyear (USA), Boart Longyear (Canada), Longyear TM, In.
Act	Corporations Act 2001
Adjusted EBITDA	Earnings before interest, tax, depreciation, amortisation and restructuring expenses
APES	Australian Professional and Ethical Standards issued by the Australian Professional and Ethical Standards Board
Ares	Affiliates of Ares Management, L.P.
Ascribe	Ascribe II Investments, LLC.
Ashurst	Ashurst Australia
ASIC	Australian Securities and Investments Commission
ASIC RG 111	Australian Securities and Investments Commission Regulatory Guide 111
ASX	Australian Securities Exchange
Beneficiaries	Means the beneficiaries under the Schemes
Budget Model	Forecast model provided to us by the Group which includes the FY17 budget and forecast through to 31 December 2021 - Project Phoenix 2017 Budget Model Reconciliation_External_v34
Capex	Capital Expenditure
CAPM	Capital asset pricing model
Centerbridge	Centerbridge Partners, L.P., its affiliates and related funds
Court	Supreme Court of New South Wales
DDL	Delay Draw Loan Facility pursuant to Term Loan Securities Agreement dated 4 January 2017.
DDL Obligors	Includes BL DDL Holdings Pty Ltd, BL DDL II Holdings Pty Ltd, Boart Longyear Canada DDL Inc, Boart Longyear Canada Holdings Inc, BLY IP Inc, BL DDL NY Holdings Inc.
DCF	Discounted Cash Flow
EBIT	Earnings Before Interest and Tax
EBITDA	Earnings Before Interest, Tax, Depreciation and Amortisation
Enterprise Value or EV	A measure of the market value of the business undertakings of the Group
Explanatory Statements	Information booklet produced by the Scheme Companies, approved by the Court and including the Schemes and explanatory statement in accordance with the Corporations Act
FinCo	Boart Longyear Management Pty Limited
FY	Financial year ended 31 December
FY16	Actual financial results for the year ended 31 December 2016
FY17- FY21	Forecast financial results for the years ended 31 December 2017 to 2021
FY+1	Current financial year plus one year forward
FY17 Budget	Management’s budget included in the Budget Model for the year ending 31 December 2017
Interim Facility	Interim funding facility from Centerbridge in the amount of $15.0 million.
IP Obligor	BLY IP Inc.
KordaMentha	KordaMentha Pty Ltd
ListCo	Boart Longyear Limited

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Abbreviation	Full text
LTM	Last twelve months
MRP	Market risk premium
Non-ABL obligors	All entities excluding the ABL Obligors, Other Obligors, DDL Obligors and the IP Obligor
Other Obligors	Includes Votraint No. 1609 Pty Ltd, Boart Longyear Manufacturing Canada Ltd, Boart Longyear Suisse Sarl, Boart Longyear Chile Limitada, Bart Longyear Comercializadora Ltda, Longyear Holdings Inc, Longyear Canada ULC, Boart Longyear S.A.C.
p.a.	Per annum
Peer Group	Businesses with similar business activities and operating risks to the Group
PIK	Payment in Kind
Q1, Q2, Q3, Q4	Financial quarter ending 31 March, 30 June, 30 September and 31 December
RG	Regulatory Guide issued by ASIC
Recapitalisation Transactions	The transactions to be entered into by the Group to implement the recapitalisation as set out in Section 5 of the Explanatory Statement for each of the Secured Scheme and the Unsecured Scheme, which includes the Secured Scheme and the Unsecured Scheme
Other Recapitalisation Transactions	The transactions to be entered into by the Group to implement the recapitalisation as set out in Section 5 of the Explanatory Statement for each of the Secured Scheme and the Unsecured Scheme, but excluding the Secured Scheme and the Unsecured Scheme
Restructuring Support Agreement	Restructuring Support Agreement between the certain Group entities and certain of its financiers dated 2 April 2017
Secured Scheme	Proposed scheme of arrangement for Secured Scheme Creditors
Unsecured Scheme	Proposed scheme of arrangement for Unsecured Scheme Creditors
Scheme Companies	Boart Longyear Limited, Boart Longyear Management Pty Limited, Boart Longyear Australia Pty Limited and Votraint No.1609 Pty Limited
Secured Scheme Creditors	Holders of the TLA, TLB and Secured Notes
Unsecured Scheme Creditors	Holders of the Unsecured Notes
Secured Notes	The 10% secured notes issued pursuant to indenture dated 27 September 2013 as amended from time to time.
Subordinate Claim	Subordinate Claim means:
	·  a claim for a debt owed by BLY to a person in the person’s capacity as a member of BLY (whether by way of dividends, profits or otherwise); or
	·  any other claim that arises from buying, holding, selling or otherwise dealing in shares of BLY.
Subordinated Notes	The new subordinated notes to be issued to holders of the Unsecured Notes upon consummation of the proposed restructure
SG&A	Selling, general and administrative expenses
The Finance Facilities	Includes the Secured Notes, TLA, TLB, ABL, DDL, Interim Facility and Unsecured Notes.
The Group	Boart Longyear Limited and its subsidiaries
The Schemes	Proposed schemes of arrangements, comprising the Secured Scheme and the Unsecured Scheme
The Scheme Documents	Includes the explanatory statement and the schemes of arrangement.
TLA	Term loan A issued pursuant to Term Loan A Securities Agreement dated 22 October 2014 as amended from time to time.
TLB	Term loan B issued pursuant to Term Loan B Securities Agreement dated 22 October 2014 as amended from time to time.
Total Debt	The Group’s total finance debt from time to time
Unsecured Notes	The 7% unsecured Notes issued pursuant to indenture dated 28 March 2011 as amended from time to time.
WACC	Weighted Average Cost of Capital
We or Us	Scott Kershaw and Jenny Nettleton
Valuation	Enterprise Valuation of the Boart Longyear Group
Valuation Date	The date of this report

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Appendix E - Valuation approach

Valuation guidelines

The performance of a valuation service and preparation of valuation report, in accordance with APES 225, can take three engagement forms:

· Calculation Engagement is where the Member and the Client or Employer agree on the Valuation Approaches, Valuation Methods and Valuation Procedures the Member will employ. It does not usually include all of the Valuation Procedures required for a Valuation Engagement or a Limited Scope Valuation Engagement.

· Limited Scope Valuation Engagement is where the scope of work is limited or restricted. The scope of work is limited or restricted where the Member is not free, as the Member would be but for the limitation or restriction, to employ the Valuation Approaches, Valuation Methods and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Member at that time, and it is reasonable to expect that the effect of the limitation or restriction on the estimate of value is material.

· Valuation Engagement is where the Member is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Member at that time.

We have performed a ‘limited scope valuation engagement’ as we were unable to perform the following procedures:

· Visit all the sites at which the Group’s entities operate.

· Independently verify the historical accounts.

· Undertake a detailed review of all claims against each company for the purposes of assessing the claims of creditors and priority claims in each jurisdiction.

· Engage an independent industry expert to review commercial matters.

· Undertake discussions with local management for each entity.

· Engage property consultants to provide formal valuations of the land and buildings owned by the Group.

· Engage plant and equipment valuers to provide formal valuations of the plant and equipment owned by the Group.

· Engage valuers to provide formal valuations of the intellectual property owned by the Group

· Undertake an assessment of the veracity of management’s forecasts.

In order to complete a Valuation Engagement, the above processes would be required for us to establish sufficient evidence to support an opinion. If a Valuation Engagement was undertaken the valuation outcomes may have been different to those assessed in this report.

It is also important to note that the price accepted for assets may vary materially from the fair market value because a buyer is particularly anxious (for example, strategic reasons for buying the asset) or a seller is particularly anxious (for example, under financial stress or subject to an insolvency proceeding/liquidation).

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Valuation methodology

ASIC RG 111 outlines the appropriate methodologies which should be considered when valuing assets or securities for the purposes of, amongst other things, share buy-backs, selective capital reductions, schemes of arrangement, takeovers and prospectuses. These include:

· The application of earnings multiples appropriate to the businesses or industries in which the company or its profit centres are engaged, to the estimated future maintainable earnings or cash flows of the company, added to the estimated realisable value of any surplus assets.

· The discounted cash flow (DCF) methodology.

· The amount that would be available for distribution to shareholders in an orderly realisation of assets (asset based valuations).

· The quoted price of listed securities, when there is a liquid and active market and allowing for the fact that the quoted market price may not reflect their value on a 100% controlling interest basis.

· Any recent genuine offers received by the target for any business units or assets as a basis for valuation of those business units or assets.

These valuation techniques are not mutually exclusive and can be applied in conjunction with each other.

Valuation approach adopted

We have considered the valuation methodologies outlined in ASIC RG 111 and are of the opinion, given the nature of the assets, the following valuation methodologies are most appropriate:

· capitalisation of maintainable earnings as the primary valuation methodology

· cross-checking of our primary valuation methodology using a DCF valuation of the Group.

Further detail on these valuation methodologies is set out below.

Capitalisation of maintainable earnings or cash flows

Earnings based valuations require consideration of the following factors:

· Estimation of future maintainable earnings having regard to historical and forecast operating results, the core long term profit potential and future economic conditions.

· Determination of an appropriate earnings multiple that reflects:

- risks inherent in the business and the industry in which the business operates

- general characteristics of the business being valued

- size of the business

- growth prospects of the business

- asset backing of the business

- time value of money.

In this report we have undertaken a separate assessment of the value of surplus/unrelated assets and liabilities, being those assets and liabilities that impliedly are not actively engaged in producing the estimated future earnings. In particular, we have included the value of surplus items of plant and equipment and inventory as part our assessed enterprise value.

Future maintainable earnings are often assessed by reference to past results on the basis they represent a reasonably accurate guide to future results. There may be reasons why past results are not indicative of future results. In such cases, future maintainable earnings must be assessed by obtaining an understanding of the entity’s earnings generation capability, past events and expected future events and through the application of professional judgement. The future maintainable profits assessed should be the level of profit which (on average) the business can expect to maintain, in real terms, notwithstanding the vagaries of the economic cycle.

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The earnings multiple must be consistent with the earnings period. Historical multiples must be applied to historical earnings and forecast multiples to forecast earnings.

The capitalisation of earnings method is particularly applicable to businesses with relatively steady growth histories and forecasts, regular capital expenditure requirements and an expected life in perpetuity. The expected maintainable earnings of a business is a proxy for the future cash flow of a business.

Earnings-based methods are not appropriate where there is:

· a history of losses

· rapidly declining profits in an industry with poor prospects

· lack of historical data or inadequate prospective financial information such as with start-up businesses

· lumpy capital expenditure requirements

· current losses with an expectation of recovery

· an asset with a finite life.

Control premium

Transactions for 100% ownership typically attract a control premium. The premium for control represents the difference between the value of 100% of the company (for example as evidenced by the price paid in a successful takeover) and the share price (prior to the bid being announced) which represents the market value of a small parcel of shares. It also reflects the value to an acquirer for the ability to control the operations of the business.

Empirical studies show that historical take-over premiums have been in the range of 20% to 35% higher than the pre-bid share price. The percentage uplift depends of the industry in which the business operates and whether the pre-bid share price has already been affected by take-over speculation (and therefore already includes a take-over premium). Our assumed premium of 25% falls into the range identified in those studies, albeit with a slight bias toward the lower end of the range which reflects the current state of the capital markets in Australia.

Capitalisation of earnings valuation conclusion

In our opinion the capitalisation of maintainable earnings methodology is the most appropriate primary valuation methodology for the Group because:

· the Group is currently profitable at the EBITDA level, which we have assessed as the appropriate level of earnings to capitalise

· FY17 budgeted earnings (EBITDA) are broadly commensurate with the actual FY16 EBITDA

· the Group has a life in perpetuity (assuming it continues to secure customers for its services).

DCF valuation

The DCF valuation method is based on the generally accepted theory that the value of a business is the present value of its net future cash flows. This methodology involves:

· the forecasting of future cash flows over a sufficiently long period of time (including, if appropriate, a terminal value of the business being valued)

· the discounting of those cash flows at an appropriate risk adjusted discount rate representing an opportunity cost of capital which reflects the expected rate of return obtainable by investors from similar investments.

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Future cash flows comprise two elements:

· the cash amounts expected to be generated each year after paying all cash costs and cash outgoings

· the net cash amount expected to be received upon the ultimate sale of the business.

The DCF method is generally accepted as the most theoretically robust valuation methodology. However, its use in practice is limited due to a number of factors including:

· lack of reliable financial information

· difficulties associated with forecasting future cash flows with the requisite level of certainty.

Due to these restrictions, DCF valuations are usually conducted in the following situations:

· projects or businesses with finite lives (such as resource assets)

· projects or businesses operating in an environment that is undergoing regulatory changes that are likely to significantly impact its earning profile

· projects or businesses expecting a growth phase

· projects or businesses with fluctuating cash flows such as abnormal or lumpy capital expenditure requirements

· businesses with no or limited trading history, such as start-ups.

Discount rate for DCF valuation

The discount rate increases as the level of assessed risk increases. Risk is generally measured as variability in return. The higher the discount rate, the lower the value. The discount rate generally has two components, a cost of equity and a cost of debt. The discount rate is determined by weighting these components using a calculation known as the weighted average cost of capital (WACC).

An underlying assumption of a DCF analysis is that an entity’s gearing ratio remains constant overtime. Changes in the gearing ratio will change the cost of equity and consequently the discount rate.

There are a number of acceptable methods of assessing an appropriate required return on equity. The methods we would consider in a DCF valuation are:

· using an economic model such as the capital asset pricing model (CAPM)

· building up a discount rate using the adjusted capital asset pricing build-up method

· estimating a rate having regard for similar businesses and professional judgment.

Each of these methods must have regard for the factors affecting the required return on equity. These include:

· operational risk of the industry and the financial asset being valued (company specific factors)

· financial risk (gearing)

· the risk free rate of return

· market risk

· country risk

· size

· liquidity or marketability.

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In calculating value using the DCF methodology it is important to ensure that the discount rate determined is expressed in terms consistent with the expression of the cash flows being discounted. In particular:

· if cash flows are expressed on an after-tax basis the discount rate should also be expressed on an after-tax basis

· if cash flows are before debt servicing costs (un-geared) the discount rate should reflect the sources of finance (debt and equity) generating those cash flows

· if cash flows are expressed in real terms the discount rate should also be expressed in real terms.

The basic discounting formula is:

c/(1+i)n

where:

c = cash flow in each period

i = discount rate

n = number of periods the specific cash flow is being discounted

DCF valuation conclusion

In our opinion, the use of the DCF valuation methodology is not appropriate to use as the primary valuation methodology for the Enterprise Value of the Group because the forecast earnings and cash flows provided to us make assumptions about contract renewals, new work to be won and future contract margins which we are unable to verify and consequently there is significant uncertainty associated with the forecast profitability of the business beyond the next 12 to 24 months.

However, we have performed a DCF valuation of the Budget Model as a cross-check to our primary valuation methodology. This is set out in Section 3.4.

Asset-based valuations

Asset-based valuations involve the determination of the net realisable value of the assets used in the business on the basis of an assumed orderly realisation (notional liquidation). This value includes an allowance for reasonable costs of carrying out the sale of assets, the time value of money and the taxation consequences of asset sales. This is not a valuation on the basis of a forced sale where the assets might be sold at values materially below their fair market values.

The sum of a company’s individual asset is not usually the most appropriate measure of the value. Asset-based valuations are normally used as a secondary method of valuation and as a cross check on the reasonableness of the level of goodwill implied in an earnings-based or DCF valuation. Asset-based valuations may be appropriate as primary valuation methods in other specific circumstances. They are particularly applicable in a liquidation scenario (i.e. the company is not a going concern) or where the company acts as an investor and does not carry on trading operations and the shares confer control of the company.

The orderly realisation of assets basis of valuation usually provides the lowest realistic valuation for a company or business. This method assumes that the shareholder or owner has the ability to liquidate the company, usually by virtue of being the controlling shareholder. The difference between the value of the company’s net assets and the value obtained using a capitalisation of earnings or DCF methodology is attributable to the value of unrecorded intangible assets. By estimating asset values it is therefore possible to work out the implied intangible component of a valuation which can be assessed for reasonableness. The higher the level of implied intangible assets relative to the level of asset backing the higher the risk.

The notional realisation of assets basis of valuation is normally only applied to businesses which do not produce an annual cash flow, or where, because of the stage of establishment of the business or industry conditions, the outlook for a particular company’s future earnings is either uncertain or the capitalised value of such earnings is less than the net realisable value of the assets employed.

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The net realisable assets methodology is also used to value assets that are surplus to the core operating business.

In our opinion, the use of an asset-based valuation methodology is not appropriate to use as a primary or cross-check valuation methodology because the vast majority of value is in the future earnings of the Group with a sale of the assets likely to result in a materially lower valuation.

Market-based valuations

The market-based valuation approach proceeds from values at which shares are traded on the stock exchange, or where transactions are observed in the market place. The share market price may constitute the market value of shares where sufficient trading of the shares takes place. Share market prices usually reflect the prices paid for parcels of shares not offering control to the purchaser.

ListCo is currently listed on the Australian Stock Exchange (ASX) and has a current share price of $0.082⁵⁹ (AUD) with a market capitalisation of $77.88 million (AUD)⁶⁰.

Market-based valuations are often the most reliable, provided that relevant data is available. This is because they proceed from values at which actual transactions have occurred. All other methodologies seek to estimate values at which it is expected that hypothetical transactions would occur.

In the chart below we have summarised movement in the share price and trading volumes of ListCo for the last five years.⁶¹

Figure 6 – Share price and trade volume for Boart Longyear Limited (ASX:BLY)

 

The chart above shows that:

· The share price of ListCo significantly decreased from 2012 to 2014.

· Following the decline in share price, the trading volume of shares in ListCo has decreased significantly from late 2014 to present.

The current market capitalisation of ListCo implies an Enterprise Value significantly in excess of the Enterprise Value we have attributed to the Group.

⁵⁹ As at 31 March 2017

⁶⁰ S&P Capital IQ

⁶¹ Ibid

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However, we do not consider the share price of ListCo to be a relevant reference point in valuing the Group because:

· there is a relatively small free float in the shares of ListCo

· the shares of ListCo are thinly traded and the share price may not be a true reflection of the value of the Group

· the current ListCo share price may also be illustrative of the fact that the market is pricing in the value increment associated with the potential restructuring of the debt, the terms of which are not known to the market.

Recent genuine offers

Where a company has undertaken a detailed and extensive process to dispose of its assets, the final round binding bids are likely to be the market’s perception of value.

The final round binding bids represent the amount a potential acquirer is willing to pay based at the immediate point in time and the information available to it.

We have not been provided with any documentary evidence of any recent offers to purchase.

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Appendix F - Comparable companies

Table 36 – Description of comparable companies

Company	Description
Ausdrill Limited (ASX:ASL)	Ausdrill Limited operates as an integrated mining and energy services company worldwide. It operates through Drilling Services Australia, Contract Mining Services Africa, Equipment Services & Supplies, and All Other segments. The company is involved in the reverse circulation, diamond drilling, rotary air blast, and air core drilling; geochemical and precious metals analysis; production and monitoring of bores, as well as depressurization and dewatering, and surface hole drilling; and procurement and supply of exploration equipment, parts, and consumables. It also engages in the drill and blast, and grade control drilling; earthmoving equipment rental business; mine development and civil works; grade control; manufacture and supply of drilling consumables, spares, drill rods, and DTH drilling equipment; manufacture of bulk explosives; and provision of blasting services. In addition, the company is involved in the clearing, pre-strip, access, and haul road construction, excavation, loading, hauling, dumping, and equipment hire; underground mining; design, manufacture, and maintenance of blast hole, RC and diamond drill rigs, and support and ancillary equipment; manufacture and supply of RC hammers, bits, drill rods, and other equipment; and sale and rental of pressure, flow, and well control equipment for the oil and gas industry. Further, it engages in the exploration and production drilling of coal seam gas and shallow oil and gas wells; servicing of oil and gas wells; design, drilling, installation, testing, and commissioning of telecom and underground power networks; and motel business. Ausdrill Limited was founded in 1987 and is based in Canning Vale, Australia.
Bradken Limited (ASX:BKN)	Bradken Limited, together with its subsidiaries, manufactures and supplies consumable and capital products worldwide. It operates through Mining & Transport, Mineral Processing, Fixed Plant, Engineered Products, and Cast Metal Services (CMS) segments. The Mining & Transport segment is involved in the design, manufacture, supply, and service of consumable wear components for various types of earth moving equipment in the mining and quarry industries. It offers ground engaging tools and related wear parts; dragline rigging packages; and various buckets for dragline, front-end loader, face shovel, and hydraulic excavator equipment, as well as crawler system products for hydraulic mining excavators and electric rope shovels. This segment also provides industrial cast products for general industry and mining OEMs; and freight rolling stock products, including freight wagons, bogies, drawgear, spare, and renewed parts; and rolling stock maintenance and refurbishment services, as well as inventory management services. The Mineral Processing segment designs, manufactures, supplies, and services mill liner products in the mineral processing industry. It offers custom designed products for grinding mills, crushing, and conveying equipment primarily for the hard rock mining industry. The Fixed Plant segment provides customized wear solutions through the design and manufacture of a range of wear resistant products to protect fixed plant equipment in mining and port operations. Its customers primarily include mining and oil companies. The Engineered Products segment offers steel castings and differentiated consumable products to the mining, resource, transportation, structural, energy, and military industries. The CMS segment provides scrap processing and cast metal services. The company was incorporated in 1922 and is headquartered in Mayfield West, Australia.
Capital Drilling Limited (LSE:CAPD)	Capital Drilling Limited and its subsidiaries provide exploration, development, grade control, blast hole, and energy drilling services to the mineral exploration and mining companies. The company also offers drilling related logistic, equipment rental, and IT support services. Its services include surface diamond core drilling, high air capacity reverse circulation drilling, underground exploration diamond drilling, reverse circulation grade control drilling, Heli-portable diamond drilling, deep directional core orientation drilling, air core drilling using medium to light weight rigs, geotechnical drilling, hole planning and design, water bores and mine dewatering, coal and coal bed methane drilling, and blast hole drilling services. In addition, the company offers surveying, down-hole wireline logging, and support services for the mineral exploration industry; and data and voice solutions to the corporate and non-governmental organizations internationally. It operates a fleet of approximately 94 drilling rigs. The company has operations in Tanzania, Zambia, Egypt, the Democratic Republic of Congo, Pakistan, Armenia, Serbia, Papua New Guinea, Mozambique, Hungary, Eritrea, Chile, the Solomon Islands, Mauritania, and Ethiopia. Capital Drilling Limited was founded in 2004 and is headquartered in Èbène CyberCity, Mauritius.
Downer EDI Limited (ASX:DOW)	Downer EDI Limited provides various services to customers in the transportation, mining, energy and industrial engineering, utilities, communications, and facilities markets in Australia and internationally. The company’s Transport Services segment offers transport infrastructure services, such as earthworks, civil construction, asset management, maintenance, surfacing and stabilization, supply of bituminous products and logistics, open space and facilities management, and rail track signaling and electrification works. Its Technology and Communications Services segment provides feasibility, design, civil and network construction, commissioning, testing, operation, and maintenance services for fibre, copper, and radio networks; data centre services; and automated ticketing and intelligent transport technology systems. The company’s Utilities Services segment offers lifecycle services to customers in the power, gas, water, and renewable energy industries. Its Rail segment provides rail asset solutions, including passenger and freight build, operation and maintenance, component overhauls, and after-market parts. The company’s EC&M segment designs, engineers, constructs, and maintains greenfield and brownfield projects, such as feasibility studies; engineering design; civil works; structural, mechanical, and piping; electrical and instrumentation; mineral process equipment design and manufacture; commissioning; operations maintenance; shutdowns, turnarounds, and outages; strategic asset management; and decommissioning. Its Mining segment provides asset management, blasting, crushing, exploration drilling, mine closure and site rehabilitation, mobile plant maintenance, open cut mining, tire

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	management, and underground mining services; manufactures and supplies explosives; undertakes civil projects; and trains and develops ATSI employees. The company is headquartered in North Ryde, Australia.
Imdex Limited (ASX:IMD)	Imdex Limited engages in the minerals business in the Asia-Pacific, Africa, Europe, and the Americas. It is involved in the manufacture, sale, and rental of downhole instrumentation; manufacture and sale of drilling fluids and chemicals, as well as related equipment; and provision of cloud-based data management solutions to the mining and mineral exploration industry. The company also provides data solutions and geo-analytics services to exploration, development, and production companies in the minerals, and oil and gas sectors. It serves mining and mineral exploration, geothermal, water well, HDD, and civil engineering industries. The company was formerly known as Pilbara Gold NL and changed its name to Imdex Limited in July 1985. Imdex Limited was incorporated in 1980 and is headquartered in Balcatta, Australia.
K&S Corporation Limited (ASX:KSC)	K&S Corporation Limited provides transportation and logistics, contract management, warehousing and distribution, and fuel distribution services primarily in Australia and New Zealand. The company operates in three segments: Australian Transport, Fuels, and New Zealand Transport. It provides road, rail, and coastal sea forwarding for full and break bulk loads, including export packing, wharf lodgement, and the delivery of integrated supply chain and system solutions to timber, paper, dairy, agriculture, and general transportation industries; support services to offshore exploration and drilling projects; dry and liquid bulk transportation services to mining, sugar, cement, and fertilizer industries; and fuel distribution services to retail and service stations, primary producers, fishing industry, and transport operators. The company also manages distribution services, as well as provides equipment and personnel. In addition, it offers facility management services to various companies; distribution chain management services for various importers; general, full load, and part load freight services, as well as project services; and heavy haulage services. Further, the company transports bulk solids, liquids, and explosives by road, rail, and sea. K&S Corporation Limited was founded in 1945 and is headquartered in Truganina, Australia. K&S Corporation Limited is subsidiary of AA Scott Pty Ltd.
Layne Christensen Company (NasdaqGS:LAYN)	Layne Christensen Company operates as a water management, construction, and drilling company that provide solutions for the water, mineral, and energy markets worldwide. The company operates through four segments: Water Resources, Inliner, Heavy Civil, and Mineral Services. The Water Resources segment offers water-related products and services, including hydrologic design and construction; source of supply exploration; well and intake construction; and well and pump rehabilitation services. This segment also provides water treatment equipment engineering services and systems for the treatment of regulated and nuisance contaminants. In addition, it offers closed loop water management solutions to energy companies that are involved in hydraulic fracturing. The Inliner segment provides process, sanitary, and storm water rehabilitation solutions to municipalities and industrial customers dealing with aging infrastructure needs, as well as other rehabilitative methods, such as Janssen structural renewal for service lateral connections and mainlines, slip lining, traditional excavation and replacement, and manhole renewal with cementitious and epoxy products. The Heavy Civil segment offers water and wastewater treatment plants design and construction, and pipeline installation services; builds radial collector wells, surface water intakes, pumping stations, and hard rock tunnels, as well as offers marine construction services; and designs and constructs biogas facilities. The Mineral Services segment conducts above ground drilling activities comprising core drilling, reverse circulation, dual tube, hammer, and rotary air-blast methods; and provides exploratory and definition drilling services. The company was formerly known as Layne Inc. and changed its name to Layne Christensen Company in June 1996. Layne Christensen Company was founded in 1981 and is headquartered in The Woodlands, Texas.
Macmahon Holdings Limited (ASX:MAH)	Macmahon Holdings Limited provides contract mining services to clients in Australia, New Zealand, South East Asia, and Africa. It operates through three segments: Surface Mining, Underground Mining, and International Mining. The company offers surface mining services, including mine planning and management, drilling and blasting, bulk and selective mining, crushing and screening, fixed plant maintenance, camp and mine management, train loadout management, and operation and maintenance of client equipment. It also provides underground mining services, such as mine management, underground development and production, portal establishment, raise drilling, cable bolting, shot creting, remote shaft lining, production drilling, and shaft sinking services. In addition, the company offers plant, maintenance, and engineering services, which include commissioning, shutdown, and maintenance management; operation and maintenance of client-owned plant and infrastructure; water management and tailings dam maintenance services; modification to existing plant to suit clients’ needs; design, construction, commission, and maintenance of crushing and screening plants; fabrication, installation, and maintenance of structural, mechanical, mining, and electrical plant and equipment for surface and underground clients; and specialized engineering services. Macmahon Holdings Limited was founded in 1963 and is headquartered in Perth, Australia.
Mastermyne Group Limited (ASX:MYE)	Mastermyne Group Limited provides contracting services to the underground long wall mining operations in Australia. It operates through two segments, Mastermyne and Mastertec. The Mastermyne segment offers project management, labour and equipment hiring, underground roadway development, underground ventilation device installation, bulk materials handling system installation and relocation, and underground mine support services, as well as underground conveyor installation, extension, and maintenance services. The Mastertec segment provides a range of above-ground contracting services to ports, resources, industrial, and infrastructure sectors. Its services include scaffolding and rigging, blast and paint, pipeline services, sustainable capital works, fabrication and machining, training and engineering, and technical services. Mastermyne Group Limited was founded in 1996 and is headquartered in Mackay, Australia.
Mineral Resources Limited (ASX:MIN)	Mineral Resources Limited operates as a mining services and processing company in Australia, China, Singapore, and internationally. The company offers contract crushing, screening, and processing services on build-own-operate or build-operate basis for mining companies; mine services, such as materials handling,

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	plant and equipment hire and maintenance, tails recovery, and aggregate crushing; and design, engineering, and construction services in the resources sector. It also manages the processing, production, logistics, ship loading, marketing, and export of the resources on behalf of tenement owners. In addition, the company has a portfolio of iron ore assets in the Yilgarn and Pilbara regions of Western Australia; produces manganese from its Sunday Hill and Ant Hill tenements within the Pilbara region; and owns 43.1% interest in the Mt Marion lithium project located to the south west of Kalgoorlie, Western Australia. Further, it offers project management and delivery services for pipeline engineering and construction, mine dewatering systems and hydrocarbon management, HDPE lined steel, polyethylene pipe fittings and components, rock trenching and terrain levelling, underground cable installation, and plant and equipment hire. Mineral Resources Limited was founded in 1993 and is headquartered in Applecross, Australia.
Monadelphous Group Limited (ASX:MND)	Monadelphous Group Limited, an engineering group, provides construction, maintenance, and industrial services to the resources, energy, and infrastructure sectors in Australia. It operates through Engineering Construction; and Maintenance and Industrial Services divisions. The company offers large-scale multidisciplinary project management and construction services, including construction management and execution; civil and electrical construction packages; turnkey design and construction; structural steel, tankage, mechanical works, and process equipment and piping fabrication and installation; fabrication and procurement; modularization and off-site pre-assembly; plant commissioning; demolition and remediation works; and offshore construction services of plant and infrastructure. It also provides multidisciplinary maintenance and improvement solutions, such as structural, mechanical, piping, electrical and instrumentation, and civil maintenance services, as well as minor capital works, shutdowns, and operations and facilities management services. In addition, the company offers process and non-process maintenance; front-end scoping; water and waste water asset construction and maintenance; irrigation; transmission pipelines and facilities construction; power and water assets operation and maintenance; heavy lift and specialist transport; access solutions; and dewatering services. Monadelphous Group Limited was founded in 1972 and is headquartered in Victoria Park, Australia.
NRW Holdings Limited (ASX:NWH)	NRW Holdings Limited, through its subsidiaries, provides civil and mining contracting services to resource and infrastructure sectors in Australia. It operates through three business divisions: NRW Civil & Mining, Action Drill & Blast (ADB), and AES Equipment Solutions (AES). The NRW Civil & Mining division delivers private and public civil infrastructure projects, mine development and contract mining, waste stripping, and ore haulage. This division’s civil construction projects include bulk earthworks, rail formation, concrete installation, and construction of roads; and mining projects comprise work in iron ore, coal, and gold. The ADB division provides contract drill and blast services to mining sector, including iron ore, gold, coal, and lithium mines; and civil projects throughout Australia. The AES division offers maintenance services to the mining and resources sectors comprising the fabrication of water and service trucks. The company also sells plants and tires. NRW Holdings Limited was founded in 1994 and is headquartered in Belmont, Australia.
Orica Limited (ASX:ORI)	Orica Limited engages in the manufacture and distribution of commercial blasting systems, and mining and tunnelling support systems to the mining and infrastructure markets in Australia, the United States, and internationally. The company offers bulk systems, electronic blasting systems, initiating systems, packaged explosives, and blasting services to the surface and underground mining, civil tunnelling, quarrying, construction, and oil and gas markets. It also offers mining chemicals comprising sodium cyanide and emulsifiers, as well as offers a range of service solutions consisting of mineral recovery, cyanide handling and use, and onsite technical support. In addition, the company provides ground support solutions, including rock fall and ground support, roof control, ventilation control, water stopping and gas sealing, slope stabilization, cavity filling, ground consolidation, convergences, and backfilling services for the underground mining, construction, tunnelling, and civil engineering industries. Further, it manufactures and supplies specialty bolts, accessories, and chemicals for stabilization and ventilation systems in underground mining and civil tunnelling works. Orica Limited was founded in 1874 and is headquartered in East Melbourne, Australia.
Primoris Services Corporation (NasdaqGS:PRIM)	Primoris Services Corporation, a specialty contractor and infrastructure company, provides a range of construction, fabrication, maintenance, replacement, water and wastewater, and engineering services in the United States and internationally. It operates through three segments: The West Construction Services, The East Construction Services, and The Energy. The company installs, replaces, repairs, and rehabilitates natural gas, refined product, and water and wastewater pipeline systems; diameter gas and liquid pipeline facilities; and heavy civil projects, earthwork, and site development, as well as constructs mechanical facilities and other structures, including power plants, petrochemical facilities, refineries, water and wastewater treatment facilities, and parking structures. It also engages in designing and installing liquid natural gas facilities, high-performance furnaces, and heaters for clients in the oil refining, petrochemical, and power generation industries, as well as offers process and product engineering services. The company serves public utilities, petrochemical companies, energy companies, municipalities, state departments of transportation, and other customers. Primoris Services Corporation is headquartered in Dallas, Texas.

Source: S&P Capital IQ

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Appendix G - Comparable company multiples

Table 37 – Earnings multiple implied by the market capitalisation of comparable listed companies

		Market		Net			Enterprise		EBIT						EBITDA				EV/EBIT						EV/EBITDA
Comparable company	Ticker	capitalisation*		debt			Value		LTM			FY+1			LTM		FY+1		LTM			FY+1			LTM		FY+1
		$‘million		S’million			$‘million		$‘million						$‘million				$‘million						$‘million
Ausdrill Limited (ASX:ASL)	ASX:ASL		434.4		138.3			572.7		44.6			47.0			92.2		106.7		12.8			12.2			6.2		5.4
Bradken Limited (ASX:BKN)	ASX:BKN		648.5		211.5			860.0		27.8			57.2			53.4		83.0		30.9			15.0			16.1		10.4
Capital Drilling Limited (LSE:CAPD)	LSE:CAPD		112.4		(1.9	)		110.5		(1.5	)		6.6			13.0		20.1		(76.2	)		16.7			8.5		5.5
Downer EDI Limited (ASX:DOW)	ASX:DOW		2,292.0		16.1			2,308.1		206.5			205.2			376.9		380.3		11.2			11.2			6.1		6.1
Imdex Limited (ASX:IMD)	ASX:IMD		234.6		-			234.6		5.6			13.9			13.8		21.9		41.6			16.9			17.0		10.7
K&S Corporation Limited (ASX:KSC)	ASX:KSC		196.3		79.6			275.9		1.8			12.8			28.7		40.4		149.2			21.6			9.6		6.8
Layne Christensen Company (NasdaqGS:LAYN)	NasdaqGS:LAYN		217.1		88.8			305.9		(5.0	)		(5.0	)		23.0		25.1		(61.7	)		(61.0	)		13.3		12.2
Macmahon Holdings Limited (ASX:MAH)	ASX:MAH		169.5		-			169.5		(20.6	)		-			4.9		-		(8.2	)					34.7
Mastermyne Group Limited (ASX:MYE)	ASX:MYE		26.0		7.6			33.6		(4.0	)		(1.3	)		1.0		3.8		(8.4	)		(26.9	)		34.3		8.8
Mineral Resources Limited (ASX:MIN)	ASX:MIN		1,867.7		-			1,867.7		205.7			228.4			312.9		374.2		9.1			8.2			6.0		5.0
Monadelphous Group Limited (ASX:MND)	ASX:MND		1,089.0		-			925.4		56.1			60.1			70.3		74.8		16.5			15.4			13.2		12.4
NRW Holdings Limited (ASX:NWH)	ASX:NWH		213.1		29.5			242.5		14.1			24.1			31.5		47.6		17.2			10.1			7.7		5.1
Orica Limited (ASX:ORI)	ASX:ORI		6,236.7		1,187.6			7,424.3		425.9			498.7			614.3		713.6		17.4			14.9			12.1		10.4
Primoris Services Corporation (NasdaqGS:PRIM)	NasdaqGS:PRIM		1,498.0		126.0			1,623.9		60.5			109.9			128.5		180.2		26.9			14.8			12.6		9.0

Minimum	9.1	8.2	6.0	5.0
First quartile	12.4	11.2	7.3	5.4
Average	33.3	14.3	14.1	8.3
Median	17.3	14.9	12.4	8.8
Third quartile	33.6	16.7	16.3	10.6
Maximum	149.2	21.6	34.7	12.4

* Includes a control premium of	25%
Date of data	27/03/2017
Currency	USD
Source: S&P Capital IQ

1) The calculations above do not include the negative multiples relating to companies with historic or forecast losses.

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Appendix H – DCF discount rate and terminal value

Valuation methodology

The determination of an appropriate discount rate or cost of capital for a business requires identification and consideration of the factors that affect the returns and risks of that business, together with the application of widely accepted methodologies for determining the returns demanded by the debt and equity providers of the capital employed in the business.

The discount rate applied to the projected cash flows from a business represents the financial return that will be demanded before an investor would be prepared to acquire (or invest in) the business.

Market rates of return for equity type investments and project evaluations are frequently assessed using the capital asset pricing model (CAPM). Combining the CAPM results with the cost of debt funding will determine a business’ weighted average cost of capital (WACC).

Whilst the CAPM generates the required return on equity investment, the WACC represents the return required by all providers of finance to the business.

Cost of equity and CAPM

The CAPM stems from the theory that a prudent investor would price an investment so that the expected return is equal to the risk free rate of return plus an appropriate premium for risk. The CAPM assumes that there is a positive relationship between risk and return. That is, investors are risk averse and demand higher returns for accepting higher levels of risk.

The CAPM is based on the concept of non-diversifiable risk and calculates the cost of equity as follows:

Table 38 – CAPM

Component
Re	= Rf+ β(Rm-Rf)
Where:
Re	= Expected equity investment return or cost of equity
Rf	= Risk free rate of return
β	= Equity beta
Rm	= Expected market return
Rm-Rf	= Market risk premium

The individual components of the CAPM are discussed below.

Risk free rate of return

The risk free rate of return is normally approximated by reference to the yield on a long term government bond with a term to maturity broadly equivalent to the timeframe over which the returns from the assets are expected to be received.

As we are undertaking a US dollar valuation it is appropriate to use the current yield on 20 year US Treasury bonds as a risk free rate. The current yield is 2.74%⁶² and is used in conjunction with a market risk premium of 6.5% (refer below). We note that this use of the risk free rate is consistent with current market practice in the US.

⁶² As at 28 March 2017 

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Market risk premium

The market risk premium (‘MRP’) represents the additional return that investors expect in return for holding risk in the form of a well-diversified portfolio of risky assets (such as a market index). The MRP is the expected risk premium. Given that expectations are not observable, a historic risk premium is generally used to proxy for the expected risk premium.

We note that, strictly speaking, the MRP is the excess of expected returns of shares over government bonds. Since expected returns are generally not observable, a common method of estimating the MRP is based on average realised (ex-post) returns. However, realised rates of return, especially for shares, are highly volatile over short periods. Therefore, short-term average realised returns are unlikely to provide reliable estimates of expected returns and the MRP. For this reason, investors and values usually rely on estimates of MRP derived from historical long term averages of realised returns. Current market practice is to adopt a MRP of between 5.0% and 7.0% per annum in developed economies such as the USA, Canada, Europe and Australia.

For the purposes of this report we have adopted a market risk premium of 6.5% per annum. In our opinion, this is consistent with current valuation practice in the US and is within the range of long-term averages of historical market risk premiums.

Equity beta

Beta is a measure of systematic risk reflecting the sensitivity of a company’s share price to the movements of the stock market as a whole. Whilst expected betas cannot be observed, conventional practice is to estimate an appropriate beta with reference to the historical betas for a company over a finite period. It is also appropriate to consider betas for comparable companies and sector averages as a proxy, particularly if the subject company is not listed.

Observed betas in the market place, known as equity betas, are affected by the gearing of the individual company. The beta for equity reflects the non-diversifiable or systematic risk of a company. Equity betas incorporate the operational risk of the underlying company assets and other financial risk associated with the financial structure of the company (i.e. the combination of debt and equity employed to finance the company assets), whereas asset betas reflect only the operational risk.

The beta of an investment represents relative risk, not a measure of the total risk of a particular investment. Under the CAPM framework, the greater a security’s beta, the greater the required return. This is indicated by a beta greater than one, which implies that firms with higher volatility of returns (as measured by standard deviation) will have higher required returns due to greater risk, other things being equal.

As mentioned above, determination of a beta can be undertaken with reference to analysis of comparable companies. It is generally necessary to make adjustments to the observed equity betas in the market place to remove the impact of the different capital structures and levels of gearing in the companies examined. This process, known as de-levering, involves removing the gearing of the subject company to arrive at the asset beta and subsequently re-levering in line with the target level of gearing.

We adopt the Harris Pringle formula to de-lever and re-lever betas as follows:

Asset beta (un-geared) = Equity beta (geared)/[1 + (D/E)]

Equity beta (re-geared) = Asset beta (un-geared) x [1 + (D/E)]

where:

E = market value of equity

D = market value of debt

D/E = company’s debt to equity ratio

The betas of comparable companies are calculated relative to both the local index of the securities exchange on which the company’s shares are listed and the MSCI World Index. We adopt the betas measured against the securities exchange on which the company’s shares are listed.

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The equity betas of listed companies involved in similar activities or exposed to the same broad industry sectors as the Group are set out in Table 39 below. We have ignored the equity beta of ListCo as its shares are thinly traded, its beta is significantly distorted by its current high gearing levels and there is a weak correlation between movements in its share price and the ASX as a whole:

Table 39 – Asset betas and debt ratios of comparable listed companies

Company	Equity beta		R - squared		Market capitalization ($’million)		Five year average debt/equity			Five year average debt/EV			Asset beta
Ausdrill Limited		1.42		0.06		347.53		93	%		48	%		0.74
Bradken Limited		1.26		0.04		518.78		65	%		40	%		0.76
Capital Drilling Limited		0.90		0.07		89.94		5	%		5	%		0.85
Downer EDI Limited		1.46		0.31		1,833.60		9	%		9	%		1.33
Imdex Limited		1.26		0.04		187.67		15	%		13	%		1.10
K&S Corporation Limited		0.79		0.09		157.06		46	%		31	%		0.54
Layne Christensen Company		0.72		0.02		173.69		38	%		28	%		0.52
Macmahon Holdings Limited		1.09		0.03		135.63		12	%		11	%		0.97
Mastermyne Group Limited		1.36		0.06		20.83		19	%		16	%		1.14
Mineral Resources Limited		1.27		0.12		1,494.13		2	%		2	%		1.25
Monadelphous Group Limited		1.83		0.35		871.19		0	%		0	%		2.11
NRW Holdings Limited		1.32		0.02		170.47		17	%		15	%		1.12
Orica Limited		0.99		0.24		4,989.35		29	%		22	%		0.77
Primoris Services Corporation		1.00		0.19		1,198.36		5	%		5	%		0.95

Date of data Currency	27/03/2017
	USD

Average asset beta	1.01
Median asset beta	0.96
Average (excl R-squared of less than 0.5)	0.96
Median (excl R-squared of less than 0.5)	0.81
Average 5-year average debt/equity	25	%
Average 5-year average debt/EV	17	%

Source: S&P Capital IQ

Table 40 – Summary of Peer Group asset beta

Minimum	0.52
First quartile	0.75
Average	1.01
Third quartile	1.17
Maximum	2.11

After considering the above beta estimates and the relative risks associated with the Group we have adopted an asset beta of 0.9 to 1.1 for the Group. This range is broadly consistent with the median asset beta and the average asset beta excluding companies with an R-squared of less than 0.5.

The application of our assessed optimal gearing structure of 43% (debt/equity) (30% debt/enterprise value) (also see discussion on following page) to our assessed asset beta range results in an equity beta in the range of 1.29 to 1.57. The equity betas calculated have been regressed against each company’s local exchange.

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Company specific premium

Taking into account the specific risks of the Group relative to the Peer Group we have included a specific risk premium in the range of 0.5% to 1.5% per annum in our assessed cost of equity.

Cost of equity

Having regard to the above we have assessed the cost of equity for the Group to be 11.6% to 13.0% per annum.

Cost of debt

A pre-tax cost of debt of 9.5% per annum has been used based on the Group’s actual weighted average cost of debt as at 31 December 2016. Our analysis of the cost of debt funding of other Peer Group Companies indicates that the Group’s cost of debt finance is broadly consistent with the Peer Group. We have assumed the corporate tax rate of 31 % to calculate the post-tax cost of debt of 6.6%.

Gearing

The level of gearing can have a significant effect on the WACC calculated and it is an important consideration in any rate of return calculation. The gearing level adopted should represent the level of debt that the asset can reasonably sustain and is not necessarily equivalent to the gearing level of the organisation owning or offering the asset.

The factors that affect the optimum level of gearing will differ between assets. Generally, the major issues to address in determining this optimum level will include:

· The variability in earnings stream

· Working capital requirements

· The level of investment in tangible assets

· The nature and risk profile of the tangible assets.

In general, the lower the expected volatility of cash flows (i.e. risk), the higher the debt levels which can be supported.

When assessing the appropriate gearing level, it is also appropriate to consider the gearing levels of the Peer Group. Our adopted optimal gearing structure is based on our review of the long term average gearing levels of the Peer Group companies. We have adopted an optimal gearing structure (debt to enterprise value ratio) of 30% which is the approximate midpoint of the average long term gearing level of the peer group of and the long term gearing level of Ausdrill Limited, which we believe is the closest comparable company in the Peer Group.

Weighted average cost of capital

The WACC represents the market return required on the total assets of the undertaking by debt and equity providers. This contrasts with the cost of equity, which represents the return required by equity holders only.

As stated earlier, a valuer should use the WACC to assess the appropriate commercial rate of return on the capital invested in the business in recognition that a mix of debt and equity normally fund investments. Accordingly, the selected discount rate should reflect a reasonable level of debt and equity relative to the level of security and the risk attributable to the investment.

There are a number of formulae for the WACC. The differences between the formulae are in the definition of the cash flows (pre-tax or post-tax), the treatment of the tax benefit arising through the deductibility of interest expenses (included in either the cash flow or the discount rate), and the manner and extent to which they adjust for the effects of dividend imputation.

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The generally accepted WACC formula is the post-tax WACC, without adjustment for imputation:

 

Where:

Re	=	Expected return or discount rate on equity
Rd	=	Interest rate on debt (pre-tax)
T	=	Corporate tax rate
E	=	Market value of equity
D	=	Market value of debt

Calculation of Nominal WACC

As the Group’s Budget Model is expressed in ‘nominal’ terms, that is, the forecast cash flow has been calculated including the impact of inflation

Summary

The table below summarises our calculation of the Nominal WACC of the Group:

Table 41 – Nominal WACC of the Group

Boart Longyear Group - WACC calculation

Discount rate	Low			High
Risk free rate		2.7	%		2.7	%
Debt margin		6.8	%		6.8	%
Pre-tax cost of debt		9.5	%		9.5	%
Post-tax cost of debt		6.6	%		6.6	%
Market risk premium		6.5	%		6.5	%
Net debt/enterprise value		30.0	%		30.0	%
Asset Beta		0.90			1.10
Equity Beta		1.29			1.57
Company specific premium		0.5	%		1.5	%
Cost of equity		11.6	%		14.5	%
Post-tax WACC (nominal)		10.1	%		12.1	%
Say		10.0	%		12.0	%
Tax rate		31.0	%

Appendix I summarises our DCF analysis based on the assumptions above.

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Appendix I - DCF summary

Table 42 – DCF summary (low case)

For the calendar year ending			Actual FY16A			Forecast FY17F			Forecast FY18F			Forecast FY19F			Forecast FY20F			Forecast FY21F			Terminal Year
Total net revenue				642.4			681.9			688.7			699.1			713.0			730.9			752.8
Revenue growth (1)							6.1	%		1.0	%		1.5	%		2.0	%		2.5	%		3.0	%
Total Cost of goods sold				556.6			573.3			575.6			580.8			588.8			599.9			617.9
Cost of goods sold as a percentage of revenue (2)							84.1	%		83.6	%		83.1	%		82.6	%		82.1	%		82.1	%
Gross profit				85.84			108.56			113.09			118.28			124.21			130.97			134.90
Gross profit margin				13.4	%		15.9	%		16.4	%		16.9	%		17.4	%		17.9	%		17.9	%
Overhead and other expenses (offset against D&A)				(84.2	)		(117.1	)		(45.1	)		(49.4	)		(49.3	)		(48.8	)		(50.3	)
EBITDA				1.6			(8.5	)		68.0			68.8			74.9			82.2			84.6
Depreciation				(62.5	)		(61.9	)		(66.8	)		(66.0	)		(49.1	)		(49.1	)		(44.4	)
EBIT				(60.8	)		(70.4	)		1.2			2.8			25.8			33.1			40.2
Less: Effective taxes (3)	31	%		(6.2	)		-			-			-			-			-			(12.5	)
Debt-free net income (excl. Amort.)				(67.0	)		(70.4	)		1.2			2.8			25.8			33.1			27.8
Depreciation							61.9			66.8			66.0			49.1			49.1			AAA
Capital expenditure (4)				(22.3	)		(35.2	)		(32.7	)		(45.9	)		(55.2	)		(64.5	)		(46.7	)
Movement in net w orking capital							17.3			(2.2	)		(3.3	)		(4.5	)		(5.8	)		-
Debt-free cash flow (5)							(26.4	)		33.1			19.6			15.1			11.8			25.4
Low case - WACC of 12%
Capitalised value (6)																						282.6
Implied EBITDA exit multiple																						3.3
Periods (Months) (7)							6			18			30			42			54			54
Present value factor (8)	12.0	%					0.94			0.84			0.75			0.67			0.60			0.60
Present value of cashflow s							(25.0	)		27.9			14.8			10.2			7.1			169.7
Sum of present value of cashflow s (USD million)							204.7

Notes:

1. Based on FY17 forecast, IBISWorld report OD5427 Oil and Mineral Exploration Drilling in Australia annual growth rate of 0.6% for 2017 to 2022 and historical performance.

2. Based on FY17 forecast percentages and revenue growth

3. Based on a review of Australian (30%), Canadian (28%) and USA (38%) tax rates as well as regional average rates for NAM (35%), LAM (28%) APAC (30%) and EMEA (28%).

4. Terminal year level of CAPEX required to support growth and existing operations based on Depreciation being 95% of CAPEX.

5. Reflects cash available to service debt obligations and make distributions to equity investors.

6. Applies Gordon Growth formula. Assumes constant growth after explicit forecast.

7. Reflects mid period discounting convention from Valuation Date.

8. Equal to the Weighted Average Cost of Capital (WACC).

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Table 43 - DCF summary (high case)

For the calendar year ending			Actual FY16A			Forecast FY17F			Forecast FY18F			Forecast FY19F			Forecast FY20F			Forecast FY21F			Terminal Year
Total net revenue				642.4			681.9			688.7			699.1			713.0			730.9			752.8
Revenue growth (1)							6.1	%		1.0	%		1.5	%		2.0	%		2.5	%		3.0	%
Total Cost of goods sold				556.6			573.3			575.6			580.8			588.8			599.9			617.9
Cost of goods sold as a percentage of revenue (2)							84.1	%		83.6	%		83.1	%		82.6	%		82.1	%		82.1	%
Gross profit				85.84			108.56			113.09			118.28			124.21			130.97			134.90
Gross profit margin				13.4	%		15.9	%		16.4	%		16.9	%		17.4	%		17.9	%		17.9	%
Overhead and other expenses (offset against D&A)				(84.2	)		(117.1	)		(45.1	)		(49.4	)		(49.3	)		(48.8	)		(50.3	)
EBITDA				1.6			(8.5	)		68.0			68.8			74.9			82.2			84.6
Depreciation				(62.5	)		(61.9	)		(66.8	)		(66.0	)		(49.1	)		(49.1	)		(44.4	)
EBIT				(60.8	)		(70.4	)		1.2			2.8			25.8			33.1			40.2
Less: Effective taxes (3)	31	%		(6.2	)		-			-			-			-			-			(12.5	)
Debt-free net income (excl. Amort.)				(67.0	)		(70.4	)		1.2			2.8			25.8			33.1			27.8
Depreciation							61.9			66.8			66.0			49.1			49.1			(44.4	)
Capital expenditure (4)				(22.3	)		(35.2	)		(32.7	)		(45.9	)		(55.2	)		(64.5	)		(46.7	)
Movement in net w orking capital							17.3			(2.2	)		(3.3	)		(4.5	)		(5.8	)		-
Debt-free cash flow (5)							(26.4	)		33.1			19.6			15.1			11.8			25.4
High case - WACC of 10%
Capitalised value (6)																						363.3
Implied EBITDA exit multiple																						4.3
Periods (Months) (7)							6			18			30			42			54			54
Present value factor (8)	10.0	%					0.95			0.87			0.79			0.72			0.65			0.65
Present value of cashflow s							(25.2	)		28.7			15.4			10.8			7.7			236.6
Sum of present value of cashflow s (USD million)							274.1

Notes:

1. Based on FY17 forecast, IBISWorld report OD5427 Oil and Mineral Exploration Drilling in Australia annual growth rate of 0.6% for 2017 to 2022 and historical performance.

2. Based on FY17 forecast percentages and revenue growth

3. Based on a review of Australian (30%), Canadian (28%) and USA (38%) tax rates as well as regional average rates for NAM (35%), LAM (28%) APAC (30%) and EMEA (28%).

4. Terminal year level of CAPEX required to support growth and existing operations based on Depreciation being 95% of CAPEX.

5. Reflects cash available to service debt obligations and make distributions to equity investors.

6. Applies Gordon Growth formula. Assumes constant growth after explicit forecast.

7. Reflects mid period discounting convention from Valuation Date.

8. Equal to the Weighted Average Cost of Capital (WACC).

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Appendix J - Solvency definition and common law principals

Statutory definition

Section 95A(1) of the Corporations Act states that:

· a person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable.

Section 95A(2) further defines that a person who is not solvent is insolvent.

This statutory definition was in existence in one form or another prior to the implementation of the Corporate Law Reform Act on 23 June 1993. In particular it was referred to in section 592(1)(b)(i) as follows:

· there were reasonable grounds to expect that the company will not be able to pay all its debts as and when they become due.

Common law principles

Although the above definition of solvency is simply stated, it has been the source of much litigation. This has resulted in the consideration of basic common law principles when determining solvency or lack thereof, some of which are summarised below:

· If a company has a deficiency of net assets but it is in a position to pay all its debts as and when they become due and payable, because of a very strong profit-making business, it is solvent (Quick v Stoland Pty Ltd, 1998).

· Insolvency, or a severe shortage of liquid assets to meet debts as and when they fall due, needs to be distinguished from a temporary lack of liquidity (Hall and Poolman Pty Limited, 2007);

· There is a difference between temporary illiquidity and an endemic shortage of working capital whereby liquidity can only be restored by a successful outcome of business ventures in which the existing working capital has been deployed (Hymix Concrete Pty Limited v Garritty,1977).

· One must consider if the debtor is able to sell, mortgage or pledge his assets within a relatively short time (taking into account the nature of the debts and the circumstances of the debtor’s business), in order to meet his liabilities (Sandell v Porter, 1996).

· Assets which might otherwise be regarded as non-current (and hence not available to pay current liabilities) can, in appropriate circumstances, be taken into account to determine whether all such current and other liabilities can be met as and when they fall due (Re Newark; Taylor v Carroll, 1991).

· Although the test of solvency and insolvency within the meaning of section 95A is to be analysed using a cash flow approach rather than a statement of financial position approach, it is conceivable that solvency might be inferred from a preponderance of current assets over current liabilities (Switz Pty Limited v Glowbind Pty Limited, 2000).

· A company must produce cogent evidence to demonstrate solvency, and not merely a statement from its own accountant asserting that it has a surplus of assets over liabilities, or that the company can pay its debts as they fall due (Expile Pty Limited v Jabb’s Excavations Pty Limited, 2003).

· It is well established that in considering a company’s financial position as a whole, reference may be had, not merely to strict legal rights and obligations under agreement with creditors and debtors, but to commercial realities (Southern Cross Interiors Pty Limited (in liq) v Deputy Commissioner of Taxation, 2001).

· If the court is satisfied that as a matter of commercial reality the company has resources available to pay all its debts as they become payable, then it will not matter that the resource is an unsecured borrowing or a voluntary extension of credit by another party (Lewis v Doran, 2004). Furthermore, the ability of a company to raise funds from third parties should be considered in assessing solvency (Powell & Duncan v Fryer, Torkin & Perry, 2000).

The commercial reality that creditors will normally allow some latitude for payment of their debts does not, in itself; warrant conclusions that the debts are not payable at the time contractually stipulated and have become debts payable only upon demand (Standard Chartered Bank v Antico, 1995).

Liability limited by a scheme approved under Professional Standards Legislation Page 98

 

Appendix K - Balance sheet reconciliation

Table 44 - Reconciliation between balance sheet and net book values used in Transaction Value allocation

			As at 28 February 2017			Value adopted
Item	Note		$’000			$’000		Variance $’000
Cash and cash equivalents		1		59,343			-		59,343
Trade and other receivables		2		107,898			92,943		14,955
Inventories				165,020			165,020		-
Asset classified as held for sale		3		5,923			-		5,923
Other current assets		4		18,003			-		18,003
Total current assets				356,187			257,963		98,224
Non-current assets
Property, plant and equipment				127,660			127,662		(2	)
Goodwill				100,036			100,036		-
Other intangible assets				43,920			43,920		-
Deferred tax assets		5		19,465			-		19,465
Non-current tax receivable		5		19,035			-		19,035
Other assets		6		10,326			-		10,326
Total Non-current assets				320,442			271,618		48,826
Total assets				676,629			529,581		147,050
Current liabilities
Trade and other payables		7		126,589			124,225		2,364
Provisions		8		13,014			9,934		3,080
Current tax payable		5		94,577			-		94,577
Loans and borrowings				140			-		140
Total current liabilities				234,320			134,159		100,161
Non-current liabilities
Loans and borrowings				734,987			-		734,987
Other financial liabilities				-			-
Deferred tax liabilities				18,884			-		18,884
Provisions		8		25,941			23,995		1,946
Total non-current liabilities				779,812			23,995		755,817
Total liabilities				1,014,132			158,154		855,978
Net Assets/(Liabilities)				(337,503	)		371,427		(780,930	)

Notes on variances

1. We have not adopted any additional value for cash. The Group has advised it requires a minimum cash holding of approximately $25.0 million, and this holding is assumed in the Enterprise Value. Once Scheme costs are paid, there is unlikely to be any surplus cash in the Group.

2. We have excluded GST and other unspecified receivables. The GST balances are held largely in developing economies and the value of these assets to a buyer would be questionable.

3. Assets held for sale are included in the Enterprise Value as surplus assets.

Liability limited by a scheme approved under Professional Standards Legislation Page 99

 

4. Other current assets include prepayments and current tax receivables. We have placed no value on tax assets as their underlying value is highly uncertain.

5. Tax assets excluded

6. The nature of the other assets is unknown.

7. Minor accruals and pre-payments excluded as of unknown value

8. Provision balances include employee liabilities which have been adopted in our workings. Other provisions including onerous leases, warranty and restructuring costs have been excluded.

Liability limited by a scheme approved under Professional Standards Legislation Page 100

 

Appendix L - Schedule of tables

Table 1 – Scope of work, section guide and conclusions	3
Table 2 – Group debt structure as at 28 February 2017	7
Table 3 – Group debt pre and post–restructure (balances as at 28 February 2017)	11
Table 4 – Pro–forma shareholder register pre and post–restructure (pre–dilution)	12
Table 5 – Summary of estimated Enterprise Value of the Group	13
Table 6 – Comparison of the FY16 actual and FY17 budget	16
Table 7 – Comparison of actual and budgeted financial results for the two months ended February 2017	17
Table 8 – Transaction multiples	18
Table 9 – Enterprise valuation range	19
Table 10 – FY16A to FY21F Revenue growth	20
Table 11 – FY16A to FY21F gross margin	20
Table 12 – Key DCF valuation assumptions	21
Table 13 –EBITDA FY17F–FY21F	21
Table 14 –Additional DCF valuation assumptions	22
Table 15 – DCF Enterprise Value range	22
Table 16 – Net tangible business assets at 28 February 2017	23
Table 17 – Base case indirect cash flow forecast	27
Table 18 – Downside case indirect cash flow forecast	28
Table 19 – Pro forma post–restructure balance sheet as at 28 February 2017	30
Table 20 – Base case profit and loss FY17–FY21	31
Table 21 – Downside case profit and loss forecast FY17–FY21	31
Table 22 – Notional NPAT FY17–FY21	32
Table 23 – Summary of Beneficiary outcomes	34
Table 24 – Transaction Value	35
Table 25 – Security and priority structure	36
Table 26 – Net book value of assets adopted for apportionment of Transaction Value	37
Table 27 – Apportionment of Transaction Value to obligor groups	37
Table 28 –Allocation of Transaction Value to Secured Lenders	38
Table 29 – Security and priority structure in liquidation scenario	39
Table 30 – Transaction Value (limited insolvency)	40
Table 31 – Apportionment of Transaction Value (limited insolvency) to obligor groups	40
Table 32 – Estimated dividend to financiers in a limited insolvency	41
Table 33 – Status quo base case cash flow forecast	42
Table 34 – Information received from the Group and relied upon for this report	77
Table 35 –Glossary of abbreviations used in report	78
Table 36 – Description of comparable companies	87
Table 37 – Earnings multiple implied by the market capitalisation of comparable listed companies	90
Table 38 – CAPM	91
Table 39 – Asset betas and debt ratios of comparable listed companies	93
Table 40 – Summary of Peer Group asset beta	93
Table 41 – Nominal WACC of the Group	95

Liability limited by a scheme approved under Professional Standards Legislation Page 101

 

Table 42 – DCF summary (low case)	96
Table 43 – DCF summary (high case)	97
Table 44 – Reconciliation between balance sheet and net book values used in Transaction Value allocation	99

Liability limited by a scheme approved under Professional Standards Legislation Page 102

 

Appendix M - Schedule of figures

Figure 1 – Simplified corporate and financing structure	8
Figure 2 – Private mineral exploration expenditure (Australia)	15
Figure 3 – Base case monthly liquidity profile FY17–FY18	27
Figure 4 – Downside case monthly liquidity profile FY17–FY18	28
Figure 5 – FY17–FY18 liquidity position assuming status quo	43
Figure 6 – Share price and trade volume for Boart Longyear Limited (ASX:BLY)	85

Liability limited by a scheme approved under Professional Standards Legislation Page 103

Annexure C

Certified Copies of Financial Statements

Annex C

I certify that this is a true and correct copy of Boart Longyear Limited's Appendix 4E - Preliminary Final Report dated 27 Febuary 2017.
Signed:	/s/ Fabrizio Rasetti
Name:	Fabrizio Rasetti
Position:	Company Secretary
Dated:	March 28, 2017

APPENDIX 4E - PRELIMINARY FINAL REPORT

Name of Entity: ABN or equivalent company reference: Current reporting period: Previous reporting period: BOART LONGYEAR LIMITED 49 123 052 728 year ended 31 December 2016 year ended 31 December 2015

RESULTS FOR ANNOUNCEMENT TO THE MARKET

	2016			2015
	US$'000			US$'000			$ change			% change
Revenue from ordinary activities		642,404			735,158			(92,754	)		-12.6	%
Net loss after tax attributable to members		(156,839	)		(326,277	)		169,438			51.9	%
Adjusted net loss after tax attributable to members		(108,450	)		(132,184	)		23,734			18.0	%

Brief explanation of any figures reported above:

Adjusted loss from ordinary activities after tax attributable to members and adjusted loss after tax attributable to members are non-IFRS measures and are used internally by management to assess the performance of the business and have been derived from the Company's financial statements by adding back significant items. Refer to Directors’ Report for explanations.

Dividends per ordinary share paid or to be paid (US$): 

	2016	2015
Interim dividend	0 cents	0 cents
Franked amount	0 cents	0 cents
Final dividend	0 cents	0 cents
Franked amount	0 cents	0 cents

No dividend had been determined for either of the half-years ended 30 June 2016 or 31 December 2016.

Total dividends for the years ended 31 December 2016 and 2015 were US$0 (nil) per share.

Net Tangible Assets per share (US$):
Current period:	$	(0.51	)
Previous corresponding period:	$	(0.36	)

Net tangible assets decrease resulted from a combination decreasing property, plant and equipment balances as assets depreciate, lower cash balances as well as increases in loans and borrowings during the year.

Control gained over entities having material effect:

N/A

Details of aggregate share of profits (losses) of associates and joint venture entities:

N/A

Segment Information:

Please refer to the Annual Financial Report for the year ended 31 December 2016.

Compliance Statement:

The above information has been prepared based on accounts that have been audited.

SIGNED:

/s/ Fabrizio Rasetti

Company Secretary

DATE: 27 February 2017

I certify that this is a true and correct copy of the financial report of Boart Longyear Limited and its controlled entities for the financial year ended 31 December 2016.
Signed:	/s/ Fabrizio Rasetti
Name:	Fabrizio Rasetti
Position:	Company Secretary
Dated:	March 28, 2017

BOART LONGYEAR LIMITED

A.B.N. 49 123 052 728

ANNUAL FINANCIAL REPORT

YEAR ENDED 31 DECEMBER 2016

 1

CONTENTS
DIRECTORS’ REPORT	3
REVIEW OF OPERATIONS	5
REMUNERATION REPORT	26
BOARD OF DIRECTORS	56
EXECUTIVE MANAGEMENT TEAM	60
AUDITOR’S INDEPENDENCE DECLARATION	62
INDEPENDENT AUDITOR’S REPORT	65
DIRECTORS’ DECLARATION	68
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME	69
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	70
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	71
CONSOLIDATED STATEMENT OF CASH FLOWS	72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	74

 2

Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

DIRECTORS' REPORT

The Directors present their report together with the financial report of Boart Longyear Limited (the “Parent”) and its controlled entities (collectively the “Company”) for the financial year ended 31 December 2016 (financial year) and the Independent Auditor’s Report thereon.

Financial results and information contained herein are presented in United States (“US”) dollars unless otherwise noted.

DIRECTORS

The Directors of the Company (the “Directors”) in office during the financial year and as at the date of this report are set out below.

Directors	Position
Marcus Randolph	Executive Chairman
Bret Clayton	Non-executive Director
Peter Day	Non-executive Director
Jonathan Lewinsohn	Non-executive Director (resigned from the Board effective 20 January 2017)
Jeffrey Long	Non-executive Director
Gretchen McClain	Non-executive Director
Rex McLennan	Non-executive Director and Senior Independent Director
Jeffrey Olsen	Executive Director (appointed effective 1 March 2016)
Deborah O'Toole	Non-executive Director
Conor Tochilin	Non-executive Director (appointed effective 20 January 2017)

For a summary of experience and qualifications for each Director, see the Board of Directors section on page 56 of this Report.

COMPANY SECRETARIES

· Fabrizio Rasetti

· Philip Mackey (appointed effective 29 January 2016)

PRINCIPAL ACTIVITIES

Boart Longyear is the world’s leading integrated provider of drilling services, drilling equipment and performance tooling for mining and mineral drilling companies globally. The Company offers a comprehensive portfolio of technologically advanced and innovative drilling services and products. The Company operates through two divisions — “Global Drilling Services” and “Global Products” — and believes that its market-leading positions in the mineral drilling industry are driven by a variety of factors, including the performance, expertise, reliability and high safety standards of Global Drilling Services, the technological innovation, engineering excellence and global manufacturing capabilities of Global Products and the Company’s vertically integrated business model. These factors, in combination with the Company’s global footprint, have allowed the Company to establish and maintain long-standing relationships with a diverse and blue-chip customer base worldwide that includes many of the world’s leading mining companies. With more than 125 years of drilling expertise, the Company believes its insignia and brand represent the gold standard in the global mineral drilling industry.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

On 29 February 2016, Jeffrey Olsen, the Company’s Chief Financial Officer (“CFO”), was announced as the Company’s new President and Chief Executive Officer (“CEO”) effective 1 March 2016. With Mr Olsen’s appointment, Marcus Randolph relinquished his duties as Boart Longyear’s Interim CEO and the associated day-to-day operating responsibilities. Mr Randolph remains the Company’s Executive Chairman at the request of the Board of Directors to assist with Mr Olsen’s assumption of his new duties.

On 12 August 2016, the Company announced several executive appointments to strengthen its senior management team. Brendan Ryan was announced as the Company’s Chief Financial Officer, and Denis Despres was appointed to the newly created role of Chief Operating Officer. Messrs Ryan and Despres commenced employment with the Company on 6 September 2016 and 1 September 2016, respectively. In addition, the Company announced the departure of Mr Kent Hoots, Senior VP, Global Products.

 3

Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

EVENTS SUBSEQUENT TO REPORTING DATE

On 5 January 2017, the Company entered into a $20 million delayed draw term loan (“DDTL”) with Centerbridge Partners L.P. The DDTL has been established to provide additional financial resources to support ongoing restructuring discussions with the Company’s lenders as well as to provide additional working capital in the first quarter of 2017. The Company drew the available $20 million balance on 13 February 2017.

The material terms of the DDTL are, as follows:

· Commitment of $20 million in aggregate principal amount;

· Secured by $50 million of collateral in the form of certain of the Company’s drilling rigs in the United States, Canada and Australia;

· Maturity date of 31 December 2020;

· Interest Rate of 12% per annum payable in kind or 10% payable in cash at the Company’s option, in each case payable quarterly in arrears; and

· Other customary terms and conditions, including customary covenants and events of default that are substantially the same as those in the Centerbridge Term Loans A and B.

In conjunction with the execution of the DDTL, the Company and Centerbridge have also modified certain terms of Term Loans A and B, which were entered into as part of the Centerbridge-led recapitalisation in 2015, as follows:

· The maturity dates for Term Loans A and B have been amended from 1 October 2020 and 1 October 2018, respectively, to 3 January 2021

· The interest rate for both Terms Loans A and B has been amended from 12% per annum payable in kind to either 12% payable in kind or 10% payable in cash at the Company’s option;

· The period for the make-whole obligations under Term Loans A and B has been extended to 3 January 2021;

· The Company must at all times maintain at least 90% of all its US, Canada and Australia tangible assets, including the collateral for the DDTL, as collateral supporting Term Loans A and B.

DIVIDENDS

No dividends have been paid during the financial year.

No dividend was determined for either of the half-years ended 30 June 2016 or 31 December 2016.

 4

Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

REVIEW OF OPERATIONS ¹

1. Safety Performance, Market Conditions and Strategies

1.1 Overview

Boart Longyear is the world’s leading integrated provider of drilling services, drilling equipment and performance tooling for mining and mineral drilling companies globally. We conduct our business activities through two segments, Global Drilling Services and Global Products.

We aim to create value for our customers through a comprehensive portfolio of technologically advanced and innovative drilling services and products. We believe that our market leading positions in the mineral drilling industry are driven by a variety of factors, including the performance, expertise and high safety standards of Global Drilling Services and the innovation, engineering excellence and global manufacturing capabilities of Global Products.

Our operating and commercial priorities include solidifying our competitive advantages with sustained investments in safety performance, productivity enhancements and operating improvements in our Global Drilling Services division, while remaining focused on the needs of our customer base. Similarly, technology and product innovation are central to the strength and future growth of our Global Products division, and we continue to pursue incremental product improvements that customers will need at any point in the mining cycle. During 2016, the Global Products division launched seven new products and continues to invest in its new product pipeline. A key launch was the LF™160 surface coring drill rig with a hands free rod loader. This rig package brings a combination of features that delivers best-in-class safety and productivity to the drill site. We continued to roll out TruCore™ in Latin America. This is the first in a range of instrumentation tools that provides accurate core orientation measurements, which represents the first step in implementing our strategy to be the global leader in providing subsurface resource information to our mining customers through our Geological Data Services business.

Our capital structure exposes us to a variety of market, operational and liquidity risks. To address these risks, we are focused on addressing our capital structure, including debt maturities in October 2018 and our high levels of debt relative to current market conditions. We also have established being cash positive in 2017 as a primary goal for the business, which we intend to achieve through continued disciplined expense and capital management, opportunistic cost reductions and productivity enhancements.

1.2 Safety Performance

Central to our success is a clear focus on driving safety improvements. We regard safety as fundamental to our relationships with our employees, customers and all stakeholders. We also consider our safety performance both to be a significant opportunity and a risk, as our customers often look to safety as a basis to differentiate their suppliers.

In 2016, the Company reported good safety performance, with a Total Case Incident Rate (“TCIR”) of 1.41 and Lost-Time Injury Rate (“LTIR”) of 0.11, compared to corresponding rates of 1.24 and 0.18 for 2015. (Both TCIR and LTIR are rates calculated based on 200,000 hours worked.) While Company performance continues to be solid, we are committed to providing our employees and customers with an injury-free workplace and industry-leading safety performance. During this half-year period, our employees experienced 69 injuries that required some medical treatment and six injuries that resulted in lost work time. We believe that significant improvements in our safety record are a moral imperative, and we are pursuing improvements through initiatives focused upon critical risk management, risk-focused field leadership, industry-leading training and competency verification and employee-centric safety messaging initiatives.

1.3 Impact of Market Conditions

Market conditions in 2016 have continued to be defined by weak demand and oversupply in our core mineral drilling industry, as most of the world’s mining companies continued to tightly control their exploration, development and capital expenditures and to seek savings from their suppliers.

During 2016, drill rig utilisation remained at historical lows and pricing conditions for our goods and services continued to be weak and adversely impact the Company’s financial performance.

(1)    The Review of Operations contains information sourced from our audited financial statements as well as additional supplemental information that has not been subject to audit or review.

 5

Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

As a result of challenging market conditions as well as significant ongoing finance costs, the Company reported a statutory loss for the 2016 financial year of $156.8 million, which was an improvement of $169.5 million compared to the prior year (2015: $326.3 million loss). Adjusted net loss after tax for the year (adding back significant items and other non-recurring items) was $108.4 million, compared to an adjusted net loss after tax for 2015 of $132.2 million, a decrease in loss of $23.8 million. See reconciliation in Section 7 ‘Non-IFRS Financial Information’.

Objectives and Strategies

We continue to prioritise cash generation and positioning the business with a more efficient operating platform in all phases of the mining industry’s cycles. Key elements of this strategy include achieving and maintaining sustainable EBITDA-to-revenue margins, improving returns on capital through disciplined variable and fixed cost management and capital spending programs, and rigorous focus in working capital particularly inventory and accounts receivable.

We are committed to driving long-term shareholder value by executing on several initiatives to improve our commercial practices in both our divisions and improved safety, productivity and profitability in our Global Drilling Services division, including through:

1. focusing on operational efficiencies and productivity at the drill rig level;

2. optimising the commercial organisation to drive value through contracting and pricing processes;

3. leveraging the supply chain function across the business; and

4. controlling SG&A and other overhead related costs.

We also are pursuing market leadership in providing subsurface resource information to our mining customers in an integrated, real-time and cost-effective manner through our Geological Data Services business.

In our Global Products division, we are focused on improving our commercial practices and product development to more closely align with customer priorities, product innovation and technology and manufacturing leadership and delivering more cost-effective products offering improved productivity and safety.

Ultimately, our goal is operational excellence to help us address the risks and challenges of the current mining industry cycle while also preserving the significant upside that we may realise in our operations when market conditions change and our operating leverage improves as a result of our significantly improved cost structure and operating performance. We also are capitalising on longer-term growth opportunities through investment in technologies that will broaden our customer offerings.

 6

Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

2 Financial and Operating Highlights

	For the year ended 31 December
	2016			2015
	US$ Millions			US$ Millions			$ Change			% Change
Key financial data
Revenue		642.4			735.2			(92.8	)		-12.6	%
NPAT(1)		(156.8	)		(326.3	)		169.5			51.9	%
Adjusted NPAT(1)		(108.4	)		(132.2	)		23.8			18.0	%
EBITDA(2)		1.6			(115.3	)		116.9			101.4	%
Adjusted EBITDA(2)		32.0			(0.1	)		32.1			32100.0	%
Operating Loss		(60.8	)		(199.2	)		138.4			69.5	%
Loss from Trading Activities (3)		(23.9	)		(45.8	)		21.9			47.8	%
Cash (used in) generated from operations		(1.4	)		11.4			(12.8	)		-112.3	%
Net cash flows used in operating activities		(50.4	)		(54.9	)		4.5			8.2	%
Capital expenditures (accrual)		20.4			20.4			-			0.0	%
Capital expenditures (cash)		22.4			24.5			(2.1	)		-8.6	%
Weighted Average number of ordinary shares		935.6			905.5			30.1			3.3	%
Earnings per share (basic and diluted)		(16.8) cents			(36.0) cents			19.2 cents			53.3	%
Average BLY rig utilisation		32	%		36	%		-4	%		-11.1	%
Average Fleet size		889			921			(32	)		-3.5	%

(1) NPAT is ‘Net profit after tax’. Adjusted NPAT is ‘Net profit after tax and before significant and other non-recurring items’. See reconciliation in section 7 ‘Non-IFRS Financial Information’.

(2) EBITDA is ‘Earnings before interest, tax, depreciation and amortisation’Adjusted EBITDA is ‘Earnings before interest, tax, depreciation and amortisation and before significant and other non-recurring items’. See reconciliation in section 7 ‘Non-IFRS Financial Information’.

(3) Loss from Trading Activities is a non-IFRS measure and is used internally by management to assess the underlying performance of the business and has been derived from the Company’s financial results by eliminating from Operating Loss charges relating to significant and other expense/income items.

3 Discussion and Analysis of Operational Results and the Income Statement

3.1 Revenue

Revenue for the year ended 31 December 2016 of $642.4 million decreased by 12.6%, or $92.8 million, compared to revenue for the prior year ended 31 December 2015 of $735.2 million.

A majority of the revenue for both Global Drilling Services and Global Products is derived from providing drilling services and products to the mining industry and is dependent on mineral exploration, development and production activities. Those activities are driven by several factors, including anticipated future demand for commodities, the outlook for supply and mine productive capacity, the level of mining exploration and development capital and the availability of financing for, and the political and social risks around, mining development.

Revenue during 2016, was lower as a result of lower volumes due to weaker sentiment in the mining industry, resulting in reduced spending on exploration and development, as well as unfavourable foreign currency impacts when compared to the same period in 2015. We are still challenged by the negative impact of price on revenue but it is less in 2016 than in 2015.

 7

Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

3.2 Cost of Goods Sold, Sales and Marketing Expense, and General and Administrative Expense

The following pro forma income statement shows the effects of removing significant items from their respective income statement line. The adjusted balances will be used in the following narrative to reflect cost categories after removing the impact of significant items.

	For the  year ended 31 December
	2016									2015
	As			Significant			Adjusted			As			Significant			Adjusted
	Reported			Items			Balance			Reported			Items			Balance
Continuing operations
Revenue		642.4			-			642.4			735.2			-			735.2
Cost of goods sold		(556.6	)		3.0			(553.6	)		(734.8	)		76.2			(658.6	)
Gross margin		85.8			3.0			88.8			0.4			76.2			76.6
Other income		8.9			-			8.9			2.2			-			2.2
General and administrative expenses		(108.8	)		22.1			(86.7	)		(119.1	)		21.1			(98.0	)
Sales and marketing expenses		(28.4	)		2.4			(26.0	)		(25.2	)		0.7			(24.5	)
Significant items		-			(27.5	)		(27.5	)		-			(98.0	)		(98.0	)
Other expenses		(18.3	)		-			(18.3	)		(57.5	)		-			(57.5	)
Operating loss		(60.8	)		-			(60.8	)		(199.2	)		-			(199.2	)

Total adjusted Cost of Goods Sold (“COGS”), adjusted Sales and Marketing expenses (“S&M”) and adjusted General and Administrative expenses (“G&A”) for the Company for the year ended 31 December 2016 were $666.3 million, compared to $781.1 million in 2015, a decrease of $114.8 million, or 14.7%.

Total adjusted COGS for the year ended 31 December 2016 was $553.6 million, representing a decrease of 15.7% compared to COGS of $658.6 million for 2015. Adjusted COGS as a percentage of revenue decreased at a greater percentage than the decrease in revenue when compared to the prior year. This decrease is due to the cost reduction actions that have been implemented over the past several years.

Total adjusted S&M expenses for the year ended 31 December 2016 of $26.0 million increased by 6.1 %, or $1.5 million, from the prior year (2015: $24.5 million for the comparable period). Adjusted S&M expenses increased as a percentage of revenue during 2016 compared to the prior year.

Total adjusted G&A expenses for the Company for the year ended 31 December 2016 were $86.7 million, representing a decrease of 11.5%, or $11.3 million (2015: $98.0 million for the prior year). Adjusted G&A expenses remained fairly consistent as a percentage of revenue year over year. The Company continues to reduce costs wherever possible. The majority of the decrease in G&A expenses relates to decreases headcount and travel expenses during the year.

In response to weakening industry conditions, the Company has taken a series of initiatives to reset its cost base and to reduce its overall expenditure profile. The initiatives have included the removal of certain operating expenses, SG&A expense, other overhead-related expense and capital expenditures. From 2012 to 2016, the Company estimates that it has reduced its overall expenditure profile by approximately $1.4 billion.

 8

Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

3.3 Significant Items

During the years ended 31 December 2016 and 2015, the Company incurred the following restructuring expense, recapitalisation costs and impairment charges related to current market conditions and cost reductions:

	For the year ended 31 December
	2016		2015		$
	US$ Millions		US$ Millions		Change
Significant items
Recapitalisation costs		7.5		0.6		6.9
Impairments
Equipment		0.9		36.8		(35.9	)
Intangible assets		1.0		0.6		0.4
Inventories		-		34.5		(34.5	)
Employee and related costs 1		8.0		16.0		(8.0	)
Other restructuring costs		10.1		9.5		0.6
Total significant items		27.5		98.0		(70.5	)
Net of tax		27.2		89.6		(62.4	)

(1) Employee and related costs include separation costs, retention and other employee-related costs

Significant items decreased to $27.5 million during the year ended 31 December 2016 (2015: $98.0 million), mainly related to the absence of significant impairment charges being recorded in respect of property, plant and equipment and inventories in the current year compared to the prior year, in which a total of $71.3 million of impairments were recorded.

3.4 Other Income/Expenses

Other income increased to $8.9 million during the year ended 31 December 2016 (2015: $2.2 million) primarily due to gains on disposals of surplus property and drilling equipment as well as foreign currency exchange gains. Based on current market conditions and future outlook, in 2015 the Company commenced a project to sell certain excess rigs and ancillary equipment that are underutilised. The opportunity for a gain by the disposition of these targeted assets allows the Company to rationalise its assets, raise capital and reduce ongoing maintenance costs. These asset rationalisation initiatives are expected to continue through 2017 and accordingly, there are $5.9 million of assets classified as Held for Sale.

Other expenses, principally amortisation of intangible and VAT-related items, decreased $39.2 million to $18.3 million during the year ended 31 December 2016 (2015: $57.5 million). The significant decrease relates to the following: in the prior year there was a significant foreign currency loss ($17.0 million) compared to a gain in the current year; there were VAT and customs settlements ($6.4 million) that did not repeat in the current year; a loss on liquidation of a subsidiary of $6.3 million that was a one-time charge and other miscellaneous items that did not recur during 2016. During the year ended 31 December 2016 the US dollar weakened against other currencies and the Company experienced a gain on foreign currency. We actively review our exposure to foreign currency exchange risk. Options to mitigate this risk may include the use of forward exchange contracts or currency options, but we did not employ these methods to manage currency exposures during the years ended 31 December 2016 and 2015 since most of the Company’s currency risk relates to intercompany transactions.

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

3.5 Income Tax Expense

Income tax expense on the pre-tax loss of $131.0 million for the year ended 31 December 2016 was $25.8 million (2015: $58.3 million for the comparable period) reflecting a negative tax rate of 19.7%. This tax rate can largely be attributed to several factors including:

· the impact of different tax rates and results in the jurisdictions in which the Company operates;

· the non-recognition of the tax benefits associated with certain current period losses; and

· non-deductible finance costs

3.6 Earnings (Losses)

NPAT for the Company was negative $156.8 million for the year ended 31 December 2016 (2015: NPAT of negative $326.3 million for the comparable period). EBITDA for the year ended 31 December 2016 was $1.6 million (2015: $115.3 million EBITDA loss for the comparable period). The increase in EBITDA is mainly due to better operating results, a decrease in other expenses and a decrease in restructuring expenses in 2016 as well as reduced impairment charges being recorded in the current year.

Adjusted NPAT for the period ended 31 December 2016 was a loss of $108.4 million (2015: adjusted loss $132.2 million for the comparable period) and adjusted EBITDA increased by $32.1 million to $32.0 million for the year ended 31 December 2016 (2015: loss of $100 thousand for the comparable period). See reconciliation in Section 7 ‘Non-IFRS Financial Information’.

4 Discussion and Analysis of Cash Flow

	For the year ended 31 December
	2016			2015
	US$ Millions			US$ Millions			$ Change			% Change
Cash (used in) generated from operations		(1.4	)		11.4			(12.8	)		-112.3	%
Net cash flows used in operating activities		(50.4	)		(54.9	)		4.5			8.2	%
Net cash flows used in investing activities		(7.9	)		(25.0	)		17.1			68.4	%
Net cash flows provided by financing activities		17.5			47.1			(29.6	)		-62.8	%

4.1 Cash Flow used in Operating Activities

Cash flow from operating activities for the year ended 31 December 2016 was negative $50.4 million, an improvement of $4.5 million from the comparable period (2015: negative $54.9 million). The improvement in 2016 was mainly due to a decrease in cash taxes paid during the year of $16.7 million, partially offset by a reduction in cash generated from working capital release in 2016 as compared to 2015.

We have invested $19.2 million in capital equipment to support existing operations during 2016, which is consistent with the comparable prior period (2015: $21.8 million). Of the 2016 amount, $13.2 million was spent on sustainment activities relating to refurbishing current rigs and other support equipment, $3.0 million was spent on product development activities, including engineering and patent maintenance and the remaining amount related to miscellaneous expenditures. 2016 capital expenditures have been partially offset by proceeds from the sale of property, plant and equipment of $16.4 million (2015: $2.4 million). Our initiatives to conserve cash during the year have included prudent and judicious control over capital expenditures.

The decrease in cash flows provided by financing activities is a direct result of the initiatives to preserve liquidity and efficiently manage costs.

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

5 Discussion of the Balance Sheet

The net assets of the Company decreased by $157.3 million, to negative $337.5 million as at 31 December 2016, compared to negative $180.2 million as at 31 December 2015. This decrease results from the use of cash to sustain business operations, decreases in property, plant and equipment due to depreciation and disposals and decreases in trade payables, accrued payroll and benefits and accrued goods and services tax due to decreased business.

We continue to actively manage networking capital in relation to the current business cycle. In sustained periods of reduced global drill rig utilisation, inventory levels do not shrink as quickly as demand and the Company must evaluate inventory monthly to determine appropriate accounting reserves for slow-moving and obsolete inventory. When the Company’s markets begin to improve, it is likely that net working capital levels will increase as we increase inventory and the Company generates additional receivables.

Cash and cash equivalents decreased by $54.1 million, or 47.6%, to $59.3 million as at 31 December 2016 (2015: $113.4 million as at 31 December). The decrease was due to cash used in operating activities of the Company.

Trade and other receivables decreased by $2.2 million, or 2.0%, to $107.9 million as at 31 December 2016 (2015: $110.1 million as at 31 December). Days Sales Outstanding (“DSO”) at 31 December 2016 remained consistent with the same period in 2015 at 53 days. This result was achieved through intense focus on collections and continued emphasis on prompt customer billing by our Global Drilling Services division.

Inventories remained relatively consistent at $165.0 million as at 31 December 2016 (2015: $166.3 million as at 31 December). The net decrease was due to $21.4 million related to third party sales and Global Drilling Services consumption, offset by an increase of $1.3 million related to foreign currency exchange differences and $17.4 million related to other non-cash items.

The net value of property, plant and equipment decreased by $48.8 million or 27.7% to $127.7 million as at 31 December 2016 (2015: $176.5 million as at 31 December), which was mainly due to depreciation expenses of $48.6 million, disposals of $12.6 million, a transfer of $5.9 million of assets to assets held for sale, a transfer of $1.5 million to other intangibles and an impairment of $878 thousand, partially offset by foreign currency movements of $3.1 million and current year additions ($17.5 million).

Tax assets remained fairly consistent at $42.9 million as at 31 December 2016 (2015: $41.9 million as at 31 December) as we continue to hold valuation allowances against our deferred tax assets as a result of adverse business conditions reflected in the Company’s medium term earnings forecast.

Trade and other payables decreased by $18.4 million, or 12.7%, to $126.6 million as at 31 December 2016 (2015: $145.0 million as at 31 December). The average credit period on purchases of certain goods increased by 6 days to 37 days. Trade payables represent 12.5% of the Company’s total liabilities. The reduction in trade and other payables was driven by the lower level of manufacturing activity and continued focus on cost control.

Provisions of $39.0 million as at 31 December 2016 decreased by 12.4%, or $5.5 million (2015: $44.5 million as at 31 December), and represent 3.8% of total Company liabilities. The decrease is mainly due to decreases in employee benefits as the number of employees has decreased and restructuring and termination costs. There was a slight offsetting increase in defined benefit plan liabilities. Although we have experienced increases in pension plan assets due to market appreciation, the decrease in discount rates resulted in a larger offsetting increase in projected liabilities.

Borrowings of $735.1 million, representing 72.6% of the Company’s liabilities, increased by $45.3 million during the year ended 31 December 2016 (2015: $689.8 million as at 31 December). The Company’s net debt (gross debt less cash and cash equivalents) increased by $99.4 million, to $675.8 million, as at 31 December 2016 (2015: $576.4 million as at 31 December). The largest contributors to the need for cash and therefore the increase in the borrowings were the cash interest payments ($45.3 million) and capital expenditure ($22.4 million). The borrowings also increased due to the interest that accretes on the term loans ($25.4 million).

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

Liquidity and Debt Facilities

The Company’s debt is comprised of the following instruments:

	Principal			Accreted
	Outstanding			Interest
	as at 31 December			as at 31 December
	2016			2016		Interest			Scheduled
Description	(millions)			(millions)		Rate			Maturity	Security
Senior Secured Notes	$	195.0					10	%	1 October 2018	Second lien on the accounts receivable, inventories, deposit accounts and cash (“Working Capital Assets”) of the Term Loan B and 10% Secured Notes guarantors that are not ABL guarantors, a third lien on the Working Capital Assets of the Term Loan B and 10% Secured Notes issuer and the Term Loan B and 10% Secured Notes guarantors that are also ABL guarantors, and a first lien on substantially all of the Non-Working Capital Assets of the Term Loan B and 10% Secured Notes issuer and guarantors, including equipment, intellectual property, the capital stock of subsidiaries and certain owned real property.
Term Loan - Tranche B	$	105.0		$	28.4		12	%2	1 October 20185	Same as Senior Secured Notes5
ABL	$	17.6	1				Variable	3	29 May 20204	First lien on the Working Capital Assets of the ABL borrower and guarantors and a third lien on substantially all of the other tangible and intangible assets (“Non-Working Capital Assets”) of the ABL borrower and guarantors, including equipment, intellectual property and the capital stock of subsidiaries (but excluding real property).
Term Loan - Tranche A	$	85.0		$	25.4		12	%2	22 October 20205	First lien on the Working Capital Assets of the Term Loan A guarantors that are not ABL guarantors, a second lien on the Working Capital Assets of the Term Loan A issuer and the Term Loan A guarantors that are also ABL guarantors, and a second lien on substantially all of the Non- Working Capital Assets of the Term Loan A issuer and guarantors, including equipment, intellectual property, the capital stock of subsidiaries and certain owned real property.5
Senior Unsecured Notes	$	284.0					7	%	1 April 2021	Unsecured

(1) $11.9 million in letters of credit were issued in addition to the $17.6 million borrowings that were outstanding.

(2) Interest rate may be reduced to 11% if the Company’s trailing 12 month adjusted EBITDA is greater than $200 million.

(3) Based on LIBOR + margin (grid-based margin is currently 3.5%).

(4) If Term Loan-tranche B and Senior Secured Notes have not been refinanced prior to July 2018, maturity accelerates to 1 July 2018.

(5) The Company entered into a $20 million credit facility with Centerbridge Partners L.P. in January 2017, subsequent to the date of the financial statements. The Company and Centerbridge also modified certain terms of Term Loans A and B. See additional disclosure in Note 33.

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

The Company’s ABL facility provides for a commitment of up to $40.0 million in revolving borrowings and other extensions of credit such as for letters of credit. This facility is a secured loan with a first-priority lien on the issuer’s and guarantors’ accounts receivable, inventories, and cash. Scheduled maturity is the earliest of (i) 90 days prior to the maturity of Existing Senior Secured Notes (or any Indebtedness refinancing the security) (ii) 90 days prior to the maturity of Term Loan A (or any Indebtedness refinancing the security) (iii) 90 days prior to the maturity of Term Loan B (or any Indebtedness refinancing the maturity of the security) or (iv) 29 May 2020. Pricing for the facility is based on LIBOR plus a grid-based spread, which spread currently is 3.5%. The facility does not include ongoing financial maintenance covenants. Certain restrictions under the facility currently limit maximum borrowings to $35.0 million and require $5.0 million in cash to be held in a restricted account with the lender. These restrictions will be lifted if the Company satisfies a 1.0x fixed charge coverage test for four consecutive quarters related to the restricted borrowings and two consecutive quarters as it relates to the restricted cash.

The following table shows the outstanding debt with maturities.

The Company’s debt ratings were subject to review by S&P Global (“S&P”) on two separate occasions since the release of the Company’s most recent half-year report, once on 21 December 2016 and once on 13 February 2017. As a result of the reviews, the following actions were taken: as follows:

· Corporate credit rating lowered to “CCC+”,

· Rating outlook remained at “Negative”,

· Ratings on senior secured notes and senior unsecured notes lowered to “CCC” and “CC”, respectively,

· Recovery ratings on senior secured notes and senior unsecured notes lowered to “2” and “5”, respectively.

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

6 Review of Segment Operations

The following table shows our third party revenue and revenue from inter-segment sales by our Global Drilling Services division. Segment profit represents earnings before interest and taxes.

	Segment Revenue								Segment Profit
	2016				2015				2016		2015
	US$ Millions				US$ Millions				US$ Millions		US$ Millions
Drilling Services			447.7				527.9			10.7		(2.6	)
Global Products revenue
Products third party revenue		194.7				207.3
Products inter-segment revenue(1)		57.7				52.5
Total Global Products			252.4				259.8			4.2		5.6
Less Global Roducts sales to Global Drilling Services			(57.7	)			(52.5	)
Total third party revenue			642.4				735.2
Total segment profit										14.9		3.0

(1) Transactions between segments are carried out at arm’s length and are eliminated on consolidation.

(1) Based on percentages of total Company revenue for the year ended 31 December 2016.

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

6.1 Review of Segment Operations - Global Drilling Services

	For the year ended 31 December
	2016 US$ Millions			2015 US$ Millions			$ Change			% Change
Financial Information
Third party revenue		447.7			527.9			(80.2	)		-15.2	%
COGS
Materials/labor/overhead/other		363.0			438.1			(75.1	)		-17.1	%
Depreciation and amortisation		38.3			54.5			(16.2	)		-29.7	%
Total COGS		401.3			492.6			(91.3	)		-18.5	%
COGS as a % of Revenue		89.6	%		93.3	%		-3.7	%		-4.0	%
Contribution margin $		35.6			23.3			12.3			52.8	%
Contribution margin %		8.0	%		4.4	%		3.6	%		81.8	%
Business unit SG&A		10.7			12.0			(1.3	)		-10.8	%
Allocated SG&A		21.3			26.0			(4.7	)		-18.1	%
EBITDA		51.6			40.9			10.7			26.2	%
Capital spend (accrual)		15.0			14.6			0.4			2.7	%
Other Metrics
Average # of Operating Drill Rigs		287			331			(44	)		-13.3	%
Average # of Drill rigs		889			921			(32	)		-3.5	%
# of Employees at period-end		3,011			3,127			(116	)		-3.7	%

Safety

The Global Drilling Services division’s Total Case Incident Rate (TCIR) for the year ended 31 December 2016 was 1.43, compared to 1.32 for 2015. Its Lost-Time Incident Rate (LTIR) for 2016 was 0.10, compared to 0.21 for 2015. Although the beginning of 2016 was challenging for Global Drilling Services in terms of TCIR performance, strong safety performance in recent months have continued the trend over several years of improving safety performance. We believe this trend supports the effectiveness of the divisions safety initiatives, which include better analysis of high-potential near miss incidents and significant injuries; applying corrective actions more globally; increasing management safety interactions at operating locations; increasing supervisory competencies through training; reinforcing hazard assessments; and increasing drill rig inspection frequency.

Key Safety Metrics
	2016				2015
	First Half		Full Year		First Half		Full Year
TCIR		1.41		1.43		1.17		1.32
LTIR		0.10		0.10		0.16		0.21

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

Rig fleet

Our Global Drilling Services division’s rig fleet, consisting of 879 rigs as at 31 December 2016, is the largest fleet operated by a mineral drilling services company in the world. Our drill rig packages range from small underground packages costing approximately $500 thousand to large diameter rotary packages that cost in excess of $4.0 million. The operational life of a drill rig varies greatly. Underground rigs are depreciated over a five-year period, whereas surface core rigs are depreciated over 10 years and rotary rigs over 12 years, or their estimated useful life.

Revenue

Consistent with recent trends, mining industry spending on exploration and development and non-mining services declined in 2016 and, as a result, Global Drilling Services’ revenue in 2016 was $447.7 million, down 15.2% from $527.9 million in 2015. The year-over-year revenue decrease was driven by a combination of volume reduction, price and changes in foreign exchange rates. Volume decreases can be attributed primarily to the reduction of agricultural drilling in the US, underground drilling in Canada, and drilling reductions in Latin America, and resulted in $59.6 million of the year-over-year decrease. The stronger US Dollar against foreign currencies as compared to the prior year resulted in reduced revenues due to translation, primarily the Canadian and Australian dollar, resulted in a $10.1 million reduction in year-over-year revenues. Price decreases in Asia Pacific and Africa drilling operations averaging 2.0% as a percentage of revenue reduced year-over-year revenue by a further $10.5 million.

Approximately 85% of Global Drilling Services’ revenue for 2016 was derived from major mining companies, including Barrick, BHP Billiton, Randgold, Goldcorp, Newmontand Rio Tinto. Our top 10 Global Drilling Services customers represented approximately 60% of the division’s revenue for 2016, with no contract contributing more than 2.0% of our consolidated revenue. The Company has one customer that contributed 12.3% of the Company’s revenue in 2016. There was no single customer that contributed more than 10% of the Company’s revenue in 2015. We believe this diversified revenue base provides greater revenue stability.

Revenue by Customer Type 

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

Revenue by Drill Type

While the percent distribution of revenue by mine stage and drill type remained relatively stable, each drilling discipline experienced reductions in overall revenue. Drilling disciplines more closely tied to brown field surface exploration and production had a lower reduction compared to other drilling disciplines. Surface coring revenues for 2016 were $153.5 million as compared to 2015 with revenues of $165.6 million, a decrease of 7.3%. The percussive drilling operations ended 2016 with revenues of $34.7 million compared to $39.9 million in 2015, a decrease of 13.0%. Water Drilling revenues for 2016 were $68.1 million as compared to the same period in 2015 with revenues of $90.2 million, a decrease of 24.5%. The reduction in Water Well drilling in 2016 was due to reduction of water services in agricultural and municipal markets in the United States.

Revenue by Stage ⁽¹⁾

Revenue by Drill Type ⁽¹⁾

	2016					2015					2014
	US$		% of			US$		% of			US$		% of
	Millions		Total			Millions		Total			Millions		Total
Surface Coring		153.5		34.3	%		165.6		31.4	%		202.4		31.8	%
UG Coring		117.9		26.3	%		142.8		27.0	%		154.8		24.3	%
Rotary		62.9		14.0	%		70.6		13.4	%		109.4		17.2	%
Water Well		68.1		15.2	%		90.2		17.1	%		98.5		15.5	%
Percussive		34.7		7.8	%		39.9		7.6	%		45.4		7.1	%
Sonic		10.6		2.4	%		18.8		3.5	%		25.6		4.0	%
Grand Total		447.7					527.9					636.1

(1) Based on percentages of total Company revenue for 2016

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

Revenue by Commodity

Gold and copper continue to be the primary commodities on which our customers were spending their exploration budgets in 2016 representing 57.5% and 16.5% of revenue, respectively. Reductions in commodity prices have negatively impacted our revenues, as mining customers elected to reduce exploration budgets in response to poor sentiment as a result of decreases in prices for many commodities at the start of 2016. In particular, Global Drilling Services’ revenue associated with copper decreased to $74.0 million for the year ended 31 December 2016, compared to $110.8 million for 2015, a decrease of 33.2%. For the same time periods, revenue associated with gold increased by 2.9%.

Revenue by Commodity ⁽¹⁾

(1) Based on percentages of total Global Drilling Services revenue for the year ended 31 December 2016

Revenue by Commodity

	2016					2015					2014
	US$		% of			US$		% of			US$		% of
	Millions		Total			Millions		Total			Millions		Total
Gold		257.5		57.5	%		250.1		47.4	%		285.7		44.9	%
Copper		74.1		16.6	%		110.8		21.0	%		120.8		19.0	%
Energy		26.1		5.8	%		44.1		8.4	%		56.3		8.9	%
Iron		18.4		4.1	%		9.2		1.7	%		39.9		6.3	%
Water Services		15.5		3.5	%		33.9		6.4	%		42.9		6.7	%
Nickel		27.1		6.1	%		26.9		5.1	%		26.8		4.2	%
Other		8.2		1.8	%		1.5		0.3	%		8.3		1.3	%
Other Metals		20.8		4.6	%		51.4		9.7	%		55.4		8.7	%
Grand Total		447.7					527.9					636.1

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

Margins

Despite challenges resulting from weak demand and a 15.2% reduction in revenue comparing 2016 to 2015, Global Drilling Services in 2016 achieved $35.6 million in Contribution Margin compared to $23.3 million in 2015, an increase of 52.8%. The primary drivers for the increase in Contribution Margin were the cost control initiatives undertaken by the business and the productivity and commercial improvements commenced in the second half of 2015. In 2016, the business improved in meters per shift, non-billable hours and revenue per shift while reducing variable and fixed cost to maintain a flat cost structure from a percent of revenue perspective.

EBITDA in 2016 was $51.6 million, up 26.2% from $40.9 million in 2015. The largest improvement was seen in our Africa and Asia Pacific operations. EBITDA in Africa and Asia Pacific drilling services increased $16.3 million in 2016 compared to a loss of $3.5 million for the same period in 2015. The turning point for the region was a cost restructure that started in 2015. Other regions of the Global Drilling Services business have had varied EBITDA results, but we continue to focus on the cost structure of all our operations and on driving continued improvement in productivity and commercial practices.

6.2 Review of Segment Operations - Global Products

	For the year ended 31 December
	2016 US$ Millions			2015 US$ Millions			$ Change			% Change
Financial Information
Third party revenue		194.7			207.3			(12.6	)		-6.1	%
COGS
Materials/labor/overhead/other		152.4			159.1			(6.7	)		-4.2	%
Inventory obsolescence		(6.9	)		(1.0	)		(5.9	)		590.0	%
Depreciation and amortisation		6.7			7.9			(1.2	)		-15.2	%
Total COGS		152.2			166.0			(13.8	)		-8.3	%
COGS as a % of Revenue		78.2	%		80.1	%		-1.9	%		-2.4	%
Contribution margin $		22.6			19.9			2.7			13.6	%
Contribution margin %		11.6	%		9.6	%		2.0	%		20.8	%
Business unit SG&A		20.0			21.4			(1.4	)		-6.5	%
Allocated SG&A		17.0			14.3			2.7			18.9	%
EBITDA		13.4			14.5			(1.1	)		-7.6	%
Capital Spend (accrual basis)		1.9			2.5			(0.6	)		-24.0	%
Other Metrics
Manufacturing plants		6			6			-			0.0	%
Average backlog		14.6			16.8			(2.2	)		-13.1	%
Inventories 1		165.0			166.3			(1.3	)		-0.8	%
# of Employees		1,001			1,258			(257	)		-20.4	%

(1) Represents total Company inventories including Global Services and Global Products.

Safety

In 2016, the Total Case Incident Rate (TCIR) for the Global Products segment was 1.46 recordable incidents per 200,000 hours worked and the Lost-Time Incident Rate (LTIR) was 0.19. As with the Global Drilling Services division, these results reflect the Company’s continued focus on programs to reinforce hazard recognition and consistently apply the Company’s EHS management system across all operations. With the release of the Company’s updated EHS management system, redefined and expanded EHS standards will continue to drive continuous improvement with a streamlined and comprehensive approach to best practices in safety.

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

Revenue

The year ended 31 December 2016 was another challenging period for the Global Products division. Revenue for the year was $194.7 million, down 6.1% from $207.3 million in 2015. The primary driver of the decrease was unfavourable currency translations. Although the US dollar has weakened against most other major currencies during 2016, it is still stronger than it was in 2015 on average. There were also moderate decreases in price and volume that contributed to the decline in revenue.

Of Global Products’ revenue for the year ended 31 December 2016, approximately 77% was comprised of performance tooling components, and the remaining 23% was comprised of drilling equipment and spares. We have a global network of over 100 sales and customer service representatives marketing our products to drilling contractors, mining companies, and distributors. Our customer base is diversified with no external Global Products customer representing more than 2% of consolidated revenue for the year. Global Products continues to provide many of the products necessary for our Global Drilling Services division.

Margins

EBITDA for the year ended 31 December 2016 was down 7.6% when compared to 2015, which was driven by the decrease in revenue. We continue to be disciplined in our cost control, as evidenced by a 6.5% decrease in Business SG&A costs. In addition, we continue to operate our manufacturing facilities at lean levels, only producing what is needed to support a lower level of sales.

Backlog

At 31 December 2016, Global Products had a backlog of product orders valued at $19.0 million. This compares to $12.9 million at 31 December 2015. Average backlog during the second half of 2016 was $16.0 million compared to $13.1 million during the first half of 2016. So while the backlog is increasing, there is no certainty that orders will always result in actual sales at the times or in the amounts ordered because our customers generally can cancel their orders without penalty (with some exceptions on capital equipment orders).

Intellectual Property

We rely on a combination of patents, trademarks, trade secrets and similar intellectual property rights to protect the proprietary technology and other intellectual property that are instrumental to our Global Products business. As at 31 December 2016, we had 451 issued patents, 629 registered trademarks, 302 pending patent applications and 28 pending trademark applications. One of the most significant patents is for our RQ™ coring rod. The RQ™ patented thread design withstands greater stress than all previously available coring rod designs, enabling drilling of substantially deeper holes. We do not consider our Global Products business, or our business as a whole, to be materially dependent upon any particular patent, trademark, trade secret or other intellectual property.

Research and Development

Our Global Products division employs engineers and technicians to develop, design and test new and improved products. We work closely with our customers, as well as our Global Drilling Services division, to identify opportunities and develop technical solutions for issues that arise on site. We believe that sharing field data, challenges, safety requirements and best practices accelerates innovation and increases safety and productivity in the field. This integrated business model provides us with an advantage in product development, and we believe it enables us to bring new technology to the market with speed and quality. Prior to their introduction, new products are subjected to extensive testing in various environments, again with assistance from our Global Drilling Services network around the world. During 2016, we launched seven new products and we continue to invest in our new product pipeline. New product development efforts remain focused on incremental product changes that increase productivity so customers are willing to pay for them regardless of the business environment. We have also launched TruCore™, the first in a range of instrumentation tools that provides accurate core orientation measurements. This is part of our strategy to be the global technology leader in providing subsurface resource information to mining companies through our Geological Data Services business.

Inventories

Cash continued to be generated from inventory in 2016 due to careful management of demand in our supply chain organisation and continuous efforts to reduce excess inventory. While we generated $21.4 million related to third-party sales and consumption in our Global Drilling Services division, this was partially offset by an increase of $1.3 million related to foreign currency translation and $17.4 million related to a net increase in other non-cash items.

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

7. Non-IFRS Financial Information

	For the year ended 31 December
	2016		2016			2015			2015
US$ Millions	US$ Millions		US$ Millions			US$ Millions			US$ Millions
EBITDA(1)		1.6					(115.3	)
NPAT(2)				(156.8	)					(326.3	)
Recapitalisation costs		7.5		7.5			0.6			0.6
Impairments
Equipment		0.9		0.9			36.8			36.8
Intangible assets		1.0		1.0			0.6			0.6
Inventories		-		-			34.5			34.5
Employee and related costs		8.0		8.0			16.0			16.0
Other restructuring costs		10.1		10.1			9.5			9.5
Other non-recurring items		2.9		2.9			17.2			17.2
Tax effect of items and other tax write offs(3)		-		18.0			-			78.9
Total of significant and non-recurring items		30.4		48.4			115.2			194.1
Adjusted EBITDA(1)		32.0					(0.1	)
Adjusted NPAT(2)				(108.4	)					(132.2	)

(1) EBITDA is ‘Earnings before interest, tax, depreciation and amortisation’. Adjusted EBITDA is ‘Earnings before interest, tax, depreciation and amortisation and before significant and other non-recurring items’.

(2) NPAT is ‘Net profit after tax’. Adjusted NPAT is ‘Net profit after tax and before significant and other non-recurring items’.

(3) Includes tax expense on derecognition of deferred tax assets and unrecognised tax losses of $43.5 million.

8. Outlook

8.1 Our 2017 Priorities

Our key priorities for 2017 are to:

· continue to eliminate job related injuries and significant safety risks by maintaining and enhancing our culture around safety and compliance;

· expand our mining and minerals drilling customer base by focusing on efficiency and productivity and enhancing our commercial practices and processes;

· effectively manage customer relationships, pricing and contract terms;

· create new products and respond to new Global Drilling Services customers while judiciously managing capital; and

· improve cash generation, with the goal to become cash positive, through disciplined management of liquidity and costs.

Continue to eliminate job related injuries and significant safety risks by maintaining and enhancing our strong safety and compliance record. Safety is critical to the Company, our employees and our customers, both in determining the success of our business and in ensuring the ongoing well-being of our employees and others with whom we come into contact. We are dedicated to providing a safe work environment for every employee and contractor and implementing state-of-the-art safety tools and practices to become the safety leader in our industry. We are particularly focused on significant risks, continually seeking ways to mitigate those risks and ensuring that, when significant injuries or high-potential near-misses occur, we thoroughly investigate the root causes of those incidents and apply the lessons learned from them broadly. We also promote a culture where employees and managers at all levels are actively engaged in promoting safe work practices.

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

Expand our mining and minerals drilling customer base by focusing on efficiency and productivity.

We remain focused on providing our customers with a full range of drilling services offerings. Our commitment is underpinned by initiatives to improve the efficiency and productivity with which we deliver services and information to our customers, combined with enhancements of our commercial practices and capabilities to ensure alignment with our customers’ most important needs. Our goal is to be the driller of choice for our clients and thereby bring value both to the customer and to Boart Longyear.

Effectively manage customer relationships, pricing and contract terms. Our Global Drilling Services and Global Products businesses have implemented rigorous internal processes to ensure our products and services reflect the full value delivered to our customers and to solidify and create lasting customer relationships.

Create new products and respond to new opportunities within a constrained capital budget. We will continue to pursue disciplined investments in our business to drive returns and capitalise on high-value opportunities in which we can leverage distinctive competencies. We also will continue to pursue strategic technologies and high value-added and more profitable activities, such as expanding our product and services offerings to provide subsurface resource information to our mining customers through our Geological Data Services business.

Improve cash generation in 2017, with the goal to become cash positive, through careful management of liquidity and costs. We have established being cash positive in 2017 as a primary goal for the business, which we intend to achieve through continued disciplined expense and capital management, opportunistic cost reductions and productivity enhancements. In 2016, we continued to drive business initiatives focused on improving our fixed and variable cost structures in five keys areas of the business and we expect these benefits to improve liquidity in 2017 and beyond. Furthermore, we will continue to focus on process improvements, streamlined working capital management and structural changes to improve customer support and responsiveness and drive long-term efficiencies throughout 2017.

8.2 Outlook and Future Developments

We are not providing an outlook for 2017 revenue or EBITDA. Our productivity and commercial improvement initiatives are making a positive impact as significant improvements in results have been achieved in 2016. We expect to continue to see gains in both of these areas going forward.

The mining industry is cyclical. Notwithstanding current sector challenges, the longer-term outlook for the mining industry is expected to remain attractive and to be underpinned by:

· continued industrialisation and urbanisation of developing economies, which are expected to support structural increases in demand for minerals and metals; and

· although volatile, improving commodity prices and customer margins relative to those over the past few years.

As a result, we believe natural resources companies will remain motivated to produce throughout the cycle and both supplement and replace their depleted reserves and resources over time, driving exploration, development and capital spending. As the leading drilling services provider in the mineral industry globally with the world’s largest drilling fleet, we continue to drive operational improvements and technological innovation which we believe will benefit the business through increased market opportunities.

We remain focused on our core mining markets and intend to continue to invest in promising organic growth opportunities in in a selective and disciplined manner. Examples of such opportunities include developing the next generation of consumable products, rod-handling solutions for the entire range of drilling rigs the Company offers, providing subsurface resource information to our mining customers through our Geological Data Services business and other products and services that enhance safety and productivity. In addition, we continue to pursue operational enhancements to deliver more value to our customers and improve operating margins, cash generation and debt reduction.

Further information about likely developments in the operations of the Company in the future years, expected results of those operations, and strategies of the Company and its prospects for future financial years have been omitted from this report because disclosure of the information would be speculative or could be prejudicial to the Company.

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

8.3 Key Risks

The Company maintains an Enterprise Risk Management (“ERM”) system by which we systematically assess the consequences of risk in areas such as market, health and safety, environment, finance, legal compliance, and reputation. We also identify and track appropriate mitigation actions for identified risks. A range of material risks have been identified, as follows, that could adversely affect the Company. These risks are not listed in order of significance. Nor are they all-encompassing. Rather, they reflect the most significant risks identified at a whole-of-entity or consolidated level.

Market Risk. The Company’s operating results, financial condition and ability to achieve shareholder returns are directly linked to underlying market demand for drilling services and drilling products. Demand for our drilling services and products depends in significant part upon the level of mineral exploration, production and development activities conducted by mining companies, particularly with respect to gold, copper and other base metals. We have experienced significant declines in our financial performance as a result of declining demand for, and global oversupply of, the Company’s services and products due to the global contraction in exploration and development spending in the commodities sector and by our mining customers. Mineral exploration, production and development activities are uncertain and could remain at depressed levels for an extended period of time or decline even further, resulting in adverse effects on our operating results, liquidity and financial condition.

We seek to mitigate the risk associated with volatility and weak demand conditions in our core mining markets by pursuing business development opportunities in other markets, such as infrastructure and geotechnical applications for our Global Products business, and new technologies for our markets, such as our Geological Data Services business. In addition, as previously outlined, our business priorities for 2017 include ongoing initiatives to gain market share in our core markets and expand our mining industry customer base by improving the efficiency and productivity with which we deliver services and information to our customers and making additional investments in our commercial organisation to augment our business development efforts and improve commercial practices for better alignment with our customers’ needs.

Operational Risks. The majority of our drilling contracts are either short-term or may be cancelled upon short notice by our customers, and our products backlog is subject to cancellation. We seek to strengthen customer relationships and lessen retention risks through improved commercial practices and ongoing initiatives targeted at strengthening our operational and safety performance. Also we pursue contracting practices to minimise the financial cost associated with the termination or suspension of customer contracts or orders but often are limited by industry practice as to the degree to which we can allocate termination risks and obligations to our customers.

We have implemented significant cost savings, productivity improvements and efficiencies during the course of the ongoing industry downturn but our future operating results, financial condition and competiveness depend on our ability to sustain previously implemented reductions and realise additional savings and improvements from ongoing and future productivity and efficiency initiatives. We may not be able to achieve expected cost savings and operational improvements in anticipated amounts or within expected time periods, and, if achieved, we may not be able to sustain them. Accordingly, we have implemented a project management organisation and rigorous monitoring processes around our key operational improvement programmes to track progress against project objectives, quantify results that are being achieved and ensure process improvements are sustainable.

Risks Related to Liquidity and Indebtedness. At 31 December 2016, our net debt was $675.8 million, with $735.1 million in gross debt and $59.3 million of cash on hand and availability through our Asset-Based Loan (“ABL”) facility. The instruments comprising the Company’s debt and their terms are set out in detail in Note 21 of the financial statements.

As announced in August 2016, the Company has been pursuing a restructuring of its capital structure with the assistance of financial and legal advisors. The primary objectives of the restructuring include reducing financial debt, securing additional liquidity to sustain the Company and extending maturities on existing debt to facilitate an eventual refinancing. Achieving these objectives, will likely require existing debt holders to convert all or part of their debt to equity, which will be highly dilutive to existing shareholders.

The restructuring process is ongoing and our ability to achieve the objectives of the restructuring is uncertain at present. Accordingly, our ability to fund operations and make further investments in the business will depend on the outcome of the restructuring process. It will also depend on the adequacy of sources of liquidity both prior to and after the completion of a restructuring, as well as whether market conditions improve or additional operating improvements can be achieved to improve cash generated by our operations. Our ability to refinance or renew our debt when it becomes due depends on our ability to generate cash flow and, potentially, other circumstances, such as existing market conditions at the time of refinancing. Given the lack of clarity around the short-term outlook for the Company’s markets, our top corporate priorities largely are directed at successfully completing the restructuring of our capital structure and realising operational and commercial improvements to achieve cash-positive operations in 2017.

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Annual Financial Report 31 December 2016 BOART LONGYEAR LIMITED

The annual financial report has been prepared on a going concern basis, which contemplates the realisation of assets and the settlement of liabilities in the ordinary course of business. As a result of the risks and uncertainties described in Note 1 of the financial statements, the Directors believe at the date of signing the financial statements, there is material uncertainty about the ability of the Company to continue as a going concern in the future and, therefore, whether it will realise its assets and settle its liabilities and commitments in the normal course of business and in the amounts stated in the financial statements. Subject to these uncertainties, the Directors reaffirm that current and expected operating cash flow, cash on hand and available drawings under the Company’s asset-based loan facility provide sufficient liquidity to meet debts as and when they fall due.

Tax Risk. As previously disclosed and further detailed in Note 11 of the financial statements, the Company is contesting a series of tax audits performed by the Canada Revenue Agency (“CRA”). We also are responding to audits that are underway or anticipated to be performed by the CRA. The resolution of existing and potential assessments by Canadian tax authorities may adversely affect our liquidity. While the timing and resolution of the Company’s appeals of the CRA’s assessments are uncertain, we are pursuing strategies to mitigate the risks of an adverse outcome with the assistance of our external legal and tax experts.

The recent closure of our centralised operating structure based in Switzerland and the establishment of a master distributor entity based in the United States could result in audits or assessments in many of the jurisdictions in which we operate and could lead to a higher effective tax rate and tax payments. Assessments related to these issues may adversely affect our liquidity in the event we are required to pay assessments, or post security to maintain challenges to such assessments. In making the decision to move to the master distributor entity, management and our external advisors carefully evaluated the operational requirements of the business, future tax risk and potential forecast scenarios and considered that the US-based master distributor structure effectively balances business objectives and tax risks inherent in any reorganisation.

Government and Regulatory Risk. Changes in, or failure to comply with, the laws, regulations, policies or conditions of any jurisdiction in which we conduct our business could have a material adverse effect on our financial condition, liquidity, results of operations and cash flows. Our operations are subject to numerous laws, regulations and guidelines (including anti-bribery, tax, health and safety, and environmental regulations) that could result in material liabilities or increases in our operating costs, or lead to the decline in the demand for our services or products. We therefore carefully monitor, and educate our employees and business partners about, legal requirements and developments to make sure our operations remain aware of applicable laws and regulations at all times. Further, we have implemented various internal and external resources and controls to promptly detect and address any potential non-compliance.

8.4 Forward Looking Statements

This report contains forward looking statements, including statements of current intention, opinion and expectation regarding the Company’s present and future operations, possible future events and future financial prospects. While these statements reflect expectations at the date of this report, they are, by their nature, not certain and are susceptible to change. The Company makes no representation, assurance or guarantee as to the accuracy of or likelihood of fulfilling any such forward looking statements (whether express or implied), and, except as required by applicable law or the Australian Securities Exchange Listing Rules, disclaims any obligation or undertaking to publicly update such forward looking statements.

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31 December 2016	BOART LONGYEAR LIMITED

9 Quarterly Income Statement and Related Information

	Quarters ended 2016												Quarters ended 2015												Quarters ended 2014
	Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Total Company
Revenue (US$ millions)		156.9			175.0			168.7			141.8			160.9			186.8			200.3			187.2			205.8			239.3			224.1			197.4
EBITDA (US$ millions)		(15.3	)		13.8			15.5			(12.4	)		(75.2	)		(0.7	)		(25.2	)		(14.2	)		(61.9	)		12.3			(31.1	)		(1.9	)
Adjusted EBITDA (US$ millions)		1.3			17.2			19.8			(6.3	)		(4.9	)		3.1			11.2			(9.5	)		(3.2	)		15.9			14.9			3.8
Operating Loss		(25.5	)		(5.5	)		3.4			(33.2	)		(90.4	)		(24.8	)		(44.6	)		(39.4	)		(83.3	)		(15.7	)		(56.6	)		(29.4	)
(Loss) Profit from Trading Activities Net cashflows (used in) provided by		(7.7	)		(0.8	)		7.8			(23.2	)		(10.3	)		(7.7	)		(3.6	)		(24.2	)		(14.3	)		(6.2	)		(4.1	)		(23.3	)
operating activities		5.5			16.6			(22.5	)		(50.0	)		28.2			2.0			(10.2	)		(74.9	)		(6.8	)		10.1			(8.3	)		(6.3	)
Net Debt (US$ millions)		675.8			674.3			670.1			639.6			576.4			554.6			556.1			538.1			547.6			550.9			555.8			544.4
Adjusted SG&A (US$ millions)		28.7			28.1			28.9			27.0			28.3			31.0			32.5			30.6			31.6			32.7			34.6			32.7
#of employees		4,337			4,626			4,629			4,611			4,725			5,089			5,151			5,537			5,933			5,972			5,871			5,593
Global Drilling Services
Revenue (US$ millions)		104.5			123.7			122.2			97.3			111.3			135.4			145.1			136.1			151.8			176.0			168.7			139.6
EBITDA (US$ millions)		8.2			20.0			21.5			1.9			3.0			15.8			18.1			4.0			9.1			22.9			25.4			11.2
Average rig utilisation		32	%		35	%		34	%		28	%		33	%		37	%		38	%		35	%		38	%		40	%		39	%		32	%
Average # of drill rigs		878			878			889			911			914			917			921			933			944			953			945			950
# of employees		3,011			3,307			3,349			3,300			3,127			3,420			3,478			3,833			4,172			4,208			4,130			3,874
Global Products
Revenue (US$ millions)		52.4			51.3			46.5			44.5			49.6			51.4			55.2			51.1			53.9			63.3			55.4			57.8
EBITDA (US$ millions)		2.1			5.2			4.3			1.8			4.0			3.4			4.5			2.6			1.2			7.0			5.0			0.8
Average backlog (US$ millions)		19.3			12.8			11.3			14.9			13.3			16.7			18.4			18.9			19.3			20.3			16.9			15.2
# of employees 1		1,001			988			960			974			1,258			1,314			1,321			1,338			1,393			1,407			1,382			1,363

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31 December 2016	BOART LONGYEAR LIMITED

REMUNERATION REPORT

This remuneration report sets out Boart Longyear’s remuneration policies and practices, the rationale underlying them and their outcomes for the year ended 31 December 2016 in accordance with the requirements of the Corporations Act 2001 (Commonwealth)(the Act) and its regulations. This information has been audited as required by Section 308(3C) of the Act.

The Company’s policies have been developed within a framework that seeks to fairly reconcile and balance:

- the overall objective of attracting, retaining, aligning and motivating management in order to achieve the highest levels of performance from them for the benefit of all shareholders;

- high standards of fairness, transparency and sound corporate governance principles; and

- the particular business environment in which Boart Longyear operates, recognising that:

○ the Company’s business is global and the senior executive team is based and operates primarily outside of Australia and is recruited internationally;

○ the markets in which the Company operates can have strong cyclical characteristics, that place equal performance pressures on management in an upswing as in down cycles; and

○ importantly, the Company is incorporated and listed in Australia and complies with local corporate regulatory disclosures and practices.

Changes in 2016

Each of the changes outlined below, were carefully designed to support the key strategic, financial and human resources objectives of the Company during difficult market conditions.

1. Change in CEO - In February 2016, the Board appointed Mr Jeff Olsen (who was previously the Company’s Chief Financial Officer since 2014) as the Company’s new President and Chief Executive Officer and a member of the Board of Directors. The remuneration arrangements for Mr Olsen were disclosed to shareholders in March and are also set out in the Remuneration Report. In light of his industry knowledge and relationships, the Board requested that Mr Randolph, who was serving as Executive Chairman and Interim CEO, continue in his role of Executive Chairman to mentor, develop and assist Mr Olsen with his transition. These duties would be regularly reviewed by the Board but are expected to continue for up to two years through 30 June 2018 before reverting back to a Non-Executive Chairman role.

2. Other Changes in Executive Leadership - In September 2016, the Company announced it was changing its organisation structure from alignment along separate business lines to a more integrated functional structure. This structure resulted in the creation of the positions of Chief Operating Officer (COO) and Chief Commercial Officer (CCO) each reporting to Mr Olsen. Mr Denis Despres joined the Company as its COO and Mr Mark Irwin (who was previously serving as the VP, Commercial and Marketing, Drilling Services) was appointed to the position of CCO. In addition, on 6 September 2016 Mr Brendan Ryan joined the Company as Chief Financial Officer.

3. Changes in Long Term Incentive (LTI) - The Board added an earnings target for LTI performance in addition to share price appreciation targets for 2016 LTI awards. The Board believes that adding this second LTI metric (each weighted as 50% of the total) provides a balanced long-term focus on both share price appreciation and continued improvement of the underlying operational and financial performance of the Company. Given the on-going challenging business environment faced by the Company, the highly leveraged capital structure and the investment made by our shareholders, the Board believes a balanced focus on share price appreciation and earnings improvement appropriately aligns management equity incentives to the interests of the Company’s shareholders.

The Company continuously monitors its remuneration plans and arrangements to ensure they remain appropriate for executives, Directors and shareholders. Any changes to remuneration arrangements will be detailed in the 2017 Remuneration Report.

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2016 business impacts on incentives

The year ended 31 December 2016 was another difficult year for the resources sector, the fourth consecutive year of lower activity. The sector’s difficulties were particularly acute for mining services and support companies like Boart Longyear, which tend to experience greater demand volatility than other industry participants. Lower demand in the Company’s key markets, challenges related to foreign currency exchange, and lower pricing resulted in a year-over-year decrease in revenue of $92.8 million, or 12.6%. Despite revenue coming in $92.8 million below the prior year, EBITDA improved by $116.9 million and NPAT improved by $169.5 million compared to 2015. Similarly, adjusted EBITDA improved by $32.1 million and adjusted NPAT improved by $23.8 million.

During 2016, the management team continued to respond to the on-going depressed market conditions by eliminating over $119 million in expenditures from the organisation (on top of $129 million eliminated in 2015, $329 million in 2014, and $807 million in 2013). The Company continued its focus on net cash generation, primarily through increased productivity as part of the Hard Work Cycle initiative, reductions in operating expenses, and improvements in working capital management. Because of these efforts, the management team was able to minimise the impacts of a continued depressed market. Free cash flow (defined for the purposes of Short Term Incentive (STI) calculations in section 3 of the report) for the business was approximately 37% of target at $12.3 million. Despite facing continued difficult market conditions in 2016 that challenged EBITDA, the company remains focused and vigilant in generating and preserving cash. As a result of the under-achievement for cash generation, individual results at or slightly above target performance and overall safety performance exceeding expected results, short-term incentive achievement for the Company’s executive KMP in 2016 was on average 90%.

Driven by the extended adverse market forces, the performance-based LTI awards granted in 2013, which were subject to a three-year return on equity performance hurdle, did not vest in 2016 and were forfeited. The retention rights granted in 2013, representing 50% of the long-term incentive award to the Company’s executive KMP and which were not subject to a performance hurdle, vested in 2016, as detailed in table 1.3.

Chief Executive Officer Transition

The Company’s Chairman, Mr Marcus Randolph, served as Executive Chairman and Interim Chief Executive Officer until Mr Jeff Olsen was appointed by the Board as President and CEO and an Executive Director of the Board on 1 March 2016. Mr Olsen’s appointment followed a thorough search by the Board of both internal and external candidates and his selection was based on his breadth of experience, mix of financial and commercial skills and strong understanding of the Company and its markets. The Board observed Mr Olsen’s skills and leadership through his involvement in Company priorities and the operational and commercial improvement initiatives the Company is currently undertaking. As mentioned above, the Board requested Mr Randolph continue in his capacity as Executive Chairman of Boart Longyear to assist Mr Olsen with on-boarding of his new duties and in executing the Company’s strategy on 1 March 2016.

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31 December 2016	BOART LONGYEAR LIMITED

Report Structure

This Remuneration Report (“Report”) is presented in six sections, as follows:

Section			Description of content
1	2016 remuneration	·	Outlines the Company’s remuneration practices and explains how executive remuneration is structured to support the Company’s strategic objectives.
	overview	·	Sets out the Directors and senior executives who are covered by this Report.
		·	Details the actual remuneration earned by the CEO and other senior executives during the year ended 31 December 2016.
2	Remuneration	·	Sets out the Company’s remuneration governance framework and explains how the
	framework and strategy		Board and its Remuneration and Nominations Committee make remuneration decisions, including the use of external remuneration consultants.
		·	Outlines the Company’s remuneration strategy.
3	Components	·	Provides a breakdown of the various components of executive remuneration.
	of executive remuneration	·	Details the components of executive remuneration that are fixed and therefore not “at-risk.”
		·	Outlines the key features of the short-term incentive plan that applies to the Company’s executives.
		·	Outlines the key features of the long-term incentive plan and option plan that apply to the Company’s executives.
4	Performance and risk	·	Explains how executive remuneration is aligned with performance and outlines short-term and long-term performance indicators and outcomes.
	alignment	·	Explains how executive remuneration is structured to encourage behaviour that supports long-term financial soundness and the Company’s risk management framework.
5	Executive remuneration	·	Sets out the total remuneration provided to executives (calculated pursuant to the accounting standards) during the years ended 31 December 2016 and 2015.
	in detail	·	Provides details of the rights granted to executives during the year ended 31 December 2016 under the long-term incentive plan.
		·	Summarises the key terms of executive service contracts (including termination entitlements).
6	Non-executive Director	·	Explains the Non-executive Directors’ (NED) remuneration structure, including the basis on which NED remuneration is set and the components.
	arrangements	·	Outlines key features of the NED Share Acquisition Plan.
		·	Sets out the NEDs’ remuneration during the years ended 31 December 2016 and 2015.

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Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

1. 2016 REMUNERATION OVERVIEW

1.1. EXECUTIVE REMUNERATION STRATEGY

The diagram below illustrates the primary objectives of the Company’s executive remuneration strategy and how the components of overall remuneration have been designed to support them:

 

Attract, Retain and Reward Top Talented Executives	Appropriate Mix of Fixed and “At Risk" Remuneration	Total Remuneration is reasonable and aligned with Share hoIder Interests	Alignment between Total Compensation and Delivered Performance
• Remuneration levels are competitive with similar roles in markets in which the Company competes for talent. • Incentive-based compensation provides for upside potential with superior performance. • Long-term incentive compensation provides for a meaningful retention.	• There is a significant amount of total executive remuneration which is at risk and dependent upon achieving challenging performance metrics. • Fixed remuneration is appropriately market competitive and consistently higher performing executives are rewarded through higher base compensation.	• The Remuneration Committee regularly performs executive compensation benchmarking utilising independent compensation consultants. • The long-term incentive component of remuneration is primarily delivered through equity share rights linked to the Company's ordinary shares. • Executives and Directors cannot hedge equity share rights that are unvested or subject to restrictions. • In some circumstances the Board may also elect to provide long-term incentives in the form of cash.	• Incentive-based compensation is designed to reward executives for deIivered performance against important Company financial and strategic objectives. • Incentive plans utilise an appropriate mix of challenging performance measures designed to only deliver value to executives if target performance is achieved over both the short and long terms.

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31 December 2016	BOART LONGYEAR LIMITED

1.2. DIRECTORS AND SENIOR EXECUTIVES

This Report sets out the remuneration arrangements in place for the key management personnel (“KMP”) of the Company for the purposes of the Corporations Act and the Accounting Standards, being those persons who have authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, including the Non-executive Directors. The KMP for the year ended 31 December 2016 are listed in Table 1.2 below. Unless otherwise indicated, the individuals below were KMP for the entire financial year.

Table 1.2: Directors and senior executives who were KMP during the year ended 31 December 2016

Directors	Position
Marcus Randolph	Executive Chairman (also served as Interim CEO until 1 March 2016)
Bret Clayton	Non-executive Director
Peter Day	Non-executive Director
Jonathan Lewinsohn	Non-executive Director
Jeffrey Long	Non-executive Director
Gretchen McClain	Non-executive Director
Rex McLennan	Non-executive Director and Senior Independent Director
Deborah O'Toole	Non-executive Director

Senior executives	Position
Jeffrey Olsen	Chief Executive Officer (appointed effective 1 March 2016)
Brendan Ryan	Chief Financial Officer (appointed effective 6 September 2016)
Fabrizio Rasetti	Senior Vice President, General Counsel and Secretary
Brad Baker	Senior Vice President, Human Resources
Denis Despres	Chief Operating Officer (appointed effective 1 September 2016)
Kent Hoots	Senior Vice President, Global Products (ceased employment effective 1 October 2016)
Mark Irwin	Chief Commercial Officer (appointed effective 18 January2016)
Terry Kirkey	Vice President, Drilling Services Operations (KMP through 31 August2016)

Changes to KMP after the 31 December 2016:

1) Jonathan Lewinsohn resigned from the Board effective 20 January 2017

2) Conor Tochilin was appointed as a non-executive Director effective 20 January 2017

1.3. REMUNERATION OUTCOMES

Actual remuneration

Details of CEO and other senior executive remuneration for the year ended 31 December 2016, prepared in accordance with statutory obligations and accounting standards, are contained in Table 5.1 of this Report. The remuneration calculations in Table 5.1 are based on the Accounting Standards principle of “accrual accounting” and, consequently do not necessarily reflect the amount of compensation an executive actually realised in a particular year. To supplement the required disclosure we have included table 1.3, below, which shows the actual compensation realised by the senior executives who were KMP at the end of 2016. Table 1.3 illustrates how the Company’s remuneration strategy for senior executives translates into practice. It is important to note that the STI and LTI amounts are amounts earned on performance during the prior plan year(s) and vested and/or paid in the current year.

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Table 1.3: Actual remuneration received by senior executives who were KMP on 31 December 2016

	Base salary		STI 1		LTI 2		LTI (cash) 3		Other 4		Total
	US$		US$		US$		US$		US$		US$
Jeffrey Olsen		536,154		338,520		-		-		32,710		907,384
Brendan Ryan 5		121,539		-		-		-		7,935		129,474
Fabrizio Rasetti		416,000		237,952		9,131		624,000		32,410		1,319,493
Brad Baker		324,450		185,585		6,899		487,000		31,903		1,035,837
Denis Despres 6		126,154		-		-		-		7,714		133,868
Mark Irwin 7		341,732		-		-		-		65,321		407,054

(1) Represents the cash paid in respect of the executive’s STI award earned for the prior year’s performance, but paid in the current reporting year. For further details of the STI Plan, see section 3.3 of this Report.

(2) Represents the value of share rights vested during the year ended 31 December 2016 (based on the market value of shares at the vesting date: A$0.10 on 15 March 2016). Share Rights granted under the Company’s LTI Plan and options granted under the Company’s option plan during other grant years that have not reached their respective vesting dates do not appear in this table, as they do not vest until the conclusion of the performance period and/or continued service requirement. For further details of the LTI Plan and option plans, see section 3.4 of this Report.

(3) Represents the payment associated with the special one-time strategic retention award made in 2014 to a group of senior executives and which vested in 2016.

(4) Represents benefits such as US 401 (k) retirement plan, Company matching and/or profit sharing contributions, car allowance, relocation fees, and tax preparation service reimbursement.

(5) Mr Ryan was hired on 6 September 2016, as such, his actual remuneration received reflects a partial year of earnings from his date of hire.

(6) Mr Despres was hired on 1 September 2016, as such, his actual remuneration received reflects a partial year of earnings from his date of hire.

(7) Mr Irwin was hired on 18 January 2016, as such, his actual remuneration received reflects a partial year of earnings from his date of hire.

2. REMUNERATION FRAMEWORK AND STRATEGY

This section outlines the Company’s remuneration governance framework and strategy and explains how the Board and Remuneration Committee make remuneration decisions that underpin the remuneration arrangements for senior executives, including the use of external remuneration consultants.

2.1. HOW REMUNERATION DECISIONS ARE MADE

Board responsibility

The Board acknowledges its responsibility for the Company’s remuneration arrangements and ensures that they are equitable and aligned with the long-term interests of the Company and its shareholders. In performing this function and making decisions about executive remuneration, the Board is fully informed and acts independently of management. To assist in making decisions related to remuneration, the Board has established a Remuneration and Nominations Committee.

Remuneration and Nominations Committee (“Remuneration Committee” or “Committee”)

The Remuneration Committee has been established to assist the Board with remuneration issues and is responsible for ensuring that the Company compensates appropriately and consistently with market practices. It also seeks to ensure that the Company’s remuneration programs and strategies will attract and retain high-calibre Directors, executives and employees and will motivate them to maximise the Company’s long-term business, create value for shareholders and support the Company’s goals and values.

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The Remuneration Committee’s responsibilities include:

• reviewing, monitoring and overseeing the implementation of the executive remuneration policy;

• reviewing all aspects of remuneration of the CEO and the proposed remuneration of other members of the KMP, including any proposed change to the terms of their employment and any proposed termination payments;

• reviewing executive incentive plans, including equity-based plans and including a consideration of performance thresholds and regulatory and market requirements;

• developing performance hurdles for the CEO and reviewing proposed performance hurdles for other KMP;

• overseeing strategies for recruitment, retention and succession planning for Directors and key executive positions; and

• reviewing the composition of the Board and monitoring the performance of the Board and the Directors.

The charter of the Remuneration Committee is set out in full on the Company’s website at www.boartlongyear.com.

The Committee members as at the date of this Report are Mr Peter Day, Chairman, Ms Gretchen McClain and Ms Deborah O’Toole. The CEO, the Senior Vice President for Human Resources and other members of senior management attend meetings of the Remuneration Committee, as appropriate, to provide information necessary for the Remuneration Committee to discharge its duties. Individual executives do not attend or participate in discussions where recommendations regarding their own circumstances are determined.

Use of remuneration consultants and external advisers

Where appropriate, the Board seeks and considers advice from independent remuneration consultants and external advisers. Remuneration consultants are engaged by, and report directly to, the Remuneration Committee and support it in assessing market practice so that base salary and targeted short-term and long-term compensation are in line with comparable roles. When remuneration consultants are engaged, the Committee ensures their independence, as necessary, from Company management in accordance with the assignment or advice being sought. Thus, the Committee may determine that complete independence from management is required, or it may direct the consultant to work with Company management to obtain relevant information or input in order to formulate advice or recommendations to the Committee.

The Committee has also established a formal Protocol that summarises the policy and procedures the Company has adopted to govern the relationship between the independent remuneration consultant, the Committee and management. The Protocol was developed in compliance with the obligations under Part 2D.8 of the Corporations Act and ensures that the remuneration consultant remains free from any undue influence by any member of the KMP to whom the recommendations relate. All consultant remuneration recommendations are provided directly to the Committee and are accompanied by an undue influence declaration from the consultant.

In 2016, the Committee did not obtain any remuneration recommendations from remuneration consultants during the year and continued to rely on the independent market review of KMP compensation obtained from Mercer Consulting in 2015 to guide its remuneration decisions throughout 2016.

2.2. REMUNERATION POLICY AND STRATEGY

The Company’s executive remuneration strategy is designed to attract, motivate and retain high performing individuals and align the interests of executives with shareholders.

The Company’s remuneration program has been designed to ensure that the structure, mix of fixed and “at-risk” remuneration and quantum of senior executive remuneration meet the Company’s specific business needs and objectives and are consistent with good market practice. An additional challenge impacting the remuneration program is the need to provide total compensation packages that are competitive in the US market, where remuneration levels and structures materially differ from Australian arrangements.

Accordingly, the Company’s senior executive remuneration program has been structured so that it:

• provides a competitive compensation program to retain, attract, motivate and reward key employees;

• achieves clear alignment between total remuneration and delivered business and personal performance over the short and long term;

• is an appropriately balanced mix of fixed and “at-risk” remuneration; and

• is reasonable in the context of the definition in the Corporations Act 2001.

The Company and the Remuneration Committee regularly review all elements of the remuneration program to ensure that it remains appropriate to business strategy, is competitive and is consistent with relevant contemporary market practice. The remuneration initiatives introduced in 2016, which were designed to assist the Company achieve key goals during a very challenging time, demonstrate this.

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The diagram below illustrates three primary components of an executive’s total compensation opportunity and how the components are structured to achieve the remuneration strategy and align with shareholder interests:

Fixed Remuneration	Short-term Incentive (Corporate Bonus Plan)	Long-term Incentive
•     Provides a predictable base level of compensation commensurate with the executive’s scope of responsibilities, leadership skills, values, performance and contribution to the Company. •     Generally targeted to be near the median of the competitive talent market using external benchmarking data. Since the majority of the Company’s executives (and all of the executive KMP) are located in the US, the competitive talent market is determined to be the US market. •     Variability around the median is based on the experience, performance, skills, position, business unit size and/or complexity and unique market considerations, where necessary.	•     This component of compensation is “at-risk” and earned only if challenging performance metrics are achieved. •     Key performance metrics for 2016 include free cash flow, safety performance, and individual strategic goals. •     These metrics were designed to weight performance on free cash flow and safety to overall Company performance in order to promote collaboration and to align with shareholder interests. •     Individual strategic goals can include financial, operational and/or strategic targets. Examples include revenue growth, cost control goals, cash flow generation, geographic expansion, and productivity programs. •     The metrics used for the CBP are reviewed annually to ensure that they continue to support the Company’s business strategy. •     The STI is awarded in cash.	•     This component of compensation is “at-risk” and earned only if challenging performance metrics are achieved and/or continued service requirements are met over a multi-year performance period. •     The Board selected two metrics as the key measures of performance-based long-term incentive awards in 2016. Performance share rights are measured against share price appreciation over a three year period and performance cash rights are measured against an EBITDA target established for 2018. The hurdles used for the LTI are reviewed annually to achieve outcomes deemed important at that time by the Board. •     The LTI performance criteria used in 2016 included a minimum threshold performance, below which no value is achieved. •     The Board believes the 2016 LTI performance criteria provides an appropriate balance for long term shareholder return and underlying financial performance of the company. •     The LTI is awarded in equity and/or cash.

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3. COMPONENTS OF EXECUTIVE REMUNERATION

The remuneration policy and programs set out in this section of the Report apply to all executive KMP and to other members of the Company’s senior management who are not KMP.

3.1. REMUNERATION MIX

Total remuneration for the CEO and senior executives is made up of fixed remuneration (consisting primarily of base salary and superannuation contributions (or the foreign equivalent, such as the United States’ 401 (k) payments) and variable “at-risk” remuneration. The variable remuneration has two “at-risk” components:

• STI - being an annual bonus granted under the Company’s Corporate Bonus Plan; and

• LTI - being equity or cash grants tied to vesting conditions, such as performance hurdles and continued employment.

The Board notes the Company’s current market capitalisation may cause some shareholders and analysts to consider certain compensation components and/or total remuneration to be higher than market comparison models would suggest. Given the volatility of the Company’s markets and the complexity of operating a global and complex business, the Board believes that maintaining its executive compensation benchmarking to levels that reflect the Company’s size through the middle of the market cycle is a more accurate reflection of the long-term potential and through-the-cycle market capitalisation of the Company and the remuneration levels necessary to attract and retain the calibre of talent required to operate a company in a complex, global and highly cyclical environment.

The relevant proportion of fixed to at-risk components for senior executive remuneration during 2016 are shown below in table 3.1. It illustrates the annualised remuneration mix for executive KMP, including annualised fixed salary, target STI (assuming performance metrics are achieved such that 100% of target bonus is earned) and LTI at the fair value at the date of grant (assuming 100% performance and vesting requirements are achieved). See section 3.4, Long-term Incentive, for further information.

Table 3.1: Remuneration mix-

 

3.2. FIXED REMUNERATION

The fixed component of executive remuneration consists primarily of base salary. Senior executives also receive other benefits, such as a vehicle allowance. In addition, the Company contributes to retirement programs, such as Australia’s compulsory superannuation scheme or the United States’ 401 (k) defined contribution retirement plan.

Base salaries are reviewed annually by the Remuneration Committee (or, for the CEO, by the Board) and may be adjusted as appropriate to maintain market competitiveness and/or based on merit in accordance with the CEO’s recommendation (for senior executives other than the CEO).

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3.3. SHORT-TERM INCENTIVE

Table 3.3: Summary of the Short Term Incentive program

What is the STI program?	The Short Term Incentive program, or Corporate Bonus Plan (“CBP”), provides certain employees with the potential to receive an annual bonus if the Company meets annual financial and safety objectives established by the Board and participants satisfy specific annual objectives and targets that are pre-determined by the CEO and/or Board.
	Potential target incentives under the CBP range between 10% and 100% of an employee’s base salary depending on the employee’s role. The actual bonus that an employee will receive under the CBP (if any) will vary depending on the Company’s and the individual’s performance against established annual objectives and targets, as detailed more fully below.
Who participates in the STI program?	101 senior employees, including the senior executive KMP, participated in the CBP in 2016.
Why does the Board consider the STI program an appropriate incentive?	The CBP and the performance conditions set under the CBP have been designed to: •     focus eligible employees on maximising Company performance in key financial, safety and operational targets; •     align individual efforts with Company and shareholder interests; and •     reward for superior individual and Company performance.
	By putting a significant proportion of senior executive remuneration at-risk against challenging targets, the CBP aligns executive interests with the Company’s financial and safety performance and with the relevant operational and/or functional objectives.
What are the performance conditions?	There are three key performance components to the CBP that were used in 2016. Each component has a threshold performance below which no bonus is earned for that component; a target level of performance where 100% of the bonus can be earned; and a maximum stretch level of performance whereby superior results can earn up to 200% of that component of the bonus.
	The Company’s annual financial target for the purposes of the CBP is reviewed by the Remuneration Committee and approved by the Board. The Remuneration Committee’s philosophy in setting financial targets is to establish threshold targets that represent the desired minimum outcome for each goal (below which no bonus is payable for that goal) and stretch targets that can only be met by the achievement of excellent outcomes for each goal.
	The financial metrics used for the CBP are reviewed annually. The Remuneration Committee also reviews and approves the non-financial targets for senior executives (including the CEO).
	The three performance components for 2016 and their relative weighting are:

(1)	Corporate Financial Target - Free Cash Flow (FCF) - 40% of a Participant’s CBP opportunity is linked to the Company’s FCF performance. For the purposes of calculating FCF, the statutory FCF is adjusted to eliminate the impact of items such as cash restructuring costs, pension plan pre-funding, interest and income tax receipts or payments, acquisition or disposals of subsidiaries, and cash flows from financing activities, including, but not limited to, proceeds from equity raisings and borrowings.
	The free cash flow metric was selected to ensure proper alignment and focus on the critical need to generate cash to fund ongoing operations and reduce debt.
	For 2016, the Board approved the following performance payout matrix for the CBP Free Cash Flow component:

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Free Cash Flow
FCF US$’000		% of Budget			Payout %
	≥ 66,004		≥ 200	%		200	%
	33,002		100	%		100	%
	< 8,251		0	%		0	%

	Any actual performance falling between threshold and target, or target and maximum achievement will be calculated linearly.
(2)	Strategic Objectives - 40% of a participant’s CBP opportunity is dependent upon performance against strategic objectives relevant to the employee’s operational or functional responsibility. Examples of strategic objectives may include: operational or functional cost targets, geographic or targeted market segment or customer growth, new product introductions, leadership, talent retention and development, specific project or initiative progress, etc.
	Strategic objectives are utilised to reinforce continued focus on critical initiatives and operational or functional priorities that have a positive impact on current and/or future business performance. Strategic objectives should be pursued regardless of the business or market pressures impacting the overall corporate financial performance. Stretch performance on strategic objectives can be achieved to a maximum of 200% of the weighting of this component (i.e. up to 80% of a participant’s annual target bonus). Depending on the nature of the objective, stretch performance can be defined when the objective is approved at the beginning of the year, or in some circumstances be determined by the CEO and approved by the Board at the end of the year. The Board has discretion to modify the amount of the strategic objective award up or down as appropriate.
(3)	Safety - 20% of a participant’s CBP opportunity is dependent upon the Company’s overall safety performance.
	The Board and management believe that a component of the CBP based on safety results appropriately focuses Company employees on adopting safe work practices, continuously identifying ways to reduce or eliminate hazards or unsafe behaviours and getting employees home safely every day. Further, safety is paramount to the Company’s customers, and the Company’s ability to secure or retain work is impacted by its safety performance.
	For 2016, the Board agreed, on the recommendation of its Environmental, Health and Safety Committee, to total case incident rates (TCIR), severity, and significant near-miss closure rates as the measurements of safety performance to be incorporated into the CBP with the following performance payout targets:

Safety TCIR		Near Miss Closure Days		Safety Severity		Payout %
	1.70		90		3.46		50	%
	1.24		47		2.89		100	%
	1.01		30		1.66		200	%

The payout is linear between levels for each safety metric, and TCIR and severity are weighted equally at 5% and near-miss closure is weighted at 10% of the CBP. In order to receive any accelerated payout above target, the lost time incident rate must be at or below 0.20.

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	In addition to the operation of the CBP, as set out above, the Board retains discretion to administer the CBP, including adjusting the bonus any participant receives. For example, if a participant fails to adhere to corporate leadership values, such as legal compliance, the Board may reduce the participant’s annual bonus by up to 100%.
How are the performance conditions measured?	Performance is assessed against the relevant targets annually based on the Company’s fiscal year. The final determination of the Company’s financial performance is determined after reviewing the Company’s audited financial results for the relevant period. Financial metrics are assessed quantitatively against pre-determined targets. Where possible, non-financial targets are also assessed quantitatively, or otherwise, they are assessed by periodic qualitative performance appraisal.
	The Remuneration Committee recommends the amount of bonus to be paid to the CEO for Board approval. For senior executives, the Remuneration Committee will evaluate and approve recommendations from the CEO.
Sample calculation	Following is an example of how a bonus would be calculated, assuming the following:
	•      Employee earns $150,000 with a 40% target bonus amount
	•      Corporate Free Cash Flow of (80% achievement)
	•      Safety and strategic objectives achievement both at target performance
	Free Cash Flow of 80% = 80% component payout (per Free Cash Flow table above) Safety performance at target = 100% component payout Strategic Objectives at target = 100% component payout
	Calculation:
	Step 1: Determine component subtotal                  Free Cash Flow = (80% x 40% weighting)                 = 32%
	+          Safety performance = (100% x 20% weighting)         = 20%
	+          Strategic objectives = (100% x 40% weighting)         = 40%
	=          Subtotal achievement                                                   = 92%
	Step 2: Calculate Bonus
	$150,000 x 40% Target Bonus x 92% Bonus achievement = $55,200 Bonus
In what form is the STI delivered?	All bonuses awarded under the CBP are paid as a cash bonus.
What STI awards did senior executives earn in 2016?	Bonuses earned by the executive KMP under the CBP for the year ended 31 December 2016 are set out in Table 4.1.3 in section 4.1 of this Report. The bonuses will be paid in or after March 2017.
What if a senior executive ceases employment?	A senior executive’s entitlement to a CBP payment ceases on the date that they cease employment, unless the Board determines otherwise. However, where a senior executive’s employment ceases for reasons other than for cause or good reason, any earned bonus will be pro-rated and paid for the amount of time actually worked during the plan year.

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3.3. Long-term incentives

Table 3.4: Summary of the Long-term Incentive

What is the purpose of the LTI?	The Company’s LTI arrangements are designed to: •     align senior executive rewards with shareholder value; •     assist in retaining key executives; •     encourage superior performance on a sustained basis; and •     provide executives with an opportunity to share in the growth and value of the Company by tying the LTI component of senior executive remuneration to equity awards that rise and fall in value in line with the Company’s share price.
Who participates in the LTI?	The executives eligible to participate in the LTI are senior management and corporate executives, including the KMP. The target value of annual LTI grants varies depending on the participant’s position, skills and contributions to the Company. The target amounts are generally based on market averages for comparable roles at similar-sized companies. The Company made grants to approximately 80 participants during the year ended 31 December 2016. See Section 4.1 for details on LTI awards made to KMP.
What proportion of total remuneration does the LTI program represent?	Senior executives are typically offered grants that represent approximately 25% - 35% (53% for the CEO) of their total remuneration (on an annualised basis). However, those senior executives and other LTI Plan participants derive no actual value from their LTI grants unless applicable performance hurdles and/or service conditions are satisfied.
How is reward delivered under the LTI?	Under the LTIP Rules and the Option Plan Rules, the Board has flexibility to offer different types of incentives (e.g., Share Rights, Cash Rights, Options, or a combination of the three) as an executive’s LTI award. The composition of the grants from year-to-year will depend on what, in the Board’s view, will best incentivise and reward executives, having regard to the Company’s circumstances. An Option is an entitlement to purchase a share at a pre-determined share price set at the grant date. A Share Right is an entitlement to receive a fully-paid ordinary share in the Company, and a Cash Right is an entitlement to receive a cash bonus up to a set maximum. Although the Board may elect to grant Cash Rights for any reason, they have typically been used to supplement Share Rights in order to limit share dilution when the stock price is low at the time of the award.
	The 2016 LTI Plan awards to the CEO, his direct reports and other Company vice-presidents were comprised of a combination of performance-based Share and Cash Rights. The Board considered this to be appropriate for 2016 as it most effectively achieved three key objectives: aligning executives’ interests with shareholders; motivating executives to focus on sustained share price growth and certain earnings targets over the longer term; and retaining key executive talent, which is critical to the Company’s long term success. The performance-based Rights were granted on terms and conditions determined by the Board, including vesting conditions linked to service, share price appreciation, and earnings achievement over a specified period (in this case three years).
Do participants pay for Options?	When Options are granted, they are offered at a pre-determined share price, which the recipient must pay in order to exercise the Option award after it vests. At the time the participant exercises the Option, the participant may pay the exercise price of the Options by making a payment to the Company, executing a cashless (broker-assisted) exercise that complies with applicable laws, authorising the withholding by the Company of an equivalent number of Shares otherwise deliverable to the participant pursuant to the Option, or by a combination of the foregoing.

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Do participants pay for Share Rights or Cash Rights?	Share Rights and Cash Rights are offered at no cost to the LTIP participants, and no amount is payable to the Company by the participant if they vest.
What rights are attached to the Options or Share Rights?	Options and Share Rights do not carry voting rights. Shares allocated upon vesting of Share Rights or the exercise of Options will carry the same rights as other ordinary shares. The Company may acquire shares underlying the Share Rights that it has granted under the LTIP, and the price paid by the Company will be the prevailing market price of the shares at the time of acquisition. The acquired shares will be held in trust. All dividends paid on unvested Share Rights will be held in trust and payable when the underlying Share Right vests. Company employees are not entitled to trade or hedge their unvested Rights or Options.
What are the vesting conditions?	For the 2016 LTI grant to KMP and certain other senior executives, the vesting conditions are as follows:

LTI Incentive	Percentage of grant	Vesting condition	Partial vesting
Performance Share Rights (granted to the CEO, his direct reports and other Company vice-presidents)	50%	Satisfaction of share price appreciation targets within three years of the grant date. PLUS Continued employment by the recipient as of the relevant testing date.	Vesting may occur on a pro-rata basis according to the conditions set out below.
Performance Cash Rights (granted to the CEO, his direct reports and other Company vice-presidents)	50%	Satisfaction of earnings targets achieved in the 2018 plan year. PLUS Continued employment by the recipient as of the relevant testing date.	Vesting may occur on a pro-rata basis according to the conditions set out below.

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How are the Performance Rights measured for awards granted to the CEO, his direct reports and other vice- presidents?	Performance Share Rights: The Share Price Appreciation target is defined as the growth in the volume-weighted average share price (VWAP) from 1 January to 31 January 2016 relative to the VWAP from 1 January to 31 January 2019. The 2019 VWAP must be greater than or equal to a 15% compounded growth rate of the VWAP price of the 2016 measurement period. Any CAGR achievement below 15% will result in no Share Rights vesting. Performance Cash Rights: The earnings target is defined as earnings before interest, tax, depreciation and amortisation (EBITDA) adjusted to exclude impairments, restructuring and other non-recurring items. The Board has established a minimum target adjusted EBITDA performance for the 2018 fiscal year that must be achieved for any Cash Rights to vest. Due to market sensitivity, the adjusted EBITDA targets will be communicated in the Remuneration Report for the period following the close of the 2018 plan year.
Why have the performance hurdles been chosen?	The Board believes that a combination of share price appreciation and earnings targets as the LTI metrics (each weighted as 50% of the total) provide a balanced long-term focus on both absolute shareholder returns and continued improvement of the underlying operational and financial performance of the Company. Given the challenging business environment in which the Company is currently operating, the highly leveraged capital structure and the investment made by our shareholders, the Board believes a balanced focus appropriately aligns management equity incentives to the interests of the Company’s shareholders. The hurdle(s) used for the LTI will be reviewed annually in light of market conditions and to ensure that it continues to encourage executives to achieve outcomes that reflect the actual long term needs and goals of the business.
What if a senior executive ceases employment?	A senior executive’s unvested LTI awards will generally lapse on the date the executive ceases employment, unless the Board determines otherwise. However, where a senior executive’s employment ceases due to death or total and permanent disability, all unvested awards will vest. Also, unless the Board determines otherwise, where a senior executive’s employment ceases by reason of “Special Circumstances” (which includes redundancy, retirement or other circumstances which are considered by the Board to be extraordinary):

• where there is no performance condition attached to an Option or Right (i.e. it is an Option, Retention Share Right or Retention Cash Right), any applicable time-based condition will be waived and the number of Options, Retention Share Rights and/ or Retention Cash Rights that vest will be pro-rated according to the extent of the retention period actually worked; and

• where there is a performance condition attached to an Option or Right (i.e. it is a performance-based Option, Performance Share Right or Performance Cash Right), there will be no accelerated vesting of the performance-based Options or Rights and instead, the performance-based Options or Rights will remain “on foot” and be tested in the ordinary course and against the applicable performance condition. However, the number of performance-based Options or Rights that vest will be pro-rated over the period of time actually worked during the continued service period.

What happens in the event of a change of control?	In the event of a takeover or change of control of the Company, any unvested Options will vest and any outstanding Rights may vest at the Board’s discretion.
What Options or Rights were granted in 2016?	Rights and Options granted during the year ended 31 December 2016 are set out in Table 5.2 of this Report.

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3.5 Executive Remuneration Clawback Policy

The Company has an incentive compensation clawback policy applicable to current and former senior executives, including the KMP listed in this report, as well as any other management of the Company who participated in the Company’s incentive compensation plans. The policy is applicable to incentive compensation including bonuses, awards or grants of cash or equity under any of the Company’s short or long-term incentive or bonus plans where bonuses, awards or grants are based in whole or in part on the achievement of financial results. If the Board determines that a covered employee was overpaid as a result of his or her fraud or willful misconduct that requires a restatement of the reported financial results, the Board may seek to recover the amount of the overpayment by a repayment or through a reduction or cancellation of outstanding future bonus or awards. The Board can make determinations of overpayment at any time through the third fiscal year following the year for which the inaccurate performance criteria were measured.

3.6 Option Plans

The Board established the 2015 Option Plan, as described above, which authorised the granting of stock options to the CEO, his direct reports and other Company vice-presidents. The options granted pursuant to the 2015 Option Plan are subject to a share-price appreciation performance condition and, subject to meeting that condition, in part or in full on any of the 14 March 2018, 14 March 2019 and 14 March 2020 testing dates. The options can be exercised for 10 years after the vesting date unless an employee terminates employment with the Company, in which case the Board may shorten the exercise period to no less than six months from the termination date.

During 2016, 1,000,000 options were issued under the 2015 Option Plan to Mr Mark Irwin, as a part of his new hire offer, with an exercise price of A$0.199. The fair value of the options awarded was approximately US$70 thousand. The terms and conditions of this award, including performance conditions, are the same as the 2015 LTI awards granted to other members of the KMP, as disclosed in the 2015 Remuneration Report.

Details of options that have been granted to senior executives can be found in Table 4.1.7.

4. PERFORMANCE AND RISK ALIGNMENT

4.1. PERFORMANCE ALIGNMENT

While senior executive remuneration is structured to attract and retain talented employees, the amount of remuneration received by an individual is dependent on the achievement of superior performance and generating value for shareholders.

Table 4.1.1 below summarises the Company’s performance over the past five years in respect of the financial and non-financial indicators identified by the Board to assess the Company’s performance and future prospects.

Table 4.1.1: Year-on-year

performance

	Share performance							Earnings performance
	Closing
	share		Dividend					Revenue		EBITDA			NPAT
Financial	price		p/share					US$		US$			US$						Net Debt
year	A$		US$ 1		EPS % 2			millions		millions			millions			ROE			millions 3
2016		0.13		-		(384.4	)%		642		1,653			(157	)		(60.6	)%		681
2015		0.06		-		(822.4	)%		735		(115	)		(326	)		(596.1	)%		586
2014		0.17		-		(510.9	)%		867		(83	)		(333	)		(133.4	)%		551
2013		0.38		0.01		(403.7	)%		1,223		(337	)		(620	)		(79.3	)%		n/a
2012		1.88		0.12		7.7	%		2,012		254			68			6.0	%		n/a

(1)	Dividends per share are shown based upon the cash amounts paid in each year.
(2)	Calculated as basic EPS divided by closing share price.
(3)	Net debt was selected as a performance criteria in 2014. Excludes impact of recapitalisation transaction, letters of credit, CRA & IRS obligations, strategic asset acquisitions & disposals, equity raise, potential asset backed loans, etc.
(4)	The closing share price for 2011 was A$2.78

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31 December 2016	BOART LONGYEAR LIMITED

Short-term performance indicators and outcomes

Overall, STI earned and awarded to KMP in 2016 was 89% on average (down from 114% in 2015). This result was due to strong performance against the safety and personal strategic objectives and under-performance against the corporate financial target component of the Corporate Bonus Plan in 2016. Additional details on actual performance for each of the bonus plan components follow.

Performance against 2016 financial target

For 2016, the Remuneration Committee specifically recommended, and the Board approved, the following performance payout matrix for the Free Cash Flow component:

Free Cash Flow
FCF US$’000		% of Budget			Payout %
	≥ 66,004		≥ 200	%		200	%
	33,002		100	%		100	%
	< 8,251		0	%		0	%

Actual corporate free cash flow generation for the year was $12.3 million, which resulted in a 37% payout of the targeted amount.

Performance against 2016 non-financial targets

The Company exceeded its performance on its targeted overall Safety metrics with actual TCIR performance of 1.41, Severity Rate of 2.28, and 28 days for Near Miss Closure, representing 81.5%, 149.6%, and 200% achievement, respectively. Senior Executives delivered solid overall performance against the strategic objectives during a particularly challenging year. The Company understands the desire for transparency of specific targets that are represented in the strategic objectives portion of the STI plan. Given the Company’s size and position in the industry, it believes disclosing certain detailed financial or strategic performance targets would put it at a competitive disadvantage due to commercial sensitivities. However, in 2016 the Board established several specific strategic and operational objectives that included, but were not limited to:

• Delivering 2016 business performance in a difficult market environment by:

o driving cost and efficiency improvements in corporate, business and functional areas;

o reducing SG&A and Overhead costs in 2016;

o improving cash management and working capital;

o delivering targeted savings on drilling services efficiency and commercial initiatives;

• Executing on a revised organisational structure to improve commercial, functional and operational alignment;

• Defining key customer strategic alliance plans and measurably improve customer relationships and benefits by increasing the commercial capabilities of the Company, particularly in our Drilling Services business;

• Achieving an improved safety culture through:

o improved awareness across the entire organisation;

o focusing on the THINK process;

o increased transparency in reporting; and

o increased use of engineering solutions to make our equipment safer.

These objectives applied to other senior executives as they relate to their operation, function or region.

The Board was satisfied that the progress made on these strategic initiatives for the KMP were achieved at or slightly higher than the targeted performance established for the year. For the senior executives the strategic objective component averaged 43% (out of a target of 40%) for the group which also reflected the Board’s recognition of the contributions, in varying amounts by executives, to the success of the operating and strategic objectives above.

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Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

Table 4.1.2: Average proportion of STI awarded, 2012 through 2016.

	2012			2013			2014			2015 2			2016
% of target STI awarded 1		72	%		40	%		122	%		114	%		90	%

(1) Weighted average for senior executives.

(2) Not including Mr Kirkey who was on his former bonus plan through 2015.

Table 4.1.3: STI earned during the year ended 31 December 2016

As described earlier in this report, for 2016 the Company’s performance on the free cash flow metric, representing 40% of the total, achieved below target performance at 15% of the bonus. Company performance on the safety metrics, representing 20% of the total, achieved above target performance at 31.5%. Performance on strategic objectives, which represent 40% of the total, were on average achieved at 43%.

	STI earned US$		Target STI 1 US$		STI earned as % of target STI			% of target STI forfeited			STI as % of maximum STI2			% of maximum STI forfeited 2
Jeffrey Olsen		554,400		600,000		92	%		8	%		46	%		54	%
Brendan Ryan 3		70,430		76,271		92	%		8	%		46	%		54	%
Fabrizio Rasetti		183,872		208,000		88	%		12	%		44	%		56	%
Brad Baker		140,162		162,225		86	%		14	%		43	%		57	%
Denis Despres 3		72,320		80,000		90	%		10	%		45	%		55	%
Kent Hoots 4		133,078		154,206		86	%		14	%		43	%		57	%
Mark Irw in 3		192,880		214,549		90	%		10	%		45	%		55	%
Terry Kirkey 5		145,200		165,000		88	%		12	%		44	%		56	%

(1) The target potential value of the 2016 STI awards for the CEO and senior executives (who receive STI awards wholly in cash) is the amount disclosed. A minimum level of performance must be achieved before any STI is awarded. Therefore, the minimum potential value of the STI for all participants in 2016 was nil.

(2) The maximum potential award assuming superior performance against all CBP metrics is 200% of target STI.

(3) Mr Ryan, Despres and Irwin’s target and earned bonuses were each calculated on their annualised base salary prorated from their date of hire in 2016.

(4) Mr Hoots’ employment with the Company terminated on 1 October 2016 and he was eligible to receive a prorated STI bonus. Pursuant to his separation agreement, his prorated amount assumed achievement of individual strategic performance at target.

(5) Mr Kirkey was a KMP 1 January through 31 August 2016, however the bonus reflected in table 4.1.3 represents his target and earned bonus for the entire year.

Long-term performance indicators and outcomes

LTI awards are provided to assist in retaining key executives, encourage superior performance on a sustained basis, and provide such executives with an opportunity to share in the growth and value of the Company.

Table 4.1.4 shows the actual Net Debt performance achieved in each of 2014, 2015 and 2016 applicable to the 2014 performance awards. The final actual cumulative Net Debt and resulting percentage of award is eligible to vest after satisfying the continued employment condition on 15 March 2017.

Table 4.1.4: Cumulative performance for 2014 grants of performance-based LTI awards

	Targets									Actual Net			Net Debt
	Threshold			Target			Maximum			Debt1			Performance
2014		554,500			542,676			530,852			550,758			66	%
2015		602,200			573,500			544,800			586,272			78	%
2016		687,289			654,537			621,885			681,044			60	%
Cumulative Performance		1,843,989			1,770,713			1,697,537			1,818,074			68	%
% of Award Earned		50	%		100	%		150	%		68	%		68	%

(1) Excludes impact of recapitalisation transaction, letters of credit, CRA & IRS obligations, strategic asset acquisitions & disposals, equity raise, potential asset backed loans, etc.;

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Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

The vested Share Rights listed in Table 4.1.5 below include the Retention Share Rights and Performance Share Rights that were granted in 2013 and vested in 2016. The Performance Share Rights were subject to the performance period ended 31 December 2015 and achieved 0% (nil) of the target award amount (as detailed in last year’s remuneration report).

Table 4.1.5: Movement in Share Rights during the year ended 31 December 2016

Name	Grant date	FMV at Grant Date US$		Vesting date	Held at the beginning of the financial year		Number of Share Rights granted as remuneration			Number of Share Rights vested		Value of Share Rights vested US$1			Number of Share Rights forfeited 2			Held at the end of the financial year
Jeffrey Olsen	1-Apr-14		0.27	1-Apr-17		972,612		-			-		-			-			972,612
	15-Mar-16		0.05	15-Mar-19		-		8,362,602			-		-			-			8,362,602
Brendan Ryan	6-Sep-16		0.08	6-Sep-19		-		3,900,000	3		-		-			-			3,900,000
Fabrizio Rasetti	15-Mar-13		1.39	15-Mar-16		238,550		-			119,275		9,943			119,275			-
	15-Mar-14		0.25	15-Mar-17		972,612		-			-		-			-			972,612
	15-Mar-16		0.05	15-Mar-19		-		2,241,177			-		-			-			2,241,177
Brad Baker	15-Mar-13		1.39	15-Mar-16		180,238		-			90,119		7,513			90,119			-
	15-Mar-14		0.25	15-Mar-17		729,459		-			-		-			-			729,459
	15-Mar-16		0.05	15-Mar-19		-		1,820,957			-		-			-			1,820,957
Denis Despres4	1-Sep-16		0.08	1-Sep-19		-		2,600,000			-		-			-			2,600,000
Kent Hoots	15-Mar-13		1.39	15-Mar-16		265,056		-			132,528		11,048			132,528			-
	15-Mar-14		0.25	15-Mar-17		778,092		-			440,245		48,254	5		117,724	5		220,123
	15-Mar-16		0.05	15-Mar-19		-		2,241,177			-		-	5		1,832,386	5		408,791
Mark Irw in	15-Mar-16		0.05	15-Mar-19		-		1,961,030			-		-			-			1,961,030
Terry Kirkey	1-Jun-13		0.67	1-Jun-16		61,500		-			30,750		2,236			30,750			-
	15-Mar-14		0.25	15-Mar-17		240,420		-			-		-			-			240,420
	15-Mar-16		0.05	15-Mar-19		-		1,961,030			-		-			-			1,961,030

(1) Represents the value of Share Rights vested during the year based on the market value of shares at the vesting and forfeiture date.

(2) A portion of the 2013 outstanding grants relate to performance Share Rights that were forfeited due to performance targets not being reached.

(3) Mr Ryan was granted 3,900,000 Performance Share Rights. 2,600,000 Performance Share Rights represent his 2016 LTI award and 1,300,000 Performance Share Rights represent a one-time new hire sign-on award. Both the LTI portion and the sign-on portion are subject to the same performance and vesting conditions as the LTI awards granted to all other executives.

(4) In addition to the 2,600,000 Performance Share Rights granted to Mr Despres as part of his 2016 LTI award, Mr Depres was granted a sign-on share award of $200 thousand that will be paid in equal installments of one-third on each anniversary of his hire date (1 September 2016) beginning with the first anniversary and ending on the third. The shares will be calculated by dividing one third of the share award by the 5-day volume weighted average share price for the five trading days immediately preceding and including the relevant anniversary date. The actual number of shares cannot be determined until the calculation is performed upon each of the three installment vesting dates. There are no performance conditions on these amounts and so long as Mr Despres does not voluntarily resign prior to a vesting date, that installment of the award will vest.

(5) Mr Hoots’ employment terminated on 1 October 2016, at which time he received a pro-rata vesting of 440,245 outstanding Retention Share Rights upon his termination date. The balance of 78,483 outstanding Retention Share Rights were forfeited. In addition, Mr Hoots’ outstanding Performance Share Rights were also pro-rated upon his termination date, resulting in the forfeiture of 1,871,627 Performance Rights. The balance of 628,914 Performance Rights remain on foot and remain subject to meeting the performance condition.

 44

Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

The Cash Rights listed in Table 4.1.6 below include the Retention Cash Rights and Performance Cash Rights that were granted in 2014 and vest in 2016 and 2017 and the Special Retention Rights granted in 2016 and vest in 2019.

Table 4.1.6: Movement in Cash Rights during the year ended 31 December 2016

			Held at the				Number of						Value of					Value of
			beginning		Number of		Special			Num ber			Cash		Number			Cash		Held at the
			of the		Cash Rights		Retention			of Cash			Rights		of Cash			Rights		end of the
	Grant	Vesting	financial		granted as		Rights			Rights			vested		Rights			forfeited		financial
Name	date	date	year		remuneration		granted			vested			US$		forfeited			US$		year
Jeffrey Olsen	1-Apr-14	1-Apr-17		125,000		-		-			-			-		-			-		125,000
	15-Mar-16	15-Mar-19		-		500,000		-			-			-		-			-		500,000
	1-Mar-16	1-Mar-19		-		-		900,000	2		-			-		-			-		900,000
Brendan Ryan	6-Sep-16	6-Sep-19		-		200,000		-			-			-		-			-		200,000
Fabrizio Rasetti	1-Mar-14	1-Mar-16		624,000		-		-			624,000	2		624,000		-			-		-
	15-Mar-14	15-Mar-17		125,000		-		-			-			-		-			-		125,000
	15-Mar-16	15-Mar-19		-		134,000		-			-			-		-			-		134,000
	1-Mar-16	1-Mar-19		-		-		624,000	2		-			-		-			-		624,000
Brad Baker	1-Mar-14	1-Mar-16		487,000		-		-			487,000	2		487,000		-			-		-
	15-Mar-14	15-Mar-17		93,750		-		-			-			-		-			-		93,750
	15-Mar-16	15-Mar-19		-		108,875		-			-			-		-			-		108,875
	1-Mar-16	1-Mar-19		-		-		487,000	2		-			-		-			-		487,000
Denis Despres 1	1-Sep-16	1-Sep-17		-		100,000		-			-			-		-			-		100,000
	1-Sep-16	1-Sep-18		-		100,000		-			-			-		-			-		100,000
	1-Sep-16	1-Sep-19		-		100,000		-			-			-		-			-		100,000
	1-Sep-16	1-Sep-19		-		200,000		-			-			-		-			-		200,000
Kent Hoots	1-Mar-14	1-Mar-16		511,000		-		-			511,000	2		511,000		-			-		-
	15-Mar-14	15-Mar-17		100,000		-		-			42,435	3		42,435		15,130	3		15,130		42,435
	15-Mar-16	15-Mar-19		-		134,000		-			-			-		109,545	3		109,545		24,455
	1-Mar-16	1-Mar-19		-		-		511,000	2		-			-		340,633	3		340,633		170,367
Mark Irwin	15-Mar-16	15-Mar-19		-		117,250		-						-		-			-		117,250
	1-Mar-16	1-Mar-19		-		-		525,000	2		-			-		-			-		525,000
Terry Kirkey	15-Mar-14	15-Mar-17		30,000		-		-			-			-		-			-		30,000
	15-Mar-16	15-Mar-19		-		117,250					-			-		-			-		117,250
	1-Mar-16	1-Mar-19		-		-		495,000	2		-			-		-			-		495,000

(1) Mr Depres received a one-time new hire sign-on award of $300 thousand that will be paid in equal instalments of one-third each on the anniversary of his hire date (1 September 2016) beginning with the first anniversary and ending on the third. There are no performance conditions on these amounts and so long as Mr Despres does not voluntarily resign prior to a vesting date, that installment of the award will vest.

(2) Represents the special strategic retention awards granted in 2014 (vesting in 2016) and granted in 2016 which will vest in 2019.

(3) Mr Hoots’ employment terminated on 1 October 2016 at which time he received a pro-rata vesting of 42,435 outstanding Retention Cash Rights upon his termination date. The balance of 7,565 outstanding Retention Cash Rights were forfeited. He also received a pro-rata portion of his Special Retention Rights which will remain outstanding until the scheduled vesting date in March 2019. The amount of 340,633 Special Retention Rights were forfeited. In addition, Mr Hoots’ outstanding Performance Cash Rights were also pro-rated upon his termination date resulting in the forfeiture of 117,110 Performance Rights. The balance of 66,890 Performance Rights remain on foot and are subject to meeting the performance conditions.

 45

Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

Table 4.1.7: Movement in options during the year ended 31 December 2016

			Held at the		Number of		Number		Exercise							Vested and
	Effective		beginning of		options		of		price per		Number			Held at the		exercisable
	grant	Vesting	the financial		granted as		options		option		of options			end of the		as at 31 Dec
Name	date	date	year		remuneration		vested		A$		forfeited			financial year		2016
Brad Baker	15-Mar-14	15-Mar-17		243,153		-		-		0.32		-			243,153		-
	1-Jul-15	15-Mar-20		4,297,990		-		-		0.20		-			4,297,990		-
Kent Hoots	15-Mar-14	15-Mar-17		259,364		-		259,364		0.32		-			259,364		259,364
	1-Jul-15	15-Mar-20		5,289,830		-		-		0.20		3,651,570	1		1,638,260		-
Mark Irwin	18-Jan-16	15-Mar-20		-		1,000,000		-		0.20		-			1,000,000		-
Terry Kirkey	15-Mar-14	15-Mar-17		80,140		-		-		0.32		-			80,140		-
	1-Jul-15	15-Mar-20		1,983,690		-		-		0.20		-			1,983,690		-
Jeffrey Olsen	1-Apr-14	1-Apr-17		324,204		-		-		0.32		-			324,204		-
	1-Jul-15	15-Mar-20		8,265,360		-		-		0.20		-			8,265,360		-
Fabrizio Rasetti	15-Mar-14	15-Mar-17		324,204		-		-		0.32		-			324,204		-
	1-Jul-15	15-Mar-20		5,289,830		-		-		0.20		-			5,289,830		-

(1) Mr Hoots’ employment terminated on 1 October 2016. Options granted on 15 March 2014 were vested in full and became exercisable upon his date of termination. Options granted in 2015 were pro-rated from the date of the grant and the portion that was not forfeited remain on foot and subject to continuing performance conditions.

The Board desired not to accelerate the vesting of outstanding Options in connection with the 2015 recapitalisation and reached an agreement with participants that accelerated vesting of Options granted prior to the recapitalisation should only occur if a participant is terminated for reasons other than cause during the 24 month period following the date of the completion of the recapitalisation (27 January 2015).

4.2. RISK ALIGNMENT

4.2.1 Employee and Director Trading in Company Securities

Under the Company’s Securities Trading Policy, Directors and employees (including senior executives) are prohibited from entering into transactions that limit the economic risk of holding unvested Rights or options that have been received as part of their remuneration. The Company treats compliance with this policy as a serious issue and takes appropriate measures to ensure the policy is adhered to, including imposing appropriate sanctions where an employee is found to have breached the policy.

Further restrictions also apply to Directors and senior executives with respect to their dealing in the Company’s shares and other securities under the Securities Trading Policy, which may be found in the Corporate Governance section on the Company website at www.boartlongyear.com.

 46

Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

5. EXECUTIVE REMUNERATION IN DETAIL

This section provides details of total remuneration and service contract terms for the CEO and other senior executives.

5.1. TOTAL REMUNERATION

Details of each senior executive’s remuneration during the years ended 31 December 2016 and 2015 (calculated in accordance with applicable accounting standards) are set out in Table 5.1.

Table 5.1: Senior executive remuneration

	Cash-based compensation																				Non-cash- based compensation
	Short term benefits 1							Post- employment benefits				Other long- term benefits					Termination Benefits 2				Share- based compensation 3
				Annual				Super- annuation				Retention Cash			Performance Cash										Share -
	Cash salary			bonus 4		Other 5		benefits 6		Other		Rights			Rights		Termination		Other		Options		Rights		based			Total
	US$			US$		US$		US$		US$		US$			US$		US$		US$		US$		US$		%			US$
Jeffrey Olsen
2016		536,154	11		554,400		24,760		7,950		-		270,814	12		152,759		-		-		142,733		197,875		18.0	%		1,887,444
2015		400,000			338,520		20,800		7,950		-		20,814			20,814		-		-		118,624		87,534		20.3	%		1,015,056
Brendan Ryan7
2016		121,539			70,430		6,320		1,615		-		-			19,444		-		-		-		18,958		8.0	%		238,306
Fabrizio Rasetti
2016		416,000			183,872		24,460		7,950		-		259,574	12		56,175		-		-		98,914		122,135		18.9	%		1,169,081
2015		416,000			237,952		27,458		7,950		-		332,388	12		20,815		-		-		83,364		149,387		18.3	%		1,275,314
Brad Baker
2016		324,450			140,162		25,150		6,754		-		201,950	12		44,341		-		-		78,814		93,514		18.8	%		915,135
2015		324,450			185,585		27,704		7,950		-		258,778	12		15,611		-		-		66,187		113,486		18.0	%		999,751
Denis Despres 8
2016		126,154			72,320		6,560		1,154		-		61,111			22,222		-		-		-		55,185		16.0	%		344,706
Kent Hoots
2016		262,096			133,078		25,246		7,950		-		233,516	12		52,013		309,750		11,794		2,349		55,641		5.3	%		1,093,434
2015		340,725			212,408		27,423		7,950		-		271,801	12		16,651		-		-		78,416		134,050		19.5	%		1,089,424
Mark Irwin9
2016		341,732			192,880		57,371		7,950		-		145,833	12		30,941		-		-		16,042		25,875		5.1	%		818,624
Terry Kirkey10
2016		330,000			145,200		16,900		7,731		-		142,495	12		35,937		-		-		33,916		48,771		10.9	%		760,950
2015		23,077			-		1,206		-		-		4,995			4,995		-		-		28,130		26,902		61.6	%		89,305

 47

Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

(1)	There were no non-monetary benefits provided.
(2)	Includes the 2016 accounting expenses representing Mr Hoots’ termination payments and the value of the waiver of medical premiums for 12 months from the date of termination. The amount in “Other” represents the payments for accrued and unused vacation for 2016.
(3)	In accordance with the requirements of the Australian Accounting Standards Board, remuneration includes a portion of the historical fair value of equity compensation recognised over the respective vesting period (i.e. Rights awarded under the LTIP and options awarded under the Option Plan(s)). The fair value of equity instruments is determined as at the grant date and is recognised over the vesting period. The amount included as remuneration is not related to or indicative of the benefit (if any) that senior executives may ultimately realise should the equity instruments vest. The fair value of options at the date of their grant has been determined in accordance with AASB 2 applying Black-Scholes and Brownian Motion valuation methods. The assumptions underpinning these valuations are set out in Note 10 to the financial statements.
(4)	The 2016 amount represents cash STI payments earned by the executive during the year ended 31 December 2016, which are expected to be paid in March 2017 and were approved by the Board on 23 February 2017. The 2015 amount represents cash STI payments earned by the executive during the year ended 31 December 2015, which were paid on 4 March 2016.
(5)	Includes automotive allowances, reimbursements of financial and tax preparation assistance, relocation expenses, and dividends received on Share Rights, if any.
(6)	Includes 401(k) plan matching contributions made by the employing entity in the United States.
(7)	Mr Ryan was hired on 6 September 2016, as such, his actual remuneration received reflects a partial year of earnings from his date of hire.
(8)	Mr Despres was hired on 1 September 2016, as such, his actual remuneration received reflects a partial year of earnings from his date of hire.
(9)	Mr Irwin was hired on 18 January 2016, as such, his actual remuneration received reflects a partial year of earnings from his date of hire.
(10)	Mr Kirkey was considered a KMP until 31 August 2016, however, his remuneration reported above for 2016 includes remuneration received during the entire year. In 2015, Mr Kirkey was not considered a KMP until his promotion on 1 September 2015, his 2015 remuneration reported above only includes remuneration received commencing on the date of his promotion. Mr Kirkey’s 2015 bonus was based on his prior non-KMP role and therefore, not included in 2015 remuneration.
(11)	Mr Olsen’s cash salary reflects a voluntary reduction of 10% in his base pay effective 11 July 2016 and expected to end no later than 1 July 2017. Any earned bonus will be calculated on his unreduced base salary of $600 thousand per annum.
(12)	Amounts reflect a portion of the expense associated with the special strategic retention awards granted in 2014 (vesting and paid in 2016) and granted in 2016 which will vest and be paid in 2019.

 48

Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

5.2. RIGHTS AND OPTIONS GRANTED

Table 5.2: Options granted during the year ended 31 December 2016 table:

	Options
						Fair
				Exercise		value		Maximum
	Number of		Future	price per		per		value of
	options		years	option		option 2		grant3
Name	granted		payable	A$		US$		US$
Mark Irwin		1,000,000	5 yrs		0.20		0.07		70,000

(1) As part of his new hire offer, Mr Irwin received 1,000,000 Options pursuant to the terms of the 2015 Option Plan.

Table 5.2.1: Rights granted during the year ended 31 December 2016 table:

												Number of
							Maximum		Number			Special			Maximum
	Number of			Future	Fair value		value of		of LTI			Retention		Future	value of
	Rights			years	per Right 3		grant 4		Rights			Rights		years	grant4
Name	granted1			payable2	US$		US$		granted1			granted8		payable2	US$
Jeffrey Olsen		8,362,602		3yrs		0.05		489,212		500,000			900,000	3yrs		1,400,000
Brendan Ryan		3,900,000	5	3yrs		0.08		365,040		200,000			-	3yrs		200,000
Fabrizio Rasetti		2,241,177		3yrs		0.05		131,109		134,000			624,000	3yrs		758,000
Brad Baker		1,820,957		3yrs		0.05		106,526		108,875			487,000	3yrs		595,875
Denis Despres		2,600,000	6	1-3yrs		0.08		243,360		500,000	7		-	1-3yrs		500,000
Kent Hoots		2,241,177		3yrs		0.05		131,109		134,000			511,000	3yrs		645,000
Mark Irwin		1,961,030		3yrs		0.05		114,720		117,250			525,000	3yrs		642,250
Terry Kirkey		1,961,030		3yrs		0.05		114,720		117,250			495,000	3yrs		612,250

(1)	The grants to senior executives for 2016 and were made on 15 March 2016 or applicable hire date (6 September 2016 for Mr Ryan and 1 September 2016 for Mr Despres). Any Rights that do not vest on the vesting date will be forfeited. Rights vest on 15 March 2019 subject to performance conditions over the period from 1 January 2016 to 31 December 2018.
(2)	Performance Rights vest on 15 March 2019 (6 September 2019 for Mr Ryan and 1 September 2019 for Mr Despres) subject to performance conditions over the period from 1 January 2016 to 31 December 2018, as described in table 3.4.The maximum fair value of the grant is based on the fair value per the instrument and full achievement of the performance conditions. The minimum total value of the grant, if the applicable performance conditions are not met, is nil. Also includes automotive allowances.
(3)	The fair value was calculated as at the grant date of 15 March 2016 for all except Mr Ryan and Mr Despres which were calculated on their hire dates, 6 September 2016 and 1 September 2016, respectively. Mr Ryan was granted 3,900,000 Performance Share Rights. 2,600,000 Performance Share Rights represent his 2016 LTI award and 1,300,000 Performance Share Rights represent a one-time new hire sign-on award. Both the LTI portion and the sign-on portion are subject to the same performance and vesting conditions as the LTI awards granted to all other executives.
(4)	The maximum fair value of the grant is based on the fair value per the instrument and full achievement of the performance conditions. The minimum total value of the grant, if the applicable performance conditions are not met, is nil. In addition to the $200 thousand LTI Share Rights, Mr Despres also received a one-time new hire sign-on award of $300 thousand that will be paid in equal instalments of one-third each on the anniversary of his hire date (1 September 2016) beginning with the first anniversary and ending on the third. There are no performance conditions on these amounts and so long as Mr Despres does not voluntarily resign prior to a vesting date, that installment of the award will vest.
(5)	Mr Ryan was granted 3,900,000 Performance Share Rights. 2,600,000 Performance Share Rights represent his 2016 LTI award and 1,300,000 Performance Share Rights represent a one-time new hire sign-on award. Both the LTI portion and the sign-on portion are subject to the same performance and vesting conditions as the LTI awards granted to all other executives.
(6)	Mr Despres was granted 5,100,000 Share Rights, of which 2,600,000 are Performance Share Rights representing his 2016 LTI award and subject to the same performance and vesting conditions as the LTI awards granted to all other executives. The balance of 2,500,000 Share Rights is an estimated number of rights representing his sign-on share award of US$200 thousand that will be paid in equal installments of one-third on each anniversary of his hire date (1 September 2016) beginning with the first anniversary and ending on the third. The shares will be calculated by dividing one third of the share award by the 5-day volume weighted average share price for the five trading days immediately preceding and including the relevant anniversary date. The 2,500,000 Share Rights included in the total above is an estimate based on a share price of US$0.08 on his award grant date of 1 September 2016. The actual number of shares cannot be determined until the calculation is performed upon each of the three installment vesting dates. There are no performance conditions on these amounts and so long as Mr Despres does not voluntarily resign prior to a vesting date, that installment of the award will vest.

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(7) In addition to the $200,000 LTI Cash Rights that are subject to the same performance and vesting conditions as the LTI awards granted to all other executives, Mr Despres also received a one-time new hire sign-on award of US$300,000 that will be paid in equal installments of one-third each on the anniversary of his hire date (1 September 2016) beginning with the first anniversary and ending on the third. There are no performance conditions on these amounts and so long as Mr Despres does not voluntarily resign prior to a vesting date, that installment of the award will vest and be payable.

(8) These amounts reflect the grant of a special strategic retention award issued during 2016 to certain key employees. There are no performance conditions on these amounts and so long as the KMP does not voluntarily resign prior to a vesting date, the award will vest. See further discussion in Section 5.5.

5.3. SHARE HOLDINGS

Shares

Table 5.3.1: Share holdings as at the end of the financial year and activity during the financial year, are as follows:

					Received on
	Balance		Granted as		exercise of		Net other change		Balance		Balance
	1 January		remuneration		options/rights		during year		31 December		held nominally
2016
Marcus Randolph		2,342,875		3,207,481		-		-		5,550,356		-
Bret Clayton		778,294		769,797		-		-		1,548,091		-
Peter Day		724,962		883,903		-		-		1,608,865		-
Jonathan Lewinsohn		-		-		-		-		-		-
Jeffrey Long		185,418		769,797		-		-		955,215		-
Gretchen McClain		46,355		772,887		-		-		819,242		-
Rex McLennan		673,694		489,990		-		-		1,163,684		-
Deborah O’Toole		98,272		815,839		-		-		914,111		-
Jeffrey Olsen		135,000		-		-		-		135,000		-
Brendan Ryan		-		-		-		-		-		-
Fabrizio Rasetti		264,109		-		-		80,191		344,300		-
Brad Baker		140,305		-		-		60,491		200,796		-
Denis Despres		-		-		-		-		-		-
Mark Irwin		-		-		-		-		-		-

Share holdings activity during the financial year for KMP who were terminated or no longer KMP prior to 31 December 2016, were as follows:

					Received on
	Balance		Granted as		exercise of		Net other change		Balance		Balance
	1 January		remuneration		options/rights		during year		as of retirement date		held nominally
2016
Kent Hoots1		71,640		-		-		386,330		457,970		-
Terry Kirkey2		12,100		-		-		19,817		31,917		-

(1) Mr Hoots’ employment terminated on 1 October 2016.

(2) Mr Kirkey was no longer considered a KMP as at 31 August 2016.

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5.4 SERVICE CONTRACTS AND TERMINATION PROVISIONS

Name and
position held at				Termination payments (where
the end of the	Duration of	Notice period by	Notice period	these are in addition to
financial year	contract	Company	by executive	statutory entitlements)
Jeffrey Olsen	No fixed term	None required	180 days	For termination with cause,
Chief Executive				statutory entitlements only
Officer				For termination without cause:
				•  12 months’salary
				•  Pro-rata bonus to termination date
				•  Waiver of medical insurance premiums for 12 months
Brendan Ryan	No fixed term	None required	90 days	For termination with cause,
Chief Financial				statutory entitlements only
Officer				For termination without cause:
				•  12 months’ salary
				•  Pro-rata bonus to termination date
				Waiver of medical insurance premiums for 12 months
Fabrizio Rasetti	No fixed term	None required	90 days	For termination with cause,
Senior Vice				statutory entitlements only
President,				For termination without cause:
General Counsel				•  12 months’ salary
and Secretary				•  Pro-rata bonus to termination date
				•  Waiver of medical insurance  premiums for 12 months
Brad Baker	No fixed term	None required	90 days	For termination with cause,
Senior Vice				statutory entitlements only
President, Human				For termination without cause:
Resources				•  12 months’ salary
				•  Pro-rata bonus to termination date
				•  Waiver of medical insurance premiums for 12 months
Denis Despres	No fixed term	None required	90 days	For termination with cause,
Chief Operating				statutory entitlements only
Officer				For termination without cause:
				•  12 months’ salary
				•  Pro-rata bonus to termination date
				Waiver of medical insurance premiums for 12 months
Mark Irwin	No fixed term	None required	90 days	For termination with cause,
Chief Commercial				statutory entitlements only
Officer				For termination without cause:
				•  12 months’ salary
				•  Pro-rata bonus to termination date
				Waiver of medical insurance premiums for 12 months

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Under the terms of the Company’s LTIP and option plans, the Board has discretion to provide for early vesting of all or a portion of unvested Rights and Options depending on the circumstances of an employee’s termination. The executive employment contracts listed above contain a twelve-month non-competition and non-solicitation covenant in the Company’s favour. The Company may, at its option, extend the term of the covenants upon an executive’s termination of employment for up to an additional twelve months in exchange for monthly payments of the executive’s base salary for the term of the extension.

5.5 SPECIAL STRATEGIC RETENTION AWARDS FOR KEY EMPLOYEES (including the KMP)

In March 2016, the Board approved special strategic retention awards to certain key employees that include the KMP in March 2016. The Board recognises there has been continued contraction in both the industry and the Company, with no immediately visible signs of recovery. The Board further recognises the importance of retaining key leaders during a time of heightened uncertainty and that current outstanding equity awards have little-to-no visible retention value. These awards will be in the form of cash retention and will vest on the third anniversary of the award. If the senior executive is terminated for reasons other than for cause, the award will be prorated (with a minimum of one third the original award value) and remain outstanding and payable on the original vesting date. For the Company’s KMP, all awards will vest in March 2019 and are in the following amounts:

Jeff Olsen	$	900,000
Fabrizio Rasetti	$	624,000
Kent Hoots(1)	$	511,000
Brad Baker	$	487,000
Mark Irwin	$	525,000
Terry Kirkey	$	495,000

(1) Mr Hoots’ amount above was reduced to $170,367 as a result of his cessation of employment and will remain outstanding until the scheduled vesting date in March 2019.

6. NON-EXECUTIVE DIRECTOR ARRANGEMENTS

This section explains the remuneration structure and outcomes for non-executive Directors.

6.1. NON-EXECUTIVE DIRECTORS’ FEE STRUCTURE

Non-executive Directors (NED) are remunerated by a fixed annual base fee with additional fees paid for serving on Board committees. NED who are also employees of Centerbridge do not receive any Director fees. The payment of committee fees recognises the additional time commitment required by NED who serve on board committees. The Chairman may attend any committee meetings but does not receive any additional committee fees in addition to base fees.

The fees are determined within a maximum aggregate fee pool that is approved by shareholders. At the 2015 general meeting, shareholders approved changing the currency of the fee pool from Australian dollars to US dollars. This change was initiated to align the currency of the fee pool with the currency in which all NED are paid, and to eliminate the variability of the fee pool due to movement in the AU/US exchange rate. The approved fee pool limit is US$2.0 million, which aside from the currency exchange rate has not changed in quantum since the Company’s initial public offering in 2007. During the financial year, US$1.3 million of the pool was utilised for non-executive Director fees, being approximately 66% of the fee pool limit.

In 2015, the Board retained Willis Towers Watson to provide an independent review of NED remuneration with the aim of ensuring an appropriate balance existed between North American and Australian Director pay practices. As a result of this analysis, the Board determined not to change base fees. In addition, effective 1 July 2015, NEDs are required to receive 50% of their annual base fees in ordinary shares of Company stock. This change was made to further strengthen the alignment of NED remuneration with shareholder interests and be more competitive with North American pay practices by including company stock as a component of the NED fee structure. The share issue occurs every three months by taking 50% of the base fees earned in US dollars, converting it to Australian dollars using the exchange rate on issue date and then dividing it by the volume weighted average price of the shares traded on the ASX in the first five days after each relevant fee period. The shares are then issued and deposited into each NED personal brokerage account. As described in Section 6.2 below, the Directors are not able to trade the shares, net of sales to cover income taxes, for a period of twelve months from when they are allocated.

Mr Randolph was appointed Executive Chairman and Interim Chief Executive Officer of the Company effective 1 September 2015 and served in that capacity until Mr Olsen was appointed as the Company’s CEO effective 1 March 2016. Mr Randolph’s remuneration during the time he performed the Interim CEO duties included additional compensation of $50 thousand per month. Mr Randolph was also eligible to receive, subject to meeting certain objectives determined by the Board, a target performance bonus amount of $500 thousand. The Board assessed Mr Randolph’s performance on objectives that included the successful selection, hiring and on-boarding of the Company’s new CEO, achieving established targets of EBITDA

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performance, achieving targeted reductions in sales, general and administrative (SG&A) expenses and establishing an effective commercial strategy. These measures were chosen because they reflected the importance of ensuring continuity of leadership and executing the key operational priorities as the Company responds to ongoing market challenges while Mr Randolph carried out his additional management responsibilities. In assessing his performance against the objectives, the Board recognised that Mr Randolph led a comprehensive and efficient CEO search, ensuring sufficient exposure of external and internal candidates to the Board of Directors and ensured no disruption in the management team during the process. Following the appointment of Mr Olsen as the Company’s new CEO, Mr Randolph organised and assisted with his successful on-boarding. Mr Randolph drove EBITDA improvement efforts related to productivity, commercial improvements in the drilling services business and turning around poor performing commercial contracts. Although the continued decline in the market largely prevented EBITDA improving by a target of approximately $60 million, the results of the improvement programs contributed greatly towards offsetting the impact of the significant revenue decline. The SG&A expense reduction slightly exceeded the target of $15 million. Finally, the Board considered Mr Randolph’s overall leadership to the executive team, providing a challenging results-driven, yet supportive environment in a time of significant change. The Board determined that Mr Randolph’s performance related to the successful accomplishment of the objectives resulted in an overall achievement of the target of $500 thousand, which was paid in July 2016.

At the conclusion of his Interim CEO duties, the Board requested Mr Randolph continue in his capacity as Executive Chairman of Boart Longyear to assist Mr Olsen with on-boarding of his new duties and in executing the Company’s strategy. The Board requested this commitment through June 2017 with a review of the need for up to an additional twelve months if mutually determined. In addition to his base Director fees as Chairman, Mr Randolph will receive compensation of $37.5 thousand per month in recognition of the on-going demands of the executive duties. Mr Randolph’s total annualised compensation will be paid as $500 thousand in cash and $250 thousand in equity. Mr Randolph will not be eligible for a performance bonus in this capacity. Mr Randolph is not subject to any notice of termination requirements nor is he entitled to any termination payments.

Mr McLennan continues in his capacity as Senior Independent Director during this period while Mr Randolph is required to perform his executive duties. Mr McLennan receives an additional US$1,000 per month for the duration of this appointment.

Table 6.1: Components of Non-executive Director Remuneration

Component	Explanation
Board fees	Current base fees per annum are: •     US$120,000 for non-executive Directors other than the Board Chairman; and •     US$300,000 for the Board Chairman •     50% of the base fees above are paid in the form of ordinary shares of the Company
Committee fees	Current committee fees for non-executive Directors (other than the Board Chairman) are:
	•     US$15,000 annually for committee members; and •     US$30,000 annually for committee chairs.
	Where the Board Chairman sits on a committee, he or she does not receive any additional fee.
Other fees/benefits	Non-executive Directors are entitled to be reimbursed for all reasonable out-of-pocket expenses incurred in carrying out their duties, including travel costs. The Board Chairman also is entitled to reimbursement for office and secretarial support.
	Non-executive Directors may also, with the approval of the Board, be paid additional fees for extra services or special exertions for the benefit of the Company.
	Non-executive Directors are not entitled to receive any performance-related remuneration, such as short-term or long-term incentives.
	During the term Mr Randolph serves as the Executive

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	Chairman he is eligible to participate in the Company’s medical and dental plans.
Post-employment benefits	Compulsory superannuation contributions for Australian-resident non-executive Directors are included in the base fee and additional committee fees set out above.
	Non-executive Directors do not receive any retirement benefits other than statutory superannuation contributions.
	During the term Mr Randolph serves as the Executive Chairman he is eligible to participate in the Company’s 401 (k) retirement plan, including receiving a 3% matching contribution by the Company up to a maximum of US$7,950.00 per annum.

6.2 NON-EXECUTIVE SHAREHOLDING GUIDELINE

In 2015, the Board implemented a shareholding guideline requiring non-executive Directors to be paid 50% of their base fees in Company shares and hold these shares for a minimum of one year.

6.3. NON-EXECUTIVE DIRECTOR SHARE ACQUISITION PLAN

In February 2008, the Remuneration Committee recommended, and the Board approved, the establishment of a non-executive Director Share Acquisition Plan (“NEDSAP”) as foreshadowed in the Company’s prospectus.

The NEDSAP is a fee sacrifice plan in which only non-executive Directors may participate. Participation in the NEDSAP is voluntary and non-executive Directors may elect to sacrifice up to 100% of their pre-tax base and committee fees to acquire ordinary shares at the prevailing market price.

Shares acquired under the NEDSAP will be subject to a holding lock for up to 10 years, during which they are unable to deal with their shares. The holding lock may be removed in certain circumstances, including a cessation of Directorship.

No shares were purchased under this plan during the year ended 31 December 2016.

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6.4. DETAILS OF REMUNERATION PAID TO NON-EXECUTIVE DIRECTORS

Details of non-executive Directors’ remuneration for the year ended 31 December 2016 and 2015 are set out in the table below.

Table 6.4: Non-executive Director Remuneration

	Fees (incl.
	committee		Superannuation
	fees) 1		contributions 2		Shares		Total
	US$		US$		US$		US$
Marcus Randolph 3
2016		150,000		-		250,000		400,000
2015		274,685		-		104,166		378,851
Bret Clayton
2016		105,000		-		60,000		165,000
2015		95,994		-		25,000		120,994
Peter Day
2016		95,891		9,109		60,000		165,000
2015		117,580		11,170		25,000		153,750
Jonathan Lewinsohn 4
2016		-		-		-		-
2015		-		-		-		-
Jeffrey Long
2016		75,000		-		60,000		135,000
2015		16,792		-		10,000		26,792
Gretchen McClain
2016		75,000		-		60,000		135,000
2015		9,583		-		2,500		12,083
Rex McLennan
2016		117,000		-		60,000		177,000
2015		128,828		-		25,000		153,828
Deborah O'Toole
2016		68,493		6,507		60,000		135,000
2015		15,335		1,457		10,000		26,792

(1) Please refer to Table 6.1 above for details of the annual non-executive Director base fees and committee fees.

(2) Includes compulsory superannuation guarantee payments to Australian-resident Directors which are deducted from their base and additional committee fees.

(3) In addition to Mr Randolph’s director fees listed above, in consideration for acting as Interim CEO and Executive Chair, he also received a cash salary of US$509,975, a performance bonus of US$500,000 and superannuation benefits of US$7,950. Mr Randolph’s total remuneration including his director fees, Interim CEO and Executive Chairman fees and Interim CEO performance bonus was US$1,009,975. Effective 11 July 2016, Mr Randolph voluntarily reduced his remuneration for his executive duties by 10%. The voluntary reduction is expected to end no later than 1 July 2017.

(4) Mr Lewinsohn is an employee of Centerbridge and receives no Director fees.

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BOARD OF DIRECTORS

A brief summary of the Directors’ work experience and qualifications is as follows.

Marcus Randolph

Marcus Randolph was appointed a Director of the Company and Chair on 23 February 2015. From 1 September 2015 through 29 February 2016 he held the positions of interim CEO and Executive Chair, and as of 1 March 2016 serves as Executive Chair. Mr Randolph has served more than 35 years in the mining industry in a variety of global, senior executive roles. Most recently, he was Chief Executive of BHP Billiton’s Ferrous and Coal business from July 2007 to September 2013, located in Melbourne, and was a member of BHP’s Group Management Committee.

Prior to that role, he also held several other senior executive roles at BHP, including as its Chief Organisation Development Officer, President Diamonds and Specialty Products, Chief Development Officer Minerals and Chief Strategic Officer Minerals. His earlier career includes Chief Executive Officer, First Dynasty Mines, Mining and Minerals Executive, Rio Tinto Plc, Director of Acquisitions and Strategy, Kennecott Inc., General Manager Corporacion Minera Nor Peru, Asarco Inc., and various mine operating positions in the US with Asarco Inc.

Mr Randolph holds a Bachelor of Sciences degree in Mining Engineering from the Colorado School of Mines in the United States and also holds a Masters in Business Administration from Harvard University.

Bret Clayton

Bret Clayton was appointed a Director of the Company on 23 February 2015. He serves as Chair of the Audit, Compliance and Risk Committee and is a member of the Environmental Health and Safety Committee. Mr Clayton joins us after a distinguished career at Rio Tinto, where he worked for 20 years and served on the Executive Committee for seven years. He joined Rio Tinto in 1994 and held a series of management positions, including Chief Executive of Rio Tinto’s global Copper and Diamonds groups, president and Chief Executive Officer of Rio Tinto Energy America (now Cloud Peak Energy) and Chief Financial Officer of Rio Tinto Iron Ore. He also served as the Group Executive for Business Support and Operations, which included Rio Tinto’s global exploration, procurement, information systems, shared services, internal audit, risk management and economics groups.

Prior to joining Rio Tinto, Mr Clayton worked for PricewaterhouseCoopers for nine years, providing auditing and consulting services to the mining industry. Mr Clayton also has served as a non-executive Director for several for-profit and non-profit entities, including Praxair, Constellium Holdco B.V. and Ivanhoe Mines Limited (now Turquoise Hills Resources).

Mr Clayton was a member of the U. S. American Institute of Certified Public Accountants from 1987 through 1996, and holds a Bachelor of Arts Degree in Accounting from the University of Utah. He also attended the International Executive Management Program of INSEAD in Fontainebleau, France.

Peter Day

Peter Day was appointed a Director of the Company on 25 February 2014. He is a member of the Audit, Compliance and Risk Committee and chairs the Remuneration Committee.

Mr Day currently serves as a non-executive Director of, Alumina Limited, Ansell Limited and Australian Office Fund.

Mr Day was formerly a Chairman and Director of Orbital Corporation Limited, a Director of Federation Centres Limited and SAI Global Limited. He was Chief Financial Officer for Amcor Limited for seven years and has also held senior executive positions with Bonlac Foods, the Australian Securities and Investments Commission, Rio Tinto, CRA and Comalco. He has a background in finance and general management across diverse industries.

Mr Day received his LL.B (hons.) from the Queen Victoria University of Manchester (UK) and MBA from Monash University (Australia). He also holds FCPA, FCA and FAICD designations.

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Jeffrey Long

Jeffrey Long was appointed a Director of the Company on 1 October 2015. He is a member of the Environmental Health and Safety Committee. He brings a wealth of operational experience to the Board. He currently serves as Chief Executive Officer of Penhall Company, a Centerbridge Partners portfolio company and North America’s largest provider of concrete cutting, coring and removal services. He also was employed by Centerbridge Partners as Senior Managing Director from 2010 to 2015, where he focused on improving portfolio company operations. Prior to joining Centerbridge, Mr Long was a Managing Director at Vestar Capital Partners from 2005 to 2010 and a Principal at McKinsey and Company from 1993 to 2005, where he similarly focused on assisting companies in a diverse range of industries drive operational improvements.

A graduate of the United States Military Academy at West Point, Mr Long also served as a Cavalry Officer in the US Army for fourteen years. He holds Masters degrees from Harvard University’s John F. Kennedy School of Government and from the US Army’s Command and General Staff College.

Gretchen McClain

Gretchen W. McClain was appointed a Director of the Company on 15 November 2015. She is a member of the Remuneration and Nominations Committee. She has more than 25 years of global experience in both Fortune 500 corporations and government service, including serving as founding CEO of an S&P 500 global water technology company, Xylem Inc., and NASA’s Chief Director of the International Space Station. Ms. McClain brings extensive business, developmental, strategic and technical expertise having served a broad industrial market.

McClain serves as a Board of Director for publicly traded companies: AMETEK, Inc., Booz Allen Hamilton Holding Corporation, and Boart Longyear Limited, and a private family owned business, J.M. Huber Corp and serves as an Advisor to EPIC Ventures. Through her own consulting practice, she provides leadership and business services to executives, frequently working with start-up businesses and private equity firms.

She graduated from the University of Utah with a B.S. in Mechanical Engineering and received the University’s prestigious Founders Award in 2015. McClain was inducted into the Utah Technology Council Hall of Fame and is the first woman to receive this honor.

Rex McLennan

Rex McLennan was appointed a Director of the Company on 24 August 2013. He served as Chairman of the Finance Committee and currently chairs the Environmental, Health and Safety Committee. He is also a member of the Audit, Compliance & Risk Safety Committee. Mr McLennan was appointed the Board’s Senior Independent Director effective 1 September 2015 upon Mr Randolph’s assumption of duties as the Company’s Executive Chairman.

Mr McLennan currently serves on the Board of Endeavour Silver Corp. (TSX, NYSE) and is Chairman of its Audit Committee. He most recently served as Chief Financial Officer for Viterra, Inc., a leading global agricultural products company primarily involved in the distribution, marketing and processing of grain and oilseeds, which was acquired by Glencore International in December 2012. He has held finance roles in the resources and other industries, including serving as Executive Vice President and Chief Financial Officer for Placer Dome, Inc. prior to its acquisition by Barrick Gold Company, and the Vancouver Organising Committee (VANOC) for the 2010 Olympic Winter Games. He also has significant experience in the energy resources industry, having held progressive leadership roles earlier in his career at Imperial Oil Limited, Exxon’s Canadian public oil company.

Mr McLennan received his Master of Business Administration from McGill University in Finance/Accounting, and a Bachelor of Science in Mathematics/Economics from the University of British Columbia. He is also a member of the Institute of Corporate Directors (Canada) and received his ICD.D designation in June 2013 having completed all of the institution’s certification requirements.

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Deborah O’Toole

Deborah O’Toole was appointed a Director of the Company on 1 October 2015. She is a member of the Remuneration and Nominations Committee. She brings hands-on experience with major business transformations to the Board in addition to significant business development and financial skills. She served as the Chief Financial Officer and Executive Vice President of Aurizon Holdings Limited (QR Limited) from 2007 through 2012. Prior to that time, she was at Queensland Cotton Holdings from 2003 to 2005, where she held roles as Chief Financial Officer and Head of the Business Development Unit. Ms. O’Toole also has nearly twenty years of experience in the mining industry, having held a number of senior management positions with MIM Holdings, including as its Chief Financial Officer, from 1982 through 2001.

Ms O’Toole currently is an independent Non-Executive Director at Credit Union Australia Limited, Sims Metal Management Limited and Asciano Rail Group of Companies in Australia. She has held several other independent Directorships during her career and is a Member of the Australian Institute of Company Directors. She holds a Bachelor of Laws from the University of Queensland and was admitted as a Solicitor of the Supreme Court of Queensland in 1981.

Conor Tochilin

Conor Tochilin was appointed a Director of the Company on 20 January 2017. Mr Tochilin is a Principal at Centerbridge Partners, L.P., a major shareholder in the Company. Centerbridge Partners, L.P. manages approximately $29 billion of assets with a focus on credit, special situations, and private equity. Prior to joining Centerbridge Partners, L.P., Mr Tochilin was an Associate at TPG-Axon Capital Management in New York and London and a Business Analyst in McKinsey’s Corporate Finance Practice in New York.

Mr Tochilin holds an A.B. in Economics and Philosophy, magna cum laude, from Harvard College, where he was elected to Phi Beta Kappa, a J.D. from Harvard Law School, and an M.B.A. from Harvard Business School.

COMPANY SECRETARIES

Fabrizio Rasetti was appointed Company Secretary on 26 February 2007. He joined Boart Longyear in April 2006. Prior to that time, he worked at SPX Corporation (New York Stock Exchange), where he held various management roles in the legal department and for business development over a period of almost nine years. He also worked in the private law firms of Howrey & Simon and Towey & Associates in Washington, DC. He received his BS in Foreign Service and J.D. from Georgetown University.

Philip Mackey was appointed Company Secretary on 29 January 2016. He has over three decades of company secretarial and commercial experience and is a member of the Company Matters’ secretariat team. Previously, he served as Company Secretary of ASX & SGX dual listed Australand Group Limited and Deputy Company Secretary of AMP Limited. Mr Mackey’s commercial experience includes appointment as Chief Operating Officer (Specialised Funds) of Babcock & Brown and at Bressan Group. He is a Fellow of Governance Institute Australia and a Graduate Member of the Australian Institute of Company Directors.

 58

Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

DIRECTORS’ MEETINGS

The following table sets out for each Director the number of Directors’ meetings (including meetings of Board committees) held and the number of meetings attended by each Director during the financial year while he/she was a Director or committee member. The table does not reflect the Directors’ attendance at committee meetings in an “ex-officio” capacity. The table also does not reflect special or informal meetings of the Board or its committees.

	Board of Directors		Remuneration Committee		Audit  Compliance & Risk  Committee		HeaIth & Safety Committee		Restructuring Committee		Board Status Change
	Held	Attended	Held	Attended	Held	Attended	Held	Attended	Held	Attended	During 2016
Bret Clayton	9	8			4	4	5	5
Peter Day	9	9	5	5	4	4
Jonathan Lewinsohn	6	6
Jeffrey Long	6	6					5	5
Gretchen McClain	9	9	5	5
Rex McLennan	9	9			4	4	5	5	16	16
Deborah O’Toole	9	9	5	5					16	16
Marcus Randolph	9	8							16	16
Jeffrey Olsen	8	8									Appointed 1 March 2016

DIRECTORS’ SHAREHOLDINGS

The following table sets out each Director’s relevant interest in shares, debentures, and rights or options over shares or debentures of the Company or a related body corporate as at the date of this report.

	Fully paid		Rights offering		Rights and
	ordinary shares		ordinary shares		options		Total
Marcus Randolph		5,550,356		-		-		5,550,356
Bret Clayton		1,548,091		-		-		1,548,091
Peter Day		1,608,865		-		-		1,608,865
Jonathan Lewinsohn		-		-		-		-
Jeffrey Long		955,215		-		-		955,215
Gretchen McClain		819,242		-		-		819,242
Rex McLennan		1,163,684		-		-		1,163,684
Deborah O’Toole		914,111		-		-		914,111

The Board adopted a non-executive Director shareholding guideline which recommends that non-executive Directors acquire and hold at least 30,000 Company shares within five years of their appointment. The target share amount was established to be roughly equivalent to one year’s Directors’ fees and was based on the value of the Company shares at the time. The target shareholding amount may be adjusted from time to time to track movements in the Company’s share price.

 59

Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

GRANTS OF SHARES, RIGHTS OVER SHARES AND OPTIONS GRANTED TO DIRECTORS AND EXECUTIVES

At the Company’s 2015 general meeting, shareholders approved a change to the remuneration structure for the Company’s non-executive Directors to further improve alignment with shareholders and preserve cash. Effective 1 July 2015, Directors were required to receive 50% of their annual base fees in ordinary shares of Company stock. The Directors are not able to trade the shares, net of sales to cover income taxes, for a period of twelve months following their allocation. Shares granted to non-executive Directors and the Executive Chairman in lieu of their base fees are set out in Table 5.3.1 of the Remuneration Report. Prior to the implementation of the revised remuneration structure for non-executive Directors, no shares or rights over shares of the Company were granted to non-executive Directors since the Company’s initial public offering in April 2007.

Shares and rights over shares granted to executives of the Company are included in the Remuneration Report. As detailed more fully in the Remuneration Report, the Company has at various times in 2009, 2010 and 2014 granted options to former and current members of senior management. 345,000 of these options granted in June 2009 vested in accordance with their terms and expired in June 2014, with none having been exercised. 25,000 of these options granted in March 2010 vested in accordance with their terms and expire in March 2015. No shares or interests have been issued during the financial year as a result of the exercise of options.

DIRECTORS’ AND OFFICERS’ INTERESTS IN CONTRACTS

Except as noted herein, no contracts involving Directors' or officers’ interests existed during, or were entered into, since the end of the financial year other than the transactions detailed in Note 30 to the financial statements.

INDEMNIFICATION OF DIRECTORS AND OFFICERS AND AUDITORS

The Directors and officers of the Company are indemnified by the Company to the maximum extent permitted by law against liabilities incurred in their respective capacities as Directors or officers. In addition, during the financial year, the Company paid premiums in respect of contracts insuring the Directors and officers of the Company and any related body against liabilities incurred by them to the extent permitted by the Corporations Act 2001. The insurance contracts prohibit disclosure of the nature of the liability and the amount of the premium.

The Company has not paid any premiums in respect of any contract insuring Deloitte Touche Tohmatsu against a liability incurred in the role as an auditor of the Company.

EXECUTIVE MANAGEMENT TEAM

A brief summary of the Executive Management Team’s work experience and qualifications is as follows.

M. Bradley Baker

M. Bradley Baker was appointed Senior Vice President, Human Resources in 2008. Prior to joining Boart Longyear he worked for Milacron Inc. in Cincinnati, Ohio for 17 years in a variety of operational, divisional and global human resources roles including: Vice President of Human Resources, Director of Human Resources, North America, Director of Human Resources for the Plastics Technologies Group and leading the human resources and leadership integration of multiple acquisitions including the Michigan-based consumable tooling manufacturer, Valenite Inc.

Mr Baker received his Bachelor of Science in Business Administration from Bowling Green State University and his Master of Business Administration from Xavier University.

Denis Depres

Denis Despres was appointed the Company’s Chief Operating Officer on 6 September 2016. He began his career with Boart Longyear in 1981 and held various positions with progressive responsibility in the Company’s drilling services and products divisions over the next 26 years, including as Senior VP, Drilling Services. After leaving Boart Longyear in 2007, Mr Despres founded his own drilling business, which was acquired by Major Drilling in 2010. He most recently served as Major’s Chief Operating Officer prior to rejoining Boart Longyear.

Mr Despres studied in Ontario, Canada, and received a diploma in mechanical engineering technology from Algonquin College, a Bachelor of Engineering from Lakehead University and a Master of Business Administration from Queen’s University, all of which are in Ontario, Canada.

 60

Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

Mark Irwin

Mark Irwin joined Boart Longyear in January 2016 as VP Drilling Services Commercial & Marketing, and in September 2016, became Chief Commercial Officer, assuming the global commercial and marketing responsibilities across Boart Longyear. Prior to joining Boart Longyear, Mr Irwin spent over 15 years working in the resources sector in mining services, in investment banking and 11 years for BHP Billiton. Roles. These roles included various global leadership roles in business development, operations, global procurement and strategy. In addition, he has also been CEO of two large Australian agricultural companies.

Mr Irwin has a Master’s of Business Degree (MBA) and a Bachelors of Law degree (LLB).

Jeffrey Olsen

Jeffrey Olsen was appointed President and Chief Executive Officer on 1 March 2016 after serving as Chief Financial Officer since 2014. Before joining Boart Longyear, he served as Chief Commercial Officer for Rio Tinto’s Iron & Titanium business since 2010. Prior to that time, he was Chief Financial Officer for Rio Tinto’s Borax and Minerals divisions for approximately eight years, and held other financial roles at Rio Tinto. Mr Olsen’s experience also includes financial roles at General Chemical Corporation and Xerox Corporation in the United States.

Mr Olsen holds a Bachelor’s of Arts from the University of Utah and a Master of Business Administration from the Simon School of Business at the University of Rochester.

Fabrizio Rasetti

Mr Rasetti’s experience and qualifications are summarised above on page 58.

Brendan Ryan

Brendan Ryan was appointed Chief Financial Officer on 6 September 6 2016. Mr Ryan’s experience includes over 24 years within the mining industry, spent predominantly with Rio Tinto and Shell / Anglo Coal, working in a variety of key commercial and operating roles. Prior to a year working with Private Equity, Mr Ryan held the role of Global Head of Business Evaluation for Rio Tinto in London where he was accountable for managing the group capital planning and allocation process. Earlier roles during his 13 years with Rio Tinto included Head of Business Development for the Rio Tinto Copper & Diamonds Group in London, VP Projects & Expansion at Kennecott Utah Copper in Salt Lake City, as well as other Business Evaluation and Business Analysis roles in London and Australia.

Mr Ryan holds a Master’s of Business Administration from the University of Oxford, UK as well as a Bachelor of Engineering (Mining) honors degree from the University of Queensland, Australia.

 61

Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

AUDITOR

AUDITOR’S INDEPENDENCE DECLARATION

The auditor’s independence declaration is included on page 64 of this report.

NON-AUDIT SERVICES

Details of amounts paid or payable for non-audit services provided during the year by the auditor are outlined in Note 8 to the financial statements.

The auditor of Boart Longyear Limited is Deloitte Touche Tohmatsu. The Company has employed Deloitte Touche Tohmatsu on assignments additional to their audit duties where their expertise and experience with the Company are important. These assignments principally have been related to tax advice and tax compliance services, the magnitude of which is impacted by the global reach of the Company.

The Company and its Audit, Compliance & Risk Committee (Audit Committee) are committed to ensuring the independence of the external auditor. Accordingly, significant scrutiny is given to non-audit engagements of the external auditor. The Company has a formal pre-approval policy that requires the pre-approval of non-audit services by the Chairman of the Audit Committee. Additionally, the total annual fees for such non-audit services cannot exceed the auditor’s annual audit fees without the approval of the Audit Committee. The Audit Committee believes that the combination of these two approaches results in an effective procedure to control services performed by the external auditor.

None of the services performed by the auditor undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing economic risks and rewards.

The Directors are satisfied that the provision of non-audit services during the year by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 and are of the opinion that the services, as disclosed in Note 8 to the financial statements, do not compromise the external auditor’s independence.

PROCEEDINGS ON BEHALF OF COMPANY

No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the financial year.

ROUNDING OF AMOUNTS

Boart Longyear Limited is a company of a kind referred to in ASIC Corporations (Rounding in Financial / Directors’ Report) Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the Directors’ Report and Financial Report. Amounts in the Directors’ Report and the Financial Report are presented in US dollars and have been rounded off to the nearest thousand dollars in accordance with that Instrument, unless otherwise indicated.

 62

Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

REMUNERATION

The Remuneration Report is included beginning at page 26 and forms part of this Directors’ Report.

Signed in accordance with a resolution of the Directors.

On behalf of the Directors

/s/ Marcus Randolph

Marcus Randolph

Chairman

27 February 2017

 63

	Deloitte Touche Tohmatsu
	ABN 74 490 121 060
	Tower 2, Brookfield Place
	123 St Georges Terrace
	Perth WA 6000
	GPO Box A46
	Perth WA 6837 Australia
The Directors	Tel: +61 8 9365 7000
Boart Longyear Limited	Fax: +61 8 9365 7001
26 Butler Boulevard	www.deloitte.com.au
Adelaide Airport SA 5650
Australia

27 February 2017

Dear Directors

Boart Longyear Limited

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Boart Longyear Limited.

As lead audit partner for the audit of the financial statements of Boart Longyear Limited for the financial year ended 31 December 2016, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) The auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

/s/ DELOITTE TOUCHE TOHMATSU

DELOITTE TOUCHE TOHMATSU

/s/ A T Richards

A T Richards

Partner

Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited

 64

	Deloitte Touche Tohmatsu
	ABN 74 490 121 060
	Tower 2, Brookfield Place
	123 St Georges Terrace
	Perth WA 6000
	GPO Box A46
	Perth WA 6837 Australia
	Tel: +61 8 9365 7000
	Fax: +61 8 9365 7001
	www.deloitte.com.au

Independent Auditor’s Report

to the members of Boart Longyear Limited

Report on the Audit of the Financial Report

Disclaimer of Opinion

We were engaged to audit the financial report of Boart Longyear Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2016, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration.

Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on this financial report. Accordingly, we do not express an opinion as to whether the financial report of Boart Longyear Limited is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Group’s financial position as at 31 December 2016 and of its financial performance for the year then ended; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for Disclaimer of Opinion

We draw attention to Note 1 in the financial report, which indicates that the Group incurred a net loss of $156.8 million during the financial year ended 31 December 2016 and, as of that date, the Group’s total liabilities exceeded its total assets by $337.5 million.

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited

 65

As stated in Note 1, the Group’s and Company’s ability to meet their ongoing operational and financing obligations requires a successful conclusion to the ongoing restructuring discussions with the Company’s lenders and achieving the forecast cash flows. This includes the ability to sustain previously implemented cost reductions and realise cost savings from both ongoing and future cost reduction and efficiency initiatives and actively managing cash flows, access additional short-term funding to manage cash flows and meet the cash interest payments due on 1 April 2017 and/or obtain agreement for the deferral of those cash interest payments.

These matters, along with other matters as set forth in Note 1, indicate the existence of material uncertainties that cast significant doubt about the Group’s and Company’s ability to continue as going concerns and whether they will realise their assets and discharge their liabilities in the normal course of business.

We have been unable to obtain sufficient appropriate audit evidence as to the likelihood that a successful conclusion to the restructuring discussions as described in Note 1 will be achieved. Accordingly, we have been unable to conclude on the Group’s and Company’s ability to continue as going concerns for a period of at least twelve months from the date of this auditor’s report.

Accordingly, in our opinion, the uncertainties are so material and pervasive that we are unable to express an opinion on the financial report as a whole.

Directors’ Responsibilities for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the Group’s and Company’s ability to continue as going concerns, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or Company or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our responsibility is to conduct and audit of the financial report in accordance with Australian Auditing Standards and to issue an auditor’s report. However, because of the matters described in the Basis for Disclaimer of Opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the financial report.

We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants(the Code) that are relevant to our audit of the financial report in Australia.

 66

 

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 26 to 55 of the directors’ report for the year ended 31 December 2016.

In our opinion, the Remuneration Report of Boart Longyear Limited, for the year ended 31 December 2016, complies with section 300A of the Corporations Act 2001.

ResponsibiIities

The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001.Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

/s/ DELOITTE TOUCHE TOHMATSU

DELOITTE TOUCHE TOHMATSU

/s/ A T Richards

A T Richards

Partner

Chartered Accountants

Perth, 27 February 2017

 67

Annual Financial Report
31 December 2016	BOART LONGYEAR LIMITED

DIRECTORS’ DECLARATION

The Directors declare that:

(a)	in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;
(b)	in the Directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as stated in Note 1 to the financial statements;
(c)	in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards, and giving a true and fair view of the financial position and performance of the consolidated entity; and
(d)	the Directors have been given the declarations required by section 295A of the Corporations Act 2001.

The Directors draw the reader’s attention to Note 1 on page 75 concerning the going concern basis of preparation of the financial report and potential impact of material uncertainties related to the Company’s ability to achieve a successful conclusion to the ongoing restructuring discussions with the Company’s lenders and the Company’s forecast cash flows.

Signed in accordance with a resolution of the Directors made pursuant to section 295(5) of the Corporations Act 2001.

On behalf of the Directors

/s/ Marcus Randolph

Marcus Randolph

Chairman

27 February 2017

 68

Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the financial year ended 31 DECEMBER 2016	BOART LONGYEAR LIMITED

	Note	2016 US$'000			2015 US$'000
Continuing operations
Revenue	3		642,404			735,158
Cost of goods sold			(556,569	)1		(734,760	)1
Gross margin			85,835			398
Other income	4		8,939			2,150
General and administrative expenses			(108,842	)1		(119,055	)1
Sales and marketing expenses			(28,394	)1		(25,223	)1
Other expenses	4		(18,360	)		(57,501	)
Operating loss			(60,822	)		(199,231	)
Interest income	5		2,486			4,059
Finance costs	5		(72,713	)		(72,769	)
Loss before taxation			(131,049	)		(267,941	)
Income tax expense	11		(25,790	)		(58,336	)
Loss for the year attributable to equity holders of the parent			(156,839	)		(326,277	)
Loss per share:
Basic loss per share	12		(16.8) cents			(36.0) cents
Diluted loss per share	12		(16.8) cents			(36.0) cents
Other comprehensive loss
Loss for the year attributable to equity holders of the parent			(156,839	)		(326,277	)
Items that may be reclassified subsequently to profit or loss
Exchange gain (loss) arising on translation of foreign operations			364			(44,476	)
Reclassification adjustments relating to foreign operations liquidated during the year			-			6,250
Items that will not be reclassified subsequently to profit or loss
Actuarial (loss) gain related to defined benefit plans	23		(6,075	)		10,956
Income benefit (tax) on income and expense recognised directly through equity			1,116			(429	)
Other comprehensive loss for the year, net of tax			(4,595	)		(27,699	)
Total comprehensive loss for the year attributed to equity holders of the parent			(161,434	)		(353,976	)

(1) In the current period significant items have not been separately presented but have been included in the relevant line items. Details of items considered to be significant are included in note 7.

See accompanying Notes to the Consolidated Financial Statements included on pages 74 to 124

 69

Consolidated Statement of Financial Position
As at 31 DECEMBER 2016	BOART LONGYEAR LIMITED

		2016			2015
	Note	US$'000			US$'000
Current assets
Cash and cash equivalents	31		59,343			113,357
Trade and other receivables	13		107,898			110,055
Inventories	14		165,020			166,258
Current tax receivable	11		4,399			6,617
Prepaid expenses and other assets			13,604			16,368
			350,264			412,655
Asset classified as held for sale	16		5,923			-
Total current assets			356,187			412,655
Non-current assets
Property, plant and equipment	17		127,660			176,475
Goodwill	18		100,036			99,658
Other intangible assets	19		43,920			54,404
Deferred tax assets	11		19,465			21,033
Non-current tax receivable	11		19,035			14,208
Other assets			10,326			13,464
Total non-current assets			320,442			379,242
Total assets			676,629			791,897
Current liabilities
Trade and other payables	20		126,589			145,041
Provisions	22		13,014			19,518
Current tax payable	11		94,577			77,964
Loans and borrowings	21		140			51
Total current liabilities			234,320			242,574
Non-current liabilities
Loans and borrowings	21		734,987			689,732
Deferred tax liabilities	11		18,884			14,818
Provisions	22		25,941			24,972
Total non-current liabilities			779,812			729,522
Total liabilities			1,014,132			972,096
Net liabilities			(337,503	)		(180,199	)
Equity
Issued capital	24		1,263,798			1,262,431
Reserves			(117,686	)		(120,813	)
Other equity			(137,182	)		(137,182	)
Accumulated losses			(1,346,433	)		(1,184,635	)
Total deficiency in equity			(337,503	)		(180,199	)

See accompanying Notes to the Consolidated Financial Statements included on pages 74 to 124

 70

Consolidated Statement of Changes in Equity
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

				Foreign												Total
				currency			Equity-settled									attributable
	Issued			translation			compensation			Other			Accumulated to			owners of
	capital			reserve			reserve			equity			losses			the parent
	US$'000			US$'000			US$'000			US$'000			US$'000			US$'000
Balance at 1 January 2015		1,159,069			(92,799	)		10,014			(137,182	)		(868,885	)		70,217
Loss for the period		-			-			-			-			(326,277	)		(326,277	)
Other comprehensive gain (loss) for the period - net of tax		-			(38,226	)		-			-			10,527			(27,699	)
Total other comprehensive loss		-			(38,226	)		-			-			(315,750	)		(353,976	)
Issued under recapitalisation program		99,732			-			-			-			-			99,732
Vesting of LTIP rights, restricted shares		3,816			-			(3,816	)		-			-			-
Purchase of shares for LTIP		(186	)		-			-			-			-			(186	)
Share-based compensation		-			-			4,014			-			-			4,014
Balance at 31 December 2015		1,262,431			(131,025	)		10,212			(137,182	)		(1,184,635	)		(180,199	)
Balance at 1 January 2016		1,262,431			(131,025	)		10,212			(137,182	)		(1,184,635	)		(180,199	)
Loss for the period		-			-			-			-			(156,839	)		(156,839	)
Other comprehensive loss for the period - net of tax		-			364			-			-			(4,959	)		(4,595	)
Total other comprehensive loss		-			364			-			-			(161,798	)		(161,434	)
Shares issued to directors		717			-			-			-			-			717
Vesting of LTIP rights, restricted shares		650			-			(650	)		-			-			-
Share-based compensation		-			-			3,413			-			-			3,413
Balance at 31 December 2016		1,263,798			(130,661	)		12,975			(137,182	)		(1,346,433	)		(337,503	)

See accompanying Notes to the Consolidated Financial Statements included on pages 74 to 124

 71

Consolidated Statement of Cash Flows
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

		2016			2015
	Note	US$'000			US$'000
Cash flows from operating activities
Loss for the year			(156,839	)		(326,277	)
Adjustments provided by operating activities:
Income tax expense recognised in profit			25,790			58,336
Finance costs recognised in profit	5		72,713			72,769
Depreciation and amortisation	6		62,470			83,911
Interest income recognised in profit	5		(2,486	)		(4,059	)
Gain on sale or disposal of non-current assets	6		(3,807	)		(1,302	)
Other non-cash items			(18,829	)		7,890
Shares issued to directors			717			-
Impairment of current and non-current assets			2,048			71,845
Non-cash foreign exchange loss			10,309			21,347
Equity-settled share-based payments	6b, 10		3,413			4,014
Long-term compensation - cash rights	6b		1,830			3,223
Changes in net assets and liabilities, net of effects from acquisition and disposal of business:
(Increase) decrease in assets:
Trade and other receivables			1,755			7,754
Inventories			21,372			21,163
Other assets			7,579			6,242
(Decrease) increase in liabilities:
Trade and other payables			(16,469	)		(4,876	)
Provisions			(12,997	)		(10,618	)
Cash (used in) provided by operations			(1,431	)		11,362
Interest paid			(45,296	)		(47,413	)
Interest received	5		2,486			4,059
Income taxes paid			(6,177	)		(22,858	)
Net cash flows used in operating activities			(50,418	)		(54,850	)

See accompanying Notes to the Consolidated Financial Statements included on pages 74 to 124

 72

Consolidated Statement of Cash Flows
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

	2016			2015
	US$'000			US$'000
Cash flows from investing activities
Purchase of property, plant and equipment		(19,190	)		(21,758	)
Proceeds from sale of property, plant and equipment		16,410			2,401
Intangible costs paid		(3,173	)		(2,771	)
Investment in unaffiliated companies		(1,905	)		(2,902	)
Net cash flows used in investing activities		(7,858	)		(25,030	)
Cash flows from financing activities
Proceeds from issuance of shares		-			83,732
Payments for share purchases for LTIP		-			(186	)
Payments for debt issuance costs		(82	)		(1,437	)
Proceeds from borrowings		25,671			-
Repayment of borrowings		(8,105	)		(35,000	)
Net cash flows provided by financing activities		17,484			47,109
Net decrease in cash and cash equivalents		(40,792	)		(32,771	)
Cash and cash equivalents at the beginning of the year		113,357			168,784
Effects of exchange rate changes on the balance of cash held in foreign currencies		(13,222	)		(22,656	)
Cash and cash equivalents at the end of the year		59,343			113,357

See accompanying Notes to the Consolidated Financial Statements included on pages 74 to 124

 73

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

1. GENERAL INFORMATION

Boart Longyear Limited (the “Parent”) is a public company listed on the Australian Securities Exchange Limited (ASX) and is incorporated in Australia. Boart Longyear Limited and subsidiaries (collectively referred to as the “Company”) operate in four geographic regions, which are defined as North America, Latin America, Asia Pacific, and Europe/Africa (EMEA).

Boart Longyear Limited’s registered office and its principal place of business are as follows:

Registered office	Principal place of business
26 Butler Boulevard	2640 West 1700 South
Burbridge Business Park	Salt Lake City, Utah 84104
Adelaide Airport, SA 5650	United States of America
Tel: +61 (8) 8375 8375	Tel: +1 (801) 972 6430

Basis of Preparation

This financial report is a general purpose financial report which:

- has been prepared in accordance with the requirements of applicable accounting standards including Australian interpretations and the Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements ofthe law. Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes ofthe Company comply with IFRS. The financial report includes the consolidated financial statements of the Company. For purposes of preparing the consolidated financial statements, the Company is a for-profit entity;

- is presented in United States dollars, which is Boart Longyear Limited’s functional and presentation currency. All values have been rounded to the nearest thousand dollars (US’000) unless otherwise stated, in accordance with ASIC class order 98/100. The financial statements were authorised for issue by the Directors on 27 February 2017;

- applies Accounting policies in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. These accounting policies have been consistently applied by each entity in the Company;

- is prepared by combining the financial statements of all of the entities that comprise the consolidated entity, Boart Longyear Limited and subsidiaries as defined in AASB 10 ‘Consolidated Financial Statements’. Consistent accounting policies are applied by each entity and in the preparation and presentation of the consolidated financial statements; Subsidiaries are all entities for which the Company (a) has power over the investee (b) is exposed or has rights, to variable returns from involvement with the investee and (c) has the ability to use its power to affect its return. All three of these criteria must be met for the Company to have control over the investee. Subsidiaries are fully consolidated from the date on which control is transferred to the Company until such time as the Company ceases to control such entity.

- all inter-company balances and transactions, and unrealised income and expenses arising from inter-company transactions, are eliminated.

- adopts all new and revised accounting standards and interpretations issued by the AASB that are relevant to the Company. The accounting policies and methods of computation are the same as those in the prior annual financial report; and

- does not early adopt Accounting Standards and Interpretations that have been issued or amended but are not yet effective. Refer to Note 32 for further details.

The financial report has been prepared on a historical cost basis, except for the revaluation of certain financial instruments that are stated at fair value. Cost is based on fair values of the consideration given in exchange for assets. The financial report has also been prepared on the basis that the consolidated entity is a going concern, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

 74

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

1. GENERAL INFORMATION (CONTINUED)

Going Concern

The financial report has been prepared on a going concern basis, which contemplates the realisation of assets and the settlement of liabilities in the ordinary course of business.

At 31 December 2016, the Company has net liabilities of $337.5 million (2015: net liabilities of $180.2 million as at 31 December). The increase in net liabilities is mainly a result of a loss after income tax of $156.8 million. At 31 December 2016, the Company has net current assets of $121.9 million (2015: $170.1 million as at 31 December).

In preparing the financial report, the Directors have made an assessment of the ability of the Company to continue as a going concern. The Company’s ability to meet its ongoing operational and financing obligations requires the Company to achieve:

• a successful conclusion to the ongoing restructuring discussions with the Company’s lenders; and

• the Company’s forecast cash flows which requires the ability to:

o sustain previously implemented cost reductions and realise cost savings from ongoing and future cost-reduction and efficiency initiatives and actively managing cash flows;

o access additional short-term funding to manage cash flows; and

o meet the cash interest payments due on 1 April 2017 and/or obtain agreement for the deferral of the cash interest payments.

Restructuring discussions

The Company remains subject to liquidity and indebtedness risks and, accordingly, continues to work with certain of its lenders to address its capital structure. (Details of the Company’s debt facilities are set out in Note 21 of the financial report.)

As announced on 5 January 2017, the Company secured a $20 million credit facility with Centerbridge Partners L.P, its largest debt and equity holder. The facility was established to provide additional financial resources to support ongoing restructuring discussions with the Company’s lenders as well as to provide additional working capital in the first quarter of 2017 when the Company’s working capital needs are typically at their seasonal peak due to the start-up of drilling projects globally.

The Company and its lenders continue to pursue an agreement on a holistic restructuring that provides a sustainable capital structure. The primary objectives of the process, which is incomplete and the outcome and timing of which remains uncertain, include the reduction of financial debt through the equitisation of debt, securing additional liquidity to sustain operations and extending debt maturities to facilitate an eventual refinancing. Achieving these objectives will likely require existing debt holders to convert all or part of their debt to equity, which will be highly dilutive to existing shareholders.

The Company’s ability to successfully achieve the restructure will depend on a number of circumstances, including market conditions, the ongoing support of the Company’s unsecured and secured lenders and, potentially, the approval of other stakeholders.

The Company has also received an indicative proposal for an additional short-term facility of $15 million from Centerbridge and certain of its bondholders to provide additional working capital for the Company. The Company and the relevant lenders are finalising the terms of the additional facility and expect to implement it imminently.

Cash flow Forecasts

The Company has prepared detailed cash flow forecasts which incorporate the financial impact of continued actions to address the challenges it faces (refer below). In preparing the cash flow forecasts the Company has used best estimate assumptions. The Directors have assessed the Company’s cash flow forecasts and revenue projections based on current market conditions and on results achieved to date attributable to ongoing cash-generating actions as well as continuing to evaluate risks and opportunities to this best estimate. Some of the key assumptions underpinning the cash flow forecasts and revenue projections are inherently uncertain and are subject to variation due to factors which are outside the control of the Company. The key assumptions are discussed below.

Market risk

The Company has experienced significant declines in financial performance as a result of declining demand for, and global oversupply of, the Company’s services and products due to the global contraction in exploration and development spending in the commodities sector and by mining customers. Mineral exploration, production and development activities and contract pricing could remain at depressed levels for an extended period of time or decline even further than assumed in the cash flow forecasts, resulting in adverse effects on the Company’s operating results, liquidity and financial condition.

 75

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

1. GENERAL INFORMATION (CONTINUED)

Going Concern (continued)

Operational risk

In response to the ongoing effects of the industry downturn, the Company has implemented significant cost savings and efficiency initiatives. These initiatives are aggressively managing fixed, variable and capital costs and, in particular, improving operational efficiencies and commercial practices.

The cash flow forecasts assume that the Company is able to maintain current volumes of work, sustain previously implemented reductions and realise cost savings from both the ongoing and future cost-reduction and efficiency initiatives.

Other key assumptions

The cash flow forecasts also include a number of other key assumptions, in particular:

• assumptions relating to the timing and outcome of the tax audits detailed in Note 11 of the financial statements,

• assumptions relating to the payment of interest due on 1 April 2017; and

• that the US dollar remains consistent with current levels, particularly in relation to the Australian and Canadian dollars.

There is a risk that the Company will not achieve a successful conclusion to the restructuring discussions or achieve its forecast cash flows.

Should the Company and Parent be unable to achieve these matters a material uncertainty would exist as to whether the Company and Parent will be able to continue as going concerns and therefore whether they will realise their assets and discharge their liabilities in the normal course of business.

Notwithstanding the uncertainties set out above, the Directors believe at the date of signing of the financial report that there are reasonable grounds to continue to prepare the financial report on the going concern basis.

The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts, or to the amounts and classifications of liabilities that might be necessary should the Company and Parent not continue as going concerns.

Key Judgements and Estimates

In applying Australian Accounting Standards, management is required to make judgments, estimates and form assumptions that affect the application of accounting policies and reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the reported revenue and expenses during the periods presented herein. On an ongoing basis, management evaluates its judgments and estimates in relation to asset, liabilities, contingent liabilities, revenues and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the respective periods in which they are revised if only those periods are affected, or in the respective periods of the revisions as well as future periods if the revision affects both current and future periods.

The key judgments, estimates and assumptions that have or could have the most significant effect on the amounts recognised in the financial statements are found in the following notes:

Note 1	Going Concern
Note 11	Income Tax
Note 14	Inventories
Note 17	Property, Plant and Equipment
Note 18	Goodwill and Other Asset Impairment Considerations
Note 27	Contingent liabilities

 76

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

1. GENERAL INFORMATION (CONTINUED)

Foreign Currency

The Company’s presentation currency is the US dollar. The financial statements of the Company and its subsidiaries have been translated into US dollars using the exchange rates at each balance sheet date for assets and liabilities and at an average exchange rates for revenue and expenses throughout the period. The effects of exchange rate fluctuations on the translation of assets and liabilities are recorded as movements in the foreign currency translation reserve (“FCTR”).

The Company determines the functional currency of its subsidiaries based on the currency used in their primary economic environment, and, as such, foreign currency translation adjustments are recorded in the FCTR for those subsidiaries with a functional currency different from the US dollar. The cumulative currency translation is transferred to the income statement when a subsidiary is disposed of or liquidated.

Transaction gains and losses, and unrealised translation gains and losses on short-term inter-company and operating receivables and payables denominated in a currency other than the functional currency, are included in other income or other expenses in profit or loss. Where an inter-company balance is, in substance, part of the Company’s net investment in an entity, exchange gains and losses on that balance are taken to the FCTR.

Other accounting policies

Significant and other accounting policies that summarise the measurement basis used and are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements.

 77

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

2. SEGMENT REPORTING

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance is based on the Company’s two general operating activities: Global Drilling Services and Global Products. The Global Drilling Services segment provides a broad range of drilling services to companies in mining, energy and other industries. The Global Products segment manufactures and sells drilling equipment and performance tooling to customers in the drilling services and mining industries.

Information regarding these segments is presented below. The accounting policies of the reportable segments are the same as the Company’s accounting policies. Segment profit shown below is consistent with the income reported to the chief operation decision maker for the purposes of resource allocation and assessment of segment performance. Segment profit represents earnings before interest and taxes.

Segment revenue and results

	Segment Revenue								Segment Profit
	2016 US$'000				2015 US$'000				2016 US$'000			2015 US$'000
Drilling Services			447,656				527,880			10,679			(2,648	)
Global Products revenue
Products third party revenue		194,748				207,278
Products inter-segment revenue 1		57,704				52,533
Total Global Products			252,452				259,811			4,214			5,593
Less Global Product sales to Global Drilling Services			(57,704	)			(52,533	)
Total third party revenue			642,404				735,158
Total segment profit										14,893			2,945
Unallocated costs 2										(48,230	)		(104,136	)
Significant items										(27,485	)		(98,040	)
Finance costs										(72,713	)		(72,769	)
Interest income										2,486			4,059
Loss before taxation										(131,049	)		(267,941	)

(1) Transactions between segments are carried out at arm’s length and are eliminated on consolidation.

(2) Unallocated costs include corporate general and administrative costs, as well as, other expense items such as foreign exchange gains or losses.

Other segment information

	Depreciation and amortisation				Additions to non-current
	of segment assets				assets 2
	2016		2015		2016		2015
	US$'000		US$'000		US$'000		US$'000
Global Drilling Services		40,916		58,044		15,028		14,613
Global Products		9,271		9,337		1,980		3,778
Total of all segments		50,187		67,381		17,008		18,391
Unallocated 1		12,283		16,530		3,459		1,962
Total		62,470		83,911		20,467		20,353

(1) Unallocated additions to non-current assets relate to the acquisition of general corporate assets such as software and hardware.

(2) Non-current assets excluding deferred tax assets.

 78

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

2. SEGMENT REPORTING (CONTINUED)

Geographic information

The Company’s two business segments operate in four principal geographic areas – North America, Asia Pacific, Latin America and EMEA. The Company’s revenue from external customers and information about its segment assets by geographical locations are detailed below:

	Revenue from external customers				Non-current assets 1
	2016		2015		2016		2015
	US$'000		US$'000		US$'000		US$'000
North America		297,309		343,363		218,460		237,512
Asia Pacific		157,299		159,765		56,188		69,522
Latin America		85,573		116,238		24,232		39,267
EMEA		102,223		115,792		2,097		11,908
Total		642,404		735,158		300,977		358,209

(1) Non-current assets excluding deferred tax assets.

3. REVENUE

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts, volume rebates and sales tax. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.

Transfers of risks and rewards vary depending on the individual terms of the contract of sale and with local statute, but are generally when title and insurance risk has passed to the customer and the goods have been delivered to a contractually agreed location.

Revenue from services rendered is recognised in the statement of comprehensive income in proportion to the stage of completion of the transaction at the reporting date. The stage of completion of the contract is determined as follows:

· revenue from drilling services contracts is recognised on the basis of actual meters drilled or other services performed for each contract; and

· revenue from time and material contracts is recognised at the contractual rates as labour hours are delivered and direct expenses are incurred.

The components of revenue are as follows:

	2016		2015
	US$'000		US$'000
Revenue from the rendering of services		447,656		527,880
Revenue from the sale of goods		194,748		207,278
		642,404		735,158

There were no customer(s) that contributed 10% or more to the Company’s revenue in 2016. Included in revenues arising from rendering of services are revenues of $77.4 million which arose from sales to the Company’s largest customer in 2015.

 79

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

4. OTHER INCOME / EXPENSE

The components of other income are as follows:

	2016		2015
	US$'000		US$'000
Gain on disposal of property, plant and equipment		3,807		1,302
Gain on foreign currency exchange differences		1,616		-
Gain on disposal of scrap		309		-
Other		3,207		848
		8,939		2,150

The components of other expense are as follows:

	2016		2015
	US$'000		US$'000
Amortisation of intangible assets		12,745		16,644
VAT write-off		2,897		4,835
Drilling services rework		603		3,096
Loss on foreign currency exchange differences		-		17,004
VAT and customs settlement		-		6,381
Loss on liquidation of a subsidiary		-		6,250
Environmental fees		-		1,458
Other		2,115		1,833
Total other expenses		18,360		57,501

5. INTEREST INCOME / FINANCE COSTS

Interest income is as follows:

	2016		2015
	US$'000		US$'000
Interest income:
Bank deposits		2,486		4,059
Finance costs are as follows:
	2016		2015
	US$'000		US$'000
Finance costs:
Interest on loans and bank overdrafts		70,643		70,822
Amortisation of debt issuance costs		2,070		1,947
Total finance costs		72,713		72,769

 80

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

6. LOSS FOR THE YEAR

Loss for the year includes the following:

(a) Gains and losses

Loss for the year includes the following gains and (losses):

	2016			2015
	US$'000			US$'000
Gain on disposal of property, plant and equipment		3,807			1,302
Loss on liquidation of subsidiary		-			(6,250	)
Net foreign exchange losses		1,616			(17,004	)
Net (expense) reversal of bad debt		(181	)		(1,875	)

(b) Employee benefits expenses

	2016			2015
	US$'000			US$'000
Salaries and wages		(240,094	)		(271,062	)
Post-em ployment benefits:
Defined contribution plans		(6,497	)		(7,684	)
Defined benefit plans		(1,337	)		(2,344	)
Long-term incentive plans:
Equity-settled share-based payments		(3,413	)		(4,014	)
Cash rights compensation		(1,830	)		(3,223	)
Termination benefits		(6,833	)		(12,919	)
Other employee benefits 1		(66,540	)		(76,463	)
		(326,544	)		(377,709	)

(1) Other employee benefits include items such as medical benefits, workers' compensation, other fringe benefits, state taxes.

(c) Other

	2016			2015
	US$'000			US$'000
Depreciation of non-current assets		(48,558	)		(66,227	)
Amortisation of non-current assets		(13,912	)		(17,684	)
Operating lease rental expense		(18,180	)		(21,770	)

 81

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

7. SIGNIFICANT ITEMS

A provision for restructuring is recognised when the Company has approved a detailed and formal restructuring plan and the Company starts to implement the restructuring plan or announces the main features of the restructuring plan to those affected by the plan in a sufficiently specific manner to raise a valid expectation of those affected that the restructuring will be carried out. The Company’s restructuring accruals include only the direct expenditures arising from the restructuring, which are those that are both necessarily incurred by the restructuring and not associated with the ongoing activities.

During 2016, the Company continued to reduce operating costs through a series of restructuring activities. The Company’s restructuring efforts included:

• controlling SG&A and other overhead related costs;

• exiting certain loss-making drilling services project or territories;

• leveraging the supply chain function across the business, and

• focusing on operational efficiencies and productivity at the drill rig level and across the global organisation.

The Company has incurred costs related to executing its restructuring and cost-reduction plans. These costs include employee separations, exiting leased facilities and impairments of inventories and capital equipment related to relocating certain manufacturing activities and resizing the business.

In addition, due to the deterioration in the Company’s revenues and profitability as well as a forecast global slowdown in the demand for drilling services and products, the Company reassessed the carrying value of certain assets, including goodwill, intangible assets, plant and equipment and inventories, resulting in additional impairment charges and provisions in the prior period. A description of the impairment process is provided below.

Significant items for the years ended 31 December 2016 and 2015 are, as follows:

		2016		2015
	Note	US$'000		US$'000
Recapitalisation costs			7,456		577
Impairments:
Equipment	17		878		36,806
Intangible assets	19		1,012		571
Inventories	14		-		34,468
Employee and related costs 1			8,008		15,980
Other restructuring costs			8,121		7,857
Onerous leases			2,010		1,781
			27,485		98,040
Net of tax2			27,189		89,625

(1) Employee and related costs include separation costs, retention and other employee-related costs.

(2) The tax effect was calculated using applicable local country tax rates before application of excess of net operating losses. The net operating losses were largely not benefitted.

Classification of significant items on the income statement for the years ended 31 December 2016 and 2015 are, as follows:

	2016		2015
	US$'000		US$'000
General and administrative expenses		22,096		21,108
Cost of goods sold		3,015		76,203
Research and development		2,278		585
Sales and marketing expenses		96		144
		27,485		98,040

 82

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

7. SIGNIFICANT ITEMS (CONTINUED)

Significant items for the years ended 31 December 2016 and 2015 by business segment are, as follows:

	2016		2015
	US$'000		US$'000
Global Drilling Services1		11,209		61,803
Global Products2		2,397		26,844
Unallocated		13,879		9,393
		27,485		98,040

(1) Transactions between segments are carried out at arm’s length and are eliminated in consolidation.

(2) Unallocated costs include corporate general and administrative costs, as well as, other expense items such as foreign exchange gains or losses.

8. REMUNERATION OF AUDITORS

	2016		2015
	US$'000		US$'000
Company auditor's remuneration
Audit and review of the financial report:
Auditor of the parent entity		1,031		1,191
Related practices of the parent entity auditor		1,136		1,240
		2,167		2,431
Non-audit services:
Review of tax returns		489		462
Tax services		360		1,176
Other non-audit services		-		74
		849		1,712
Total remuneration to Company auditor		3,016		4,143
Remuneration to other accounting firms
Audit services		184		292
Non-audit services:
Tax services		2,362		2,053
Global mobility		342		12
Internal audit		-		15
Accounting and payroll services		280		934
Other		83		297
Total remuneration to other accounting firms		3,251		3,603

Boart Longyear Limited’s auditor is Deloitte Touche Tohmatsu. The Company has employed Deloitte Touche Tohmatsu on assignments additional to their audit duties where their expertise and experience with the Company are important. These assignments principally have been related to tax advice and tax compliance services, the magnitude of which is impacted by the global reach of the Company.

The Board and its Audit, Compliance & Risk Committee (Audit Committee) are committed to ensuring the independence of the external auditor. Accordingly, significant scrutiny is given to non-audit engagements of the external auditor. The Company has a formal pre-approval policy which requires the pre-approval of non-audit services by the Chairman of the Audit Committee. Additionally, the total annual fees for such non-audit services cannot exceed the auditor’s annual audit fees without the approval of the Audit Committee. The Audit Committee believes that the combination of these two approaches results in an effective procedure to pre-approve services performed by the external auditor.

 83

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

9. KEY MANAGEMENT PERSONNEL COMPENSATION

The aggregate compensation made to key management personnel of the Company is set out below.

	2016		2015
	US$		US$
Short-term employee benefits		4,823,617		5,354,090
Post-employment benefits		64,670		66,942
Other long-term benefits		1,729,127		2,118,133
Termination benefits		321,544		1,261,781
Share-based payments		1,600,722		2,389,083
		8,539,680		11,190,029

10. EMPLOYEE LONG TERM INCENTIVE PAYMENTS

Share-based Payment Accounting Policies

Equity-settled share-based payments with employees and others providing similar services in 2014 and prior years are measured at the fair value of the equity instrument at the grant date. For equity-settled share-based payments granted in 2015 and 2016, the fair value of the equity instrument is measured by the use of the Brownian Motion model. For stock options, fair value is measured by use of a Black-Scholes-Merton model and Brownian Motion model. Both models require the input of highly subjective assumptions.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period based on the Company’s estimate of shares that will eventually vest.

For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.

When determining expense related to long-term incentive plans, the Company considers the probability of shares vesting due to the achievement of performance metrics established by the Board of Directors related to long-term incentives that includes performance vesting conditions. The Company also estimates the portion of share and Cash Rights that will ultimately be forfeited. A forfeiture rate over the vesting period has been estimated, based upon extrapolation of historic forfeiture rates.

LTIP Share Rights and Cash Rights

The Company provides long term equity incentives to assist in retaining key employees and encouraging superior performance on a sustained basis. Annual long term incentive grants have generally been made through the Company’s Long-term Incentive Plan (“LTIP”), which allows for annual grants of share rights to management that will vest based on the satisfaction of either time-based conditions or both performance-based and time-based conditions. Vested share rights convert to ordinary fully paid shares on a one-for-one basis.

The Board has flexibility to offer different types of incentives (e.g., Share Rights, Cash Rights, Options, or a combination of the three) for an executive’s long-term incentive award. The composition of the grants from year-to-year will depend on what, in the Board’s view, will best incentivise and reward executives, having regard to the Company’s circumstances. An Option is an entitlement to purchase a share at a pre-determined share price set at the grant date. A Share Right is an entitlement to receive a fully-paid ordinary share in the Company, and a Cash Right is an entitlement to receive a cash bonus up to a set maximum. Although the Board may elect to grant Cash Rights for any reason, they have typically been used to supplement Share Rights in order to limit share dilution when the stock price is low at the time of the award.

Under the terms of the LTIP, Performance Share Rights vest upon the achievement of performance targets set by the Board. Retention Share Rights granted vest upon continuous employment with the Company from the grant date until the third anniversary of the grant date.

Awards granted to management in 2013 included Performance Share Rights that would vest based on three-year average Return-on- Equity (“ROE”) targets set by the Board. Achievement for Performance-based Share Rights under the 2013 LTIP grants, which reached the end of the performance measurement period in March 2016, was 0%, as the Company did not meet the minimum ROE performance criterion for those grants.

 84

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

10. EMPLOYEE LONG TERM INCENTIVE PAYMENTS (CONTINUED)

LTIP Share Rights and Cash Rights (continued)

Awards granted to management for 2014 comprised a combination of options under the Company’s Option Plan and Share Rights and Cash Rights under the LTIP. The performance criterion for the 2014 LTIP Performance Share Rights is based on the achievement of three-year cumulative net debt reduction targets in addition to total shareholder return targets set by the Board. Vesting occurs on a linear basis beginning at 50% of a participant’s grant once minimum “threshold” performance objectives are met, and vesting up to 150% of a participant’s target grant amount is possible if the Company’s actual results exceed the targets established for the three-year period. Participants must also remain continuously employed with the Company during the performance period.

Awards granted to management for 2015 comprised of a combination of Options and Share Rights. The vesting of the Options and Share Rights are contingent upon share appreciation conditions set forth by the Board. Participants must remain continuously employed with the Company during the performance period. There were no Cash Rights issued in 2015.

The 2016 LTI Plan awards to management were solely comprised of performance-based Rights. The Board considered this to be appropriate for 2016 as it most effectively achieved three key objectives: aligning executives’ interests with shareholders; motivating executives to focus on sustained share price growth and certain earnings targets over the longer term; and retaining key executive talent, which is critical to the Company’s long term success. The performance-based Rights were granted on terms and conditions determined by the Board, including vesting conditions linked to service, share price appreciation, and earnings achievement over a specified period (in this case three years).

The total share-based expense associated with Share Rights granted under the LTIP for both years ended 31 December 2016 and 2015 was $2.6 million.

The following table reflects the Share Rights arrangements that were in existence at 31 December 2016:

Series - Share Rights	Number		Effective grant date		Vesting date		Fair value at grant date US$
1 - Issued 15 March 2014		8,308,106		15-Mar-14		15-Mar-17		0.25
2 - Issued 1 April 2014		972,612		1-Apr-14		1-Apr-17		0.27
3 - Issued 1 July 2015		12,455,879		1 -Jul-15		15-Mar-19		0.25
4 - Issued 15 March 2016		43,981,341		15-Mar-16		15-Mar-19		0.05
5 - Issued 6 June 2016		2,035,756		6-Jun-16		6-Jun-19		0.05
6 - Issued 1 September 2016		2,600,000		1-Sep-16		1-Sep-19		0.08
7 - Issued 1 September 20161		N/A		1-Sep-16		various		N/A
8 - Issued 6 September 2016		3,900,000		6-Sep-16		6-Sep-19		0.08

(1) These are shares issued to a member of management as part of his 2016 LTI award, he was granted a sign-on share award of $200 thousand that will be paid in equal installments of one-third on each anniversary of his hire date (1 September 2016) beginning with the first anniversary and ending on the third. The shares will be calculated by dividing one third of the share award by the 5-day volume weighted average share price for the five trading days immediately preceding and including the relevant anniversary date. The actual number of shares cannot be determined until the calculation is performed upon each of the three installment vesting dates. There are no performance conditions on these amounts and so long as he does not voluntarily resign prior to a vesting date, that installment of the award will vest.

The following reconciles the outstanding Share Rights at the beginning and end of the year:

	2016			2015
	Number of			Number of
	rights			rights
Share rights	’000			’000
Balance at beginning of year		28,038			22,141
Granted		55,676			18,290
Forfeited		(7,251	)		(8,443	)
Vested		(2,209	)		(3,950	)
Balance at end of year		74,254			28,038

 85

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

10. EMPLOYEE LONG TERM INCENTIVE PAYMENTS (CONTINUED)

LTIP Share Rights and Cash Rights (continued)

The following Share Rights vested during 2016:

Vest date range					Fair value at vest date range A$
Grant date	Start	End	Number of shares		Low		High
15-Mar-13	31-Jan-16	15-Mar-16		1,077,122		0.05		0.10
1-Jun-13	1-Jun-16	1-Jun-16		190,750		0.10		0.10
15-Mar-14	31-Jan-16	31-Dec-16		793,219		0.05		0.19
1-Jul-15	31-Jan-16	31-Dec-16		148,376		0.05		0.19

LTIP Share Options

The Board has, on certain occasions, granted Share Options to certain senior management members in order to attract, retain and properly incentivise those individuals.

During 2014, new Options were granted to Mr O’Brien as part of a special one-off strategic award and new options were granted to senior executives as part of the long-term incentive plan.

The 2015 LTI Plan awards to the KMP was solely comprised of performance-based Options. The performance- based Options were granted on terms and conditions determined by the Board, including vesting conditions linked to service and share price appreciation over a four-year period. Additional information concerning the terms of the 2015 long-term incentive awards to KMP may be found in the Remuneration Report.

During 2016, 1,000,000 Options were granted to a member of management under the 2015 Option Plan.

25,000 Options granted in March 2010 vested in accordance with their term and expired in March 2015. 77,640 Options granted in March 2014 vested in 2015 due to an employee termination and expired in July 2016. 3,304,753 Options granted in May 2014 vested in accordance with their term on April 2015. In addition, 4,979,976 Options and 259,364 Options vested early due to employee terminations in 2015 and 2016, respectively. Terminations also resulted in forfeitures of 30,408,995 Options in 2015 and 3,651,570 Options in 2016.

The share-based expense associated with Share Options for the years ended 31 December 2016 and 2015 was $793 thousand and $1.4 million, respectively. No shares or interests have been issued during the 2016 or 2015 financial years as a result of the exercise of options.

The following table reflects the Options arrangements that were in existence at 31 December 2016:

Series - Options	Number		Effective grant date		Vesting date		Fair value at grant date US$
1 - Issued 15 March 2014		3,517,285		15-Mar-14		15-Mar-17		0.23
2 - Issued 1 April 2014		324,204		1-Apr-14		1-Apr-17		0.25
3 - Issued 19 May 2014		3,034,753		19-May-14		19-May-14		0.19
4 - Issued 19 May 2014		3,034,753		19-May-14		1-Apr-15		0.19
5 - Issued 19 May 2014		3,034,752		19-May-14		1-Apr-16		0.19
6 - Issued 1 July 2015		38,788,304		1-Jul-15		15-Mar-20		0.07
7 - Issued 18 January 2016		1,000,000		18-Jan-16		15-Mar-20		0.07

 86

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

10. EMPLOYEE LONG TERM INCENTIVE PAYMENTS (CONTINUED)

LTIP Share Options (continued)

The fair values of the Series 1-5 Options grants were determined using the Black-Scholes option pricing model using the following inputs:

	Grant date share price US$		Expected volatility			Life of rights	Dividend yield			Risk-free interest rate
Series 1		0.25		115	%	120 months		0	%		0.74	%
Series 2		0.27		114	%	120 months		0	%		0.91	%
Series 3		0.21		114	%	120 months		0	%		0.01	%
Series 4		0.21		114	%	120 months		0	%		0.09	%
Series 5		0.21		114	%	120 months		0	%		0.36	%

The fair values of the Series 6-7 Options grants were determined using the Brownian Motion option pricing model using the following inputs:

			Vesting Schedule				Discount Rates
	Grant date share price US$		min		max		5-year treasury			4-year treasury
Series 6		0.10		0.25		0.58		1.60	%		1.40	%
Series 7		0.04		0.25		0.58		1.60	%		1.40	%

The following reconciles the outstanding options at the beginning and end of the year:

	2016					2015
				Weighted					Weighted
				average					average
	Number of			exercise		Number of			exercise
	options			price		options			price
Options	’000			US$		’000			US$
Balance at beginning of year		58,866			0.17		13,391			0.18
Granted		1,000			0.14		75,909			0.15
Forfeited		(7,055	)		0.15		(30,409	)		0.15
Exercised		-			-		-			-
Expired during the financial year		(77	)		0.29		(25	)		2.93
Balance at end of year		52,734			0.17		58,866			0.17
Exercisable at end of year		52,734			0.17		58,866			0.17

 87

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

11. INCOME TAXES

Income Taxes

The Company is subject to income taxes in Australia and other jurisdictions around the world in which the Company operates. Significant judgment is required in determining the Company’s current tax assets and liabilities. Judgments are required about the application of income tax legislation and its interaction with income tax accounting principles. Tax positions taken by the Company are subject to challenge and audit by various income tax authorities in jurisdictions in which the group operates.

Judgment is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the balance sheet. Deferred tax assets, including those arising from unrecouped tax losses, capital losses, foreign tax credits and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Assumptions about the generation of future taxable profits and repatriation of retained earnings depend on management’s estimates of future cash flows.

These judgments and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and tax liabilities recognised on the balance sheet. In such circumstances, some or all of the carrying amount of recognised deferred tax assets and tax liabilities may require adjustment, resulting in a corresponding credit or charge to the income statement.

Current and deferred taxation

Income tax expense includes current and deferred tax expense (benefit) and is recognised in profit or loss except to the extent that 1) amounts relate to items recognised directly in equity, in which case the income tax expense (benefit) is also recognised in equity, or 2) amounts that relate to a business combination, in which case the income tax expense (benefit) is recognised in goodwill.

Current income tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Management periodically evaluates provisions taken in tax returns with respect to situations in which applicable tax regulation is open to interpretation. The Company establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided on all temporary differences for which transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred but have not reversed at the balance sheet date. Temporary differences are differences between the Company’s taxable income and its profit before taxation, as reflected in profit or loss, that arise from the inclusion of profits and losses in tax assessments in periods different from those in which they are recognised in profit or loss.

Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they likely will not reverse in the foreseeable future.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets are regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to all or part of the deferred tax asset to be realised.

 88

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

11. INCOME TAXES (CONTINUED)

Tax consolidation

The Company includes tax consolidated groups for the entities incorporated in Australia and the United States. The Parent Entity and its wholly-owned Australian resident entities are part of the same tax-consolidated group and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Boart Longyear Limited. Companies within the US group also form a tax-consolidated group within the United States.

Tax expense (benefit) and deferred tax assets/liabilities arising from temporary differences of the members of each tax-consolidated group are recognised in the separate financial statements of the members of that tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts in the separate financial statements of each entity. Tax credits of each member of the tax-consolidated group are recognised by the head entity in that tax-consolidated group.

Entities within the Australian tax-consolidated group have entered into tax-funding arrangements with the head entity. Under the terms of the tax-funding arrangements, the tax-consolidated groups and each of the entities within the tax-consolidated group agrees to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable or payable to other entities in the tax-consolidated group.

Income tax expense is as follows:

	2016		2015
	US$'000		US$'000
Income tax expense:
Current tax expense		13,217		13,263
Adjustments recognised in the current year in relation to the current tax of prior years		6,238		2,151
Deferred tax expense		6,335		42,922
		25,790		58,336

(a) Reconciliation of the prima facie income tax expense on pre-tax accounting profit to the income tax expense in the financial statements:

Loss before taxation	(131,049	)	(267,942	)
Income tax benefit calculated at Australian rate of 30%	(39,315	)	(80,383	)
Impact of higher rate tax countries	(5	)	3,549
Impact of lower rate tax countries	2,064		13,977
Net non-deductible/non-assessable items other	20,692		(1,030	)
Unrecognised tax losses 1	31,094		59,672
Profit/Losses subject to double taxation in the US	(4,947	)	3,118
Withholding tax net of foreign tax credit	2,035		4,796
(Recognition) derecognition of net prior year deferred tax assets	(4,879	)	47,894
Other	12,813		4,592
	19,552		56,185
Under provision from prior years	6,238		2,151
Income tax expense per the Consolidated Statement of Profit or Loss and Other Comprehensive Income	25,790		58,336

(1) Due to the group being in a tax loss position in many jurisdictions during the current financial year, the Company has not recognised current period losses.

 89

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

11. INCOME TAXES (CONTINUED)

(b) Income tax recognised directly in equity during the period

The following current and deferred amounts were (charged) credited directly to equity during the year:

	2016		2015
	US$'000		US$'000
Deferred tax recognised in equity:
Actuarial movements on defined benefit plans		1,116		(429	)

(c) Tax assets and liabilities

Tax assets:
Income tax receivable attributable to:
Parent	(80,971	)	(55,696	)
Other entities in the tax consolidated group	80,971		55,696
Other entities	23,434		20,825
	23,434	1	20,825	1
Current tax liabilities:
Income tax payable attributable to:
Parent	-		(56	)
Entities other than parent and entities in the consolidated group	94,577		78,020
	94,577		77,964

(d) Deferred tax balances

Deferred tax com prises:
Temporary differences	(7,502	)	2,109
Unused tax losses and credits	8,083		4,106
	581		6,215

(1) The income tax receivable for 2016 is $23.4 million (2015: $20.8 million) of which $4.4 million is classified as current tax receivable and $19.0 million is classified as non-current tax receivable (2015: $6.6 million and $14.2 million respectively).

 90

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

11. INCOME TAXES (CONTINUED)

	Opening			Recognised			FX			Recognised		Closing
	balance			in income			differences			in equity		balance
2016	US$'000			US$'000			US$'000			US$'000		US$'000
Deferred tax assets (liabilities) temporary differences
Property, plant and equipment		4,767			(3,362	)		(101	)		-		1,304
Provisions		8,637			(601	)		(182	)		-		7,854
Doubtful debts		30			(29	)		(1	)		-		-
Other intangible assets		(15,246	)		(4,183	)		-			-		(19,429	)
Accrued liabilities		1,056			669			(22	)		-		1,703
Pension		79			(593	)		(2	)		1,116		600
Inventories		3,728			(2,463	)		(79	)		-		1,186
Investments in subsidiaries		(1,500	)		-			-			-		(1,500	)
Unrealised foreign exchange		(810	)		764			-			-		(46	)
Other		1,368			(514	)		(28	)		-		826
		2,109			(10,312	)		(415	)		1,116		(7,502	)
Unused tax losses and credits:
Tax losses		4,106			1,611			-			-		5,717
Foreign tax credits		-			2,366			-			-		2,366
		4,106			3,977			-			-		8,083
		6,215			(6,335	)		(415	)		1,116		581

Presented in the statement of financial position as follows:
Deferred tax asset	19,465
Deferred tax liability	(18,884	)
	581

Where deferred tax assets have been recognised, it is considered probable that the Company will generate sufficient future taxable income to utilise the assets. The deferred tax on foreign tax credits are in relation to the US group that is currently profitable and expects future utilisation of foreign tax credits based on forecast taxable income in the next 5 years.

 91

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

11. INCOME TAXES (CONTINUED)

	Opening			Recognised			FX			Recognised			Closing
	balance			in income			differences			in equity			balance
2015	US$’000			US$’000			US$’000			US$’000			US$’000
Deferred tax assets (liabilities) temporary differences
Property, plant and equipment		22,308			(16,870	)		(671	)		-			4,767
Provisions		11,689			(2,701	)		(351	)		-			8,637
Doubtful debts		256			(218	)		(8	)		-			30
Other intangible assets		(16,568	)		824			498			-			(15,246	)
Accrued liabilities		1,101			(12	)		(33	)		-			1,056
Pension		1,157			(614	)		(35	)		(429	)		79
Inventories		14,123			(9,970	)		(425	)		-			3,728
Investments in subsidiaries		(1,500	)		-			-			-			(1,500	)
Unrealised foreign exchange		464			(1,274	)		-			-			(810	)
Other		4,048			(2,559	)		(121	)		-			1,368
		37,078			(33,394	)		(1,146	)		(429	)		2,109
Unused tax losses and credits:
Tax losses		-			4,106			-			-			4,106
Foreign tax credits		13,634			(13,634	)		-			-			-
		13,634			(9,528	)		-			-			4,106
		50,712			(42,922	)		(1,146	)		(429	)		6,215

Presented in the statement of financial position as follows:
Deferred tax asset	21,033
Deferred tax liability	(14,818	)
	6,215

	2016		2015
Unrecognised deferred tax assets	US$'000		US$'000
Tax losses - revenue		171,488		175,153
Unused tax credits		39,369		56,422
Temporary differences		126,105		106,025
		336,962		337,600

 92

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

11. INCOME TAXES (CONTINUED)

Canadian income tax audits

The Company’s Canadian income tax returns for the tax years 2007-2012 have been reassessed by the Canada Revenue Agency (“CRA”). These reassessments are being appealed through a multi-national dispute resolution process, known as “competent authority” to prevent the double-taxation of income assessed by multiple jurisdictions. The assessment for the 2007 through 2012 tax years, if upheld, would result in federal and provincial tax liabilities (including interest) of approximately C$109.6 million.

The outcome and timing of any resolution of the Canadian reassessments are unknown. Interest will continue to accrue on all disputed and unpaid amounts until they are paid, or, alternatively, until the disputes are resolved in the Company’s favour.

The Company has recorded a tax provision related to the CRA’s audits of the 2007 through 2012 tax years. The provision reflects the uncertainties regarding the outcome of those audits. While the Company believes it is appropriately reserved in respect of the CRA tax disputes, the resolution of those disputes on terms substantially as assessed by the CRA for the 2007 through 2012 tax years could be material to the Company’s financial position or results of operations. The Company’s liquidity could also be impacted negatively by the CRA reassessments.

Other tax matters

The recent closure of our centralised operating structure based in Switzerland and the establishment of a master distributor entity based in the United States could result in audits or assessments in many of the jurisdictions in which we operate and could lead to a higher effective tax rate and tax payments. Assessments related to these issues may adversely affect our liquidity in the event we are required to pay assessments, or post security to maintain challenges to such assessments. In making the decision to move to the master distributor entity, management and our external advisors carefully evaluated the operational requirements of the business, future tax risk and potential forecast scenarios and considered that the US-based master distributor structure effectively balances business objectives and tax risks inherent in any reorganisation.

 93

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

12. LOSS PER SHARE

	2016			2015
	US cents			US cents
	per share			per share
Basic loss per share		(16.8	)		(36.0	)
Diluted loss per share		(16.8	)		(36.0	)

Basic loss per share

The loss and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:

	2016			2015
	US$'000			US$'000
Loss used in the calculation of basic EPS		(156,839	)		(326,277	)

	2016		2015
	’000		’000
Weighted average number of ordinary shares for the purposes of basic loss per share		935,553		905,490

Diluted loss per share

The loss used in the calculation of diluted loss per share are as follows:

	2016			2015
	US$'000			US$'000
Loss used in the calculation of diluted EPS		(156,839	)		(326,277	)

	2016		2015
	’000		’000
Weighted average number of ordinary shares used in the calculation of diluted EPS		935,553		905,490

The following potential shares are anti-dilutive and are therefore excluded from the weighted average number of ordinary shares for the purposes of diluted earnings per share.

	2016		2015
	’000		’000
Shares deemed to be issued for no consideration in respect of LTIP share rights		16,596		6,617

 94

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

13. TRADE AND OTHER RECEIVABLES

Trade receivables are recorded at amortised cost. The Company reviews collectability of trade receivables on an ongoing basis and provides allowances for credit losses when there is evidence that trade receivables may not be collectible. These losses are recognised in the income statement within operating expenses. When a trade receivable is determined to be uncollectible, it is written off against the allowance for doubtful accounts. Subsequent recoveries of amounts previously written off are recorded in other income in profit or loss.

	2016			2015
	US$'000			US$'000
Trade receivables		94,220			96,771
Allowance for doubtful accounts		(1,278	)		(2,482	)
Goods and services tax receivable		13,194			13,997
Other receivables		1,762			1,769
		107,898			110,055

The ageing of trade receivables is detailed below:

	2016		2015
	US$'000		US$'000
Current		68,591		69,364
Past due 0 - 30 days		14,682		15,577
Past due 31 - 60 days		4,134		4,134
Past due 61 - 90 days		3,259		3,952
Past due 90 days		3,554		3,744
		94,220		96,771

The average credit period on sales of goods is 53 days as at 31 December 2016, and 31 December 2015. No interest is charged on trade receivables.

The Company’s policy requires customers to pay the Company in accordance with agreed payment terms. The Company’s settlement terms are generally 30 to 60 days from date of invoice. All credit and recovery risk associated with trade receivables has been provided for in the statement of financial position. Trade receivables have been aged according to their original due date in the above ageing analysis.

Credit risk management

The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, when appropriate, as a means of mitigating the risk of financial loss from defaults.

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on accounts receivable. The Company holds security for a number of trade receivables in the form of letters of credit, deposits, and advanced payments.

The Company does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. No derivative financial instruments were entered into during 2016 or 2015.

14. INVENTORIES

Inventories are measured at the lower of cost or net realisable value. The cost of most inventories is based on a standard cost method, which approximates actual cost on a first-in first-out basis, and includes expenditures incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overhead expenses (including depreciation) based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Allowances are recorded for inventory considered to be excess or obsolete and damaged items are written down to the net realisable value. Due to the decline in the demand for products, and consumables used in our Global Drilling Services business, and the high inventory balances across the group and the speed at which inventory is turning in the current market, significant judgment is required in determining net realisable value of inventory.

 95

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

14. INVENTORIES (CONTINUED)

	2016		2015
	US$'000		US$'000
Raw materials		25,726		33,987
Work in progress		3,364		3,717
Finished products		135,930		128,554
		165,020		166,258

The Company did not record any additional provisions against inventory for the year ended 31 December 2016 but recorded an additional provision of $34.5 million for the year ended 31 December 2015. Obsolescence provisions were $36.9 million and $111.2 million as at 31 December 2016 and 2015, respectively.

15. FINANCIAL RISK MANAGEMENT

Capital risk management

The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balances.

The capital structure of the Company consists of debt, which includes the loans and borrowings disclosed in Note 21, cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued capital, reserves, and accumulated losses/retained earnings.

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed throughout these notes.

Of the outstanding loans and borrowings, Centerbridge Partners, L.P. accounted for $190.0 million of Term Loans outstanding and accreted interest of $53.8 million. There are no significant concentrations of credit risk. The carrying amount reflected above represents the Company’s maximum exposure to credit risk for trade and other receivables.

Financial assets

A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss is not recognised directly for trade receivables because the carrying amount is reduced through the use of an allowance account.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

Financial risk management objectives

The Company’s corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, and monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

The Company seeks to minimise the effects of these risks, where deemed appropriate, by using derivative financial instruments and other non-derivative strategies to manage these risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the Board, which provide written principles on foreign exchange risk and interest rate risk. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

 96

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

15. FINANCIAL RISK MANAGEMENT (CONTINUED)

Market risk

The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Company seeks to minimise the effects of these risks, where deemed appropriate, by using derivative financial instruments and other non-derivative strategies to manage these risk exposures to interest rate and foreign currency risk, including:

· foreign exchange forward contracts to hedge the exchange rate risk arising from transactions not recorded in an entity’s functional currency,

· interest rate swaps to mitigate the risk of rising interest rates; and

· other non-derivative strategies.

The Company did not utilise any derivative instruments during the years ended 31 December 2016 or 2015.

Foreign currency risk management

Company subsidiaries undertake certain transactions denominated in currencies other than their functional currency, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters, which may include utilising forward foreign exchange contracts as well as options in addition to non-derivative strategies.

The most significant carrying amounts of monetary assets and monetary liabilities (which include intercompany balances with other subsidiaries) that: (1) are denominated in currencies other than the functional currency of the respective Company subsidiary; and (2) cause foreign exchange rate exposure, at 31 December are as follows:

	Assets				Liabilities
	2016		2015		2016		2015
	US$'000		US$'000		US$'000		US$'000
Australian Dollar		310,407		412,346		117,848		26,491
Canadian Dollar		1,032		1,429		43,048		58,518
Euro		23,218		9,380		114,206		109,413
US Dollar		167,783		159,249		593,271		591,635

Foreign currency sensitivity

The Company is mainly exposed to exchange rate fluctuations in the Australian Dollar (AUD), Canadian Dollar (CAD) Euro (EUR) and United States Dollar (USD). The Company is also exposed to translation differences as the Company’s presentation currency is different from the functional currencies of various subsidiaries. However, this represents a translation risk rather than a financial risk and consequently is not included in the following sensitivity analysis.

The following tables reflect the Company’s sensitivity to a 10% change in the exchange rate of each of the currencies listed above. This sensitivity analysis includes only outstanding monetary items denominated in currencies other than the respective subsidiaries’ functional currencies and remeasures these at the respective year end to reflect a 10% decrease in the indicated currency against the respective subsidiaries’ functional currencies. A positive number indicates an increase in net profit and/or net assets.

	10% decrease in AUD						10% decrease in CAD
	2016			2015			2016		2015
	US$'000			US$'000			US$'000		US$'000
Net profit		(2,965	)		(2,181	)		1,616		2,329
Net assets		(19,538	)		(37,069	)		3,835		4,308

	10% decrease in EUR				10% decrease in USD
	2016		2015		2016		2015
	US$'000		US$'000		US$'000		US$'000
Net profit		1,753		5,810		8,120		6,913
Net assets		5,566		8,801		38,681		39,308

In management’s opinion, the sensitivity analysis is not fully representative of the inherent foreign exchange risk as the year-end exposure may not reflect the exposure during the course of the year.

 97

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

15. FINANCIAL RISK MANAGEMENT (CONTINUED)

Forward foreign exchange contracts

There were no open forward foreign currency contracts as at 31 December 2016 or 2015.

Interest rate risk management

The Company is not currently exposed to interest rate risk as entities within the Company borrow funds at fixed interest rates.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Company’s Treasurer and Board.

The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

Liquidity risk

The following tables reflect the expected maturities of non-derivative financial liabilities as at 31 December 2016 and 2015. These are based on the undiscounted expected cash flows of financial liabilities based on the maturity profile per the loan agreement. The table includes both interest and principal cash flows. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which are not included in the carrying amount on the balance sheet.

	Weighted average effective interest rate %			Less than 1 month US$'000		1 to 3 months US$'000		3 months to 1 year US$'000		1-5 years US$'000		5+ years US$'000		Adjust- ment US$'000			Total US$'000
31 December 2016
Non-interest bearing payables		-			91,064		35,525		-		-		-		-			126,589
Variable interest rate instruments		4.2	%		61		122		548		19,328		-		(2,493	)		17,566
Fixed interest rate instruments		9.5	%		-		-		39,380		913,994		-		(230,595	)		722,779
Financial Lease		4.7	%		10		24		106		495		-		-			635
					91,135		35,671		40,034		933,817		-		(233,088	)		867,569
31 December 2015
Non-interest bearing payables		-			119,883		25,158		-		-		-		-			145,041
Fixed interest rate instruments		9.4	%		-		-		39,380		481,134		482,181		(305,334	)		697,361
Financial Lease		4.7	%		-		-		13		38		206		-			257
					119,883		25,158		39,393		481,172		482,387		(305,334	)		842,659

 98

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

15. FINANCIAL RISK MANAGEMENT (CONTINUED)

Liquidity risk (continued)

The following tables reflect the expected maturities of non-derivative financial assets. These are based on the undiscounted expected cash flows of the financial assets.

	Less than 1 month US$'000		1 to 3 months US$'000		3 months to 1 year US$'000		Total US$'000
2016
Non-interest bearing receivables		52,830		40,503		14,565		107,898
Cash		59,343		-		-		59,343
		112,173		40,503		14,565		167,241
2015
Non-interest bearing receivables		53,563		41,065		15,427		110,055
Cash		113,357		-		-		113,357
		166,920		41,065		15,427		223,412

The liquidity risk tables are based on the Company’s intent to collect the assets or settle the liabilities in accordance with the contractual terms.

Fair value of financial instruments

The fair values of financial assets and financial liabilities are determined as follows:

• Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements.

• The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices.

• The fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analyses using prices from observable current market transactions.

• The fair value of derivative instruments are calculated using quoted prices. Where such prices are not available, use is made of discounted cash flow analyses using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives.

Management considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements materially approximate their fair values, except for the Company’s senior secured notes that are trading below their carrying value.

16. ASSETS CLASSIFIED AS HELD FOR SALE

Based on current market conditions and future outlook, the Company has classified certain property, plant and equipment assets in the amount of $5.9 million as held for sale as at 31 December 2016. These assets consist primarily of excess rigs and ancillary equipment. The opportunity for a gain by the disposition of these targeted assets allows the Company to rationalise its assets, raise capital and eliminate ongoing costs associated with maintaining these assets. These initiatives are expected to continue through 2017.

 99

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

17. PROPERTY, PLANT AND EQUIPMENT

The Company’s assets are held in various differing geographical, political and physical environments across the world, therefore, the estimation of useful lives of assets is an area of significant judgment. Our current estimate has been based on historical experience. In addition, the condition of the assets is assessed at least annually and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary.

Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Costs include expenditures that are directly attributable to the acquisition of the asset, including the costs of materials and direct labour and other costs directly attributable to bringing the asset to a working condition for the intended use. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate assets.

Subsequent costs related to previously capitalised assets are capitalised only when it is probable that they will result in commensurate future economic benefit and the costs can be reliably measured. All other costs, including repairs and maintenance, are recognised in profit or loss as incurred.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease terms or their useful lives. Items in the course of construction or not yet in service are not depreciated.

The following useful lives are used in the calculation of depreciation:

Buildings	20-40	years
Plant and machinery	5-10	years
Drilling rigs	5-12	years
Other drilling equipment	1-5	years
Office equipment	5-10	years
Computer equipment:
Hardware	3-5	years
Software	1-7	years

Depreciation methods, useful lives and residual values are reassessed at each reporting date.

Leased assets

Leases are classified as finance leases when the terms of the leases transfer substantially all the risks and rewards incidental to ownership of the leased assets to the Company. All other leases are classified as operating leases.

Assets held under finance leases are initially recognised at fair value or, if lower, at amounts equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

Finance lease payments are apportioned between finance charges and reductions of the lease obligations so as to achieve a constant rate of interest on the remaining balance of the liability. Finance leased assets are amortised on a straight-line basis over the shorter of the lease terms or the estimated useful lives of the assets.

Operating lease payments are recognised as expenses on a straight-line basis over the lease terms.

 100

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

17. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

	Land and			Plant and			Construction
	Buildings			Equipment			in Progress			Total
	US$'000			US$'000			US$'000			US$'000
Balance at 1 January 2015		65,811			831,615			25,184			922,610
Additions		442			202			17,748			18,392
Disposal		(1,279	)		(82,437	)		-			(83,716	)
Transfer to/from CIP		777			29,854			(30,631	)		-
Transfer from intangible assets		-			5,711			326			6,037
Currency movements		(4,121	)		(73,823	)		(1,462	)		(79,406	)
Balance at 1 January 2016		61,630			711,122			11,165			783,917
Additions		40			962			16,542			17,544
Disposal		(12,814	)		(81,565	)		-			(94,379	)
Transfers to assets held for sale		-			(29,529	)		-			(29,529	)
Transfer from CIP		59			16,531			(16,590	)		-
Transfer to intangible assets		-			-			(1,536	)		(1,536	)
Currency movements		(1,571	)		(8,853	)		(8	)		(10,432	)
Balance at 31 December 2016		47,344			608,668			9,573			665,585
Accumulated depreciation and impairment:
Balance at 1 January 2015		(21,969	)		(621,335	)		-			(643,304	)
Depreciation		(2,376	)		(63,851	)		-			(66,227	)
Impairment		-			(36,806	)		-			(36,806	)
Disposal		1,230			81,387			-			82,617
Currency movements		2,133			54,145			-			56,278
Balance at 1 January 2016		(20,982	)		(586,460	)		-			(607,442	)
Depreciation		(2,106	)		(46,452	)		-			(48,558	)
Reversal of/(impairment of)		167			(1,045	)		-			(878	)
Disposal		8,116			73,660			-			81,776
Transfer to held for sale		-			23,606			-			23,606
Currency movements		(338	)		13,909			-			13,571
Balance at 31 December 2016		(15,143	)		(522,782	)		-			(537,925	)
Net book value at 31 December 2015		40,648			124,662			11,165			176,475
Net book value at 31 December 2016		32,201			85,886			9,573			127,660

Property, plant and equipment is reviewed at each reporting date to determine whether there is any indication of impairment. Due to the decline in demand for our drilling services and low rig utilisation rates, the Company reviewed specific assets for impairment. As a result of this exercise, the Company recorded an impairment loss at 31 December 2016 and 31 December 2015 of $878 thousand and $1.3 million respectively on property, plant and equipment. The Company also assesses the recoverability of its assets across CGU’s. As a result of this process, the Company recorded no additional impairment losses at 31 December 31 2016 and $35.5 million at 31 December 2015. See Note 18 for details of other assumptions used as part of this impairment testing.

 101

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

18. GOODWILL AND OTHER ASSET IMPAIRMENT CONSIDERATIONS

Goodwill resulting from business combinations is recognised as an asset at the date that control is acquired. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the previously held equity interest in the acquiree (if any) over the net amounts of the identifiable assets acquired and the liabilities assumed.

Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Company’s cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the carrying value of the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Upon disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Goodwill, intangible assets and property, plant and equipment

The Company determines whether goodwill is impaired on an annual basis and assesses impairment of all other assets at each reporting date by evaluating whether indicators of impairment exist. This evaluation includes consideration of the market conditions specific to the industry in which the group operates, the decline in demand for our drilling services and low rig utilisation rates, the political environment in countries in which the group operates, technological changes, expectations in relation to future cash flows and the Company’s market capitalisation. Where an indication of impairment exists the recoverable amount of the asset is determined. Recoverable amount is the greater of fair value less costs to sell and value in use. Impairment is considered for individual assets, or cash generating units (CGU). Judgments are made in determining appropriate cash generating units. When considering whether impairments exist at a CGU, the Company uses the value in use methodology.

The value in use calculation requires the Company to estimate the future cash flows expected to arise from a cash-generating unit and a suitable discount rate in order to calculate present value. These estimates are subject to risk and uncertainty; hence there is a possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets.

See below for details relating to expenses arising as a result of the impairment process and a description of the key assumptions made.

	US$'000
Gross carrying amount:
Balance at 1 January 2015		102,471
Currency movements		(2,813	)
Balance at 31 December 2015		99,658
Balance at 1 January 2016		99,658
Currency movements		378
Balance at 31 December 2016		100,036

Goodwill by cash-generating units

For purposes of impairment testing, goodwill is included in cash-generating units that are significant individually or in aggregate. The carrying amount of goodwill of $100.0 million as at 31 December 2016 and $99.7 million as at 31 December 2015 was in the North America Drilling Services CGU.

The carrying amount of goodwill is tested for impairment annually at 31 October and whenever there is an indicator that the asset may be impaired. If goodwill is impaired, it is written down to its recoverable amount. Due to potential indicators of impairment at both the 30 June 2016 and 31 December 2016 reporting periods, the company performed impairment testing at those dates.

 102

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

18. GOODWILL AND OTHER ASSET IMPAIRMENT CONSIDERATIONS (CONTINUED)

Goodwill impairment by cash-generating units

Goodwill and intangible assets in the EMEA, Latin America and Asia Pacific Drilling Services CGUs have been fully impaired. For the cash-generating units with remaining goodwill and intangible assets, being the North America Drilling Services CGU, the Company performed a goodwill impairment test at 31 December 2016 and the recoverable amount for the North America Drilling Services CGU exceeded the goodwill carrying amount. Consequently, no goodwill impairments were recorded for the year ended 31 December 2016.

Impairment Process

In performing its impairment analysis the Company takes the following approach:

• Assets are first considered individually to determine whether there is any impairment related to specific assets due to factors such as technical obsolescence, declining market value, physical condition or saleability within a reasonable timeframe.

• The Company also assesses the recoverability of its assets collectively across CGUs, where assets are not fully covered by the individual analysis above. In assessing the appropriate CGUs to test the Company takes the following approach:

o Whilst not operating its full asset pool on an individual country basis, where goodwill exists the Company assesses the recoverability of goodwill within the region in which the original acquisition generating the goodwill was incurred;

o For the Global Drilling Services segment, as the Company operates the business on a regional basis and the primary assets being rigs and associated equipment and inventory, are considered to be mobile between countries within a region, the Company assesses for impairment at a regional CGU level.

As a result of the impairment process set out above, the Company recorded an impairment charge of $279 thousand as at 31 December 2016 (2015: $36.8 million impairment charge for property, plant and equipment).

Key assumptions

Certain key assumptions are used for CGU impairment testing and are described below.

In its impairment assessment, the Company calculates the recoverable amounts based on value-in-use calculations. Cash flow projections are based on the Company’s expected performance over a nine-year period, which approximates the length of a typical mining business cycle based on historical industry experience, with a terminal value. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects the current market assessments of the time value of money and risks specific to the asset. The post-tax discount rate is applied to post tax cash flows that include an allowance for tax based on the respective jurisdictions’ tax rate. No allowance is made for existing timing differences or carry-forward losses.

This method is used to approximate the requirement of the accounting standards to apply a pre-tax discount rate to pre-tax cash flows as the Company determined it was not feasible to calculate a stand-alone pre-tax discount rate.

As noted above cash flow projections are based on the Company’s expected performance over a nine-year period, which approximates the length of a typical mining business cycle based on historical industry experience, with a terminal value. Central to the approach adopted is the assumption that the mining industry will continue to follow its historical trend of cycles and that we are currently at or near the bottom of the current cycle.

In considering the appropriateness of the assumptions used in the value in use analysis, the Company has considered the fact that the implied enterprise value implicit in its market capitalisation is below its internal models. This factor is one of many indicators of impairment that the Company has considered.

 103

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

18. GOODWILL AND OTHER ASSET IMPAIRMENT CONSIDERATIONS (CONTINUED)

Revenue - Global Drilling Services

In determining the growth rates applied to revenue through the mining cycle, we have had regard to the following:

• Average revenue growth over previous mining cycles, with revenue in the forecast period and terminal year based on the average actual revenue in the last five years.

• Rates of inflation in the countries where the Company does business (sourced from Bloomberg and Damodaran).

• Price and volume expectations over the forecast period.

Revenue - Global Products

Revenue for the Global Products CGU (manufacturing facilities) has been determined based on current production levels with revenue assumed to grow at 5% each year in the forecast period.

Expenses

In determining gross margin and SG&A expenses management has used historical performance trends, overlaying the impacts of recent programs and other initiatives already taken within the business to reduce costs.

Working capital and capital expenditure

Working capital and capital expenditure assumptions are assumed to be in line with historic trends given the level of utilisation and operating activity.

Discount rate and terminal growth rate

A global discount rate of 11.5% is used and adjusted on a case-by-case basis for regional variations in the required equity rate of return. Based on information published by Bloomberg, the adjusted post-tax discount rates ranged from 10.5% to 27.1%, as shown in the table below. The terminal growth rate does not exceed the long-term average growth rate for the industry.

	Post-Tax
	Discount			Growth
	Rate			Rate
Global		11.5	%		3.0	%
North America		10.5	%		2.2	%
Asia Pacific		12.1	%		2.8	%
Latin America		12.8	%		7.8	%
EMEA		27.1	%		7.2	%

As part of our impairment analysis we have considered a number of different scenarios that consider the impact on the value-in-use calculations if key assumptions were to vary from those used in the calculations. Whilst a number of our scenarios did not show any impairment, if revenue and gross margins for each region and manufacturing facility do not improve as forecast in our impairment analysis due to lower than expected price and volume recovery⁽¹⁾ and the Company is unable to adjust its cost structure, there would be impairments as follows:

	US$'000
North America		15,168
Asia Pacific		16,890
Latin America		12,001
Plants		9,697

(1) For the purposes of our sensitivity analysis, we have assumed that revenue is on average 3.0% lower than forecast and gross margin is on average 5.0% lower than forecast.

 104

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

19. OTHER INTANGIBLE ASSETS

Trademarks and trade names

Trademarks and trade names recognised by the Company that are considered to have indefinite useful lives are not amortised. Each period, the useful life of each of these assets is reviewed to determine whether events and circumstances continue to support an indefinite useful life assessment for the asset. Trademarks and trade names that are considered to have a finite useful life are carried at cost less accumulated amortisation and accumulated impairment losses and have an average useful life of three years. Such assets are tested for impairment at least annually or more frequently if events or circumstances indicate that the asset might be impaired.

Contractual customer relationships

Contractual customer relationships acquired in business combinations are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be reliably measured. Contractual customer relationships have finite useful lives and are carried at cost less accumulated amortisation and accumulated impairment losses.

Contractual customer relationships are amortised over 10-15 years on a straight-line basis. Amortisation methods and useful lives are reassessed at each reporting date.

Patents

Patents are measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is charged on a straight-line basis over estimated useful lives of 10 - 20 years. Amortisation methods and useful lives are reassessed at each reporting date.

Research and development costs

Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognised in profit or loss when incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development costs are capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Capitalised costs include the cost of materials, direct labour and overhead costs directly attributable to preparing the asset for its intended use. Other development costs are expensed when incurred.

Capitalised development costs are measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over the estimated useful lives, which on average is 15 years.

 105

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

19. OTHER INTANGIBLE ASSETS (CONTINUED)

							Customer
							relationships						Development
	Trademarks			Patents			and other			Software			assets			Total
	US$'000			US$'000			US$'000			US$'000			US$'000			US$'000
Gross carrying amount:
Balance at 1 January 2015		4,224			5,724			50,078			87,307			49,622			196,955
Additions		29			1,186			-			87			659			1,961
Disposals		-			(660	)		-			-			(70	)		(730	)
Transfer to PP&E		-			-			-			-			(6,037	)		(6,037	)
Currency movements		-			-			(3,403	)		77			(234	)		(3,560	)
Balance at 31 December 2015		4,253			6,250			46,675			87,471			43,940			188,589
Balance at 1 January 2016		4,253			6,250			46,675			87,471			43,940			188,589
Additions		40			891			-			1,626			362			2,919
Disposals		-			(4	)		-			(5	)		(164	)		(173	)
Transfer from PP&E		-			-			-			-			1,536			1,536
Currency movements		-			-			(146	)		19			71			(56	)
Balance at 31 December 2016		4,293			7,137			46,529			89,111			45,745			192,815
Accumulated amortisation:
Balance at 1 January 2015		(1,270	)		(737	)		(39,176	)		(51,544	)		(26,960	)		(119,687	)
Amortisation for the period		-			(378	)		(1,634	)		(14,632	)		(1,040	)		(17,684	)
Disposals		-			661			-			-			-			661
Impairment for the period		-			(571	)		-			-			-			(571	)
Currency movements		-			-			3,105			(8	)		(1	)		3,096
Balance at 31 December 2015		(1,270	)		(1,025	)		(37,705	)		(66,184	)		(28,001	)		(134,185	)
Balance at 1 January 2016		(1,270	)		(1,025	)		(37,705	)		(66,184	)		(28,001	)		(134,185	)
Amortisation for the period		-			(488	)		(1,609	)		(10,653	)		(1,162	)		(13,912	)
Disposals		-			-			-			-			143			143
Impairment for the period		-			-			-			-			(1,170	)		(1,170	)
Currency movements		-			-			238			(9	)		-			229
Balance at 31 December 2016		(1,270	)		(1,513	)		(39,076	)		(76,846	)		(30,190	)		(148,895	)
Net book value at 31 December 2015		2,983			5,225			8,970			21,287			15,939			54,404
Net book value at 31 December 2016		3,023			5,624			7,453			12,265			15,555			43,920

Other intangible assets are reviewed at each reporting date to determine whether there is any indication of impairment. As a result of the Company’s review of specific intangible assets, an impairment of $1.2 million was recorded at 31 December 2016. Based upon the impairment analysis performed at 31 December 2015 the Company recognised an intangible asset impairment loss of $571 thousand due to the most recent financial performance of various cash-generating units as well as the expected financial performance of the business at that time. In its impairment assessment, the Company assumes the recoverable amount based on a value-in-use calculation. Cash flow projections are based on the Company’s three-year strategic plan and financial forecasts over a nine-year period, which approximates the length of a typical business cycle based on historical industry experience, with a terminal value. See Note 18 for details of other assumptions used as part of this impairment testing.

The Company has reassessed the carrying value of certain development assets relating to its Global Products business. The 31 December 2016 review did not lead to an impairment for that period.

The Company recognised $1.1 million of research and development expenses in the consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2016 (2015: $7.8 million).

 106

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

20. TRADE AND OTHER PAYABLES

Trade payables and other payables are carried at amortised cost. They represent unsecured liabilities for goods and services provided to the Company prior to the end of the financial period that are unpaid and arise when the Company becomes obligated to make future payments.

	2016		2015
	US$'000		US$'000
Current
Trade payables		55,082		59,475
Accrued payroll and benefits		24,000		30,383
Accrued recapitalision costs		4,150		-
Goods and services tax payable		1 1,128		15,452
Accrued interest		10,036		10,106
Accrued legal and environmental		1,866		5,988
Professional fees		7,351		5,507
Accrued drilling costs		2,798		3,211
Other sundry payables and accruals		10,178		14,919
		126,589		145,041

The average credit period on purchases of certain goods is 37 days (2015: 31 days). No interest is charged on the trade payables for this period. Thereafter, various percentages of interest may be charged on the outstanding balance based on the terms of the specific contracts. The Company has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

Goods and services tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except:

• where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

• for receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.

 107

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

21. LOANS AND BORROWINGS

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. Debt issuance costs are amortised using the effective interest rate method over the life of the borrowing. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

	2016			2015
Unsecured - at amortised cost	US$'000			US$'000
Non-current
Senior notes		284,000			284,000
Debt issuance costs		(2,473	)		(3,055	)
Secured - at amortised cost
Current
Finance lease liabilities		140			51
Non-current
Senior notes		195,000			195,000
Term loans		190,000			190,000
Accreted interest		53,779			28,361
Revolver bank loans		17,566			-
Debt issuance costs		(3,380	)		(4,780	)
Finance lease liabilities		495			206
		735,127			689,783
Disclosed in the financial statements as:
Current borrowings		140			51
Non-current borrowings		734,987			689,732
		735,127			689,783
A summary of the maturity of the Company's borrowings is as follows:
Less than 1 year		140			51
Between 1 and 2 years		328,576			51
Between 2 and 3 years		156			314,494
Between 3 and 4 years		128,068			51
More than 4 years		284,040			382,971
		740,980			697,618
Debt issuance costs		(5,853	)		(7,835	)
		735,127			689,783

 108

Notes to the Consolidated Financial Statements
For the financial year ended 31 December 2016	BOART LONGYEAR LIMITED

21. LOANS AND BORROWINGS (CONTINUED)

Senior notes

Senior Unsecured Notes

The Company has $284.0 million of senior unsecured notes outstanding at 31 December 2016 and 31 December 2015. These notes carry an interest rate of 7% with a scheduled maturity date of 1 April 2021. The Company may redeem all or a portion of the notes prior to maturity subject to certain conditions, including in certain cases the payment of premiums or make-whole amounts.

Senior Secured Notes

The Company has $195.0 million of senior secured notes outstanding at 31 December 2016 and 2015. These notes carry an interest rate of 10% with a scheduled maturity date of 1 October 2018. The Company may redeem all or a portion of the notes prior to maturity subject to certain conditions, including in certain cases the payment of premiums or make-whole amounts.

Bank Credit Facility

The Company has an asset-based, revolving bank credit facility (the “ABL”) that provides up to $40.0 million of capacity for loans or other purposes such as letters of credit. As at 31 December 2016 there was $17.6 million outstanding under this facility. In addition, there were outstanding letters of credit totalling $11.9 million that reduced the amount available to draw under the ABL commitments. As at 31 December 2015 there was no drawdown under this facility; however, there were outstanding letters of credit totalling $11.4 million that reduced the amounts available to draw under the ABL commitments. Interest rates on usage/drawings (we pay this on letters of credit which are not “borrowings”) are based on a base rate plus an applicable margin. The base rate is generally based on 30-day USD LIBOR, while the margin is determined based on the Company’s leverage according to a pricing grid. As at 31 December 2016 the applicable margin was 3.5% for LIBOR-based loans.

The ABL facility is secured by a first lien on the accounts receivable, inventories, deposit accounts and cash (“Working Capital Assets”) of the ABL borrower and guarantors and a third lien on substantially all of the other tangible and intangible assets (“Non-Working Capital Assets”) of the ABL borrower and guarantors, including equipment, intellectual property and the capital stock of subsidiaries (but excluding real property). Provisions in the facility currently restrict availability by $5.0 million until the Company maintains an unadjusted fixed charge coverage ratio of at least 1.0:1.0 for four consecutive quarters. Provisions also require that $5.0 million of cash be held in a restricted bank account with the lender until the Company maintains an unadjusted fixed charge coverage ratio of at least 1.0:1.0 for two consecutive quarters, at which time the restricted cash shall be released. Following release of the restricted cash, but only to the extent that less than $7.5 million of excess availability exists under the facility, the facility triggers a requirement to maintain an unadjusted fixed charge coverage ratio of not less than 1.1:1.0. Scheduled maturity is the earliest of (i) 90 days prior to maturity of senior secured notes (or any Indebtedness refinancing the security) (ii) 90 days prior to maturity of Tranche A of the Term Loan (or any Indebtedness refinancing the security) (iii) 90 days prior to maturity of Tranche B of the Term Loan (or any Indebtedness refinancing the maturity of the security) and (iv) 29 May 2020. Guarantors for the term loans are Boart Longyear Limited, Boart Longyear Canada, Boart Longyear Australia Pty Ltd, and Boart Longyear Company with the Issuer being Boart Longyear Management Pty Ltd.

Term Loans

The Company has a term loan facility which is structured as Tranche A and Tranche B loans. The term loan has an interest rate of 12% per annum, which would be reduced to 11 % per annum if the Company’s trailing 12 month adjusted EBITDA is greater than $200.0 million. The term loan tranches are structured to accrete interest, which is payable to the term loan lender, Centerbridge Partners, L.P., a related party, and which is guaranteed by an unrestricted subsidiary funded with intangible assets not to exceed $44.0 million.

Tranche A

Upon obtaining the ABL revolving credit facility on 1 June 2015, $35.0 million of Tranche A was repaid resulting in an outstanding principal balance of $85.0 million as at 31 December 2016. This tranche contains a maturity of 22 October 2020 and is non-callable for the first 4 years. It is secured by a first lien on the Working Capital Assets of the Term Loan A guarantors that are not ABL guarantors, a second lien on the Working Capital assets of the Term Loan A issuer and the Term Loan A guarantors that are also ABL guarantors, and a second lien on substantially all of the Non-Working Capital Assets of the Term Loan A issuer and guarantors, including equipment, intellectual property, the capital stock of subsidiaries and certain owned real property.

 109

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

21. LOANS AND BORROWINGS (CONTINUED)

Tranche B

As at 31 December 2016 the amount outstanding under Tranche B was $105.0 million. This tranche contains a maturity of 1 October, 2018 and is non-callable for the life of the loan. It is secured by a second lien on the Working Capital Assets of the Term Loan B and 10% Secured Notes guarantors that are not ABL guarantors, a third lien on the Working Capital Assets of the Term Loan B and 10% Secured Notes issuer and the Term Loan B and 10% Secured Notes guarantors that are also ABL guarantors, and a first lien on substantially all of the Non-Working Capital Assets of the Term Loan B and 10% Secured Notes issuer and guarantors, including equipment, intellectual property, the capital stock of subsidiaries and certain owned real property.

Covenants and other material items – bank credit facility and senior notes

The Company’s ABL term loans do not require maintenance or testing of financial covenant ratios.

With respect to the senior notes issued by the Company, the indenture governing those senior notes includes covenants that restrict the Company’s ability to engage in certain activities, including incurring additional indebtedness and making certain restricted payments as well as a limitation on the amount of secured debt the Company may incur. The senior notes contain certain provisions that provide the note holders with the ability to declare a default, and accelerate the notes, should a default occur under either of the Term Loans that results in acceleration of such Term Loans. The senior notes do not require maintenance or testing of financial covenant ratios.

The Company’s ABL includes a covenant that is triggered following release of the restricted cash, but only to the extent that less than $7.5 million of excess availability exists under the facility. If triggered, the Company is required to maintain an unadjusted fixed charge coverage ratio of not less than 1.1:1.0.

As at 31 December 2016 the Company was in compliance will all of its debt covenants.

 110

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

21. LOANS AND BORROWINGS (CONTINUED)

Covenants and other material items – bank credit facility and senior notes (continued)

Further details around the Issuer/Borrower and Guarantors of the Company’s debt instruments are included below:

Description	Issuer/Borrower	Guarantors
Senior Secured Notes	Boart Longyear Management Pty Limited	Australia: Boart Longyear Australia Pty Limited, Boart Longyear Limited and Votraint No. 1609 Pty Limited
		Canada: Boart Longyear Canada, Boart Longyear Manufacturing Canada Ltd. And Longyear Canada ULC
		Chile: Boart Longyear Chile Limitada and Boart Longyear Commercializadora Limitada
		Peru: Boart Longyear S.A.C.
		Switzerland: Boart Longyear Suisse Sari
		United States: Boart Longyear Company, Boart Longyear Manufacturing and Distribution Inc., Longyear Holdings, Inc. and Longyear TM, Inc.
Term Loan – tranche B1	Same as Senior Secured Notes	Same as Term Loan tranche A
ABL	Same as Senior Secured Notes	Australia: Boart Longyear Australia Pty Limited, Boart Longyear Limited
		Canada: Boart Longyear Canada
		United States: Boart Longyear Company
Term Loan – tranche A1	Same as Senior Secured Notes	Australia: Boart Longyear Australia Pty Limited, Boart Longyear Limited and Votraint No. 1609 Pty Limited
		Canada: Boart Longyear Canada, Boart Longyear Manufacturing Canada Ltd. And Longyear Canada ULC
		Chile: Boart Longyear Chile Limitada and Boart Longyear Commercializadora Limitada
		Peru: Boart Longyear S.A.C.
		Switzerland: Boart Longyear Suisse Sari
		United States: Boart Longyear Company, Boart Longyear Manufacturing USA, Inc.,Longyear Holdings, Inc., BLY IP Inc. and Longyear TM, Inc.
Senior Unsecured Notes	Same as Senior Secured Notes	Same as Senior Secured Notes

(1) The Company entered into a $20 million credit facility with Centerbridge Partners L.P. in January 2017, subsequent to the date of the financial statements. The Company and Centerbridge also modified certain terms of Term Loans A and B. See additional disclosure in Note 33.

 111

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

22. PROVISIONS

A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Employee benefits

Liabilities for employee benefits for wages, salaries, annual leave, long service leave, and sick leave represent present obligations resulting from employees’ services provided and are calculated at discounted amounts based on rates that the Company expects to pay as at reporting date, including costs such as workers’ compensation insurance and payroll tax, when it is probable that settlement will be required and they are capable of being reliably measured.

Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Company in respect of services provided by employees up to reporting date.

Non-accumulating non-monetary benefits, such as medical care, housing, cars and free or subsidised goods and services, are expensed based on the net marginal cost to the Company as the benefits are provided to the employees.

Provisions are recognised for amounts expected to be paid under short-term cash bonus or profit-sharing plans if the Company has present legal or constructive obligations to pay these amounts as a result of past service provided by employees and the obligations can be reliably estimated.

Warranties

The Company maintains warranty reserves for products it manufactures. A provision is recognised when the following conditions are met: 1) the Company has an obligation as a result of an implied or contractual warranty; 2) it is probable that an outflow of resources will be required to settle the warranty claims; and 3) the amount of the claims can be reliably estimated.

Onerous contracts

A provision for onerous contracts is recognised when the expected benefits to be derived from a contract are less than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.

The following table reflects the provision balances:

	2016		2015
	US$’000		US$’000
Current
Employee benefits		9,935		13,868
Restructuring and termination costs		590		3,403
Warranty		885		319
Onerous leases		1,604		1,928
		13,014		19,518
Non-current
Employee benefits		1,559		2,040
Pension and post-retirement benefits (Note 23)		22,435		21,315
Onerous leases		1,947		1,617
		25,941		24,972
		38,955		44,490

 112

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

23. PENSION AND POST-RETIREMENT BENEFITS

Defined contribution pension plans and post-retirement benefits

A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The amount recognised as an expense in profit or loss in respect of pension costs and other post-retirement benefits is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the statement of financial position.

Defined contribution plans

Pension costs represent actual contributions paid or payable by the Company to the various plans. At 31 December 2016, and 2015, there were no significant outstanding/prepaid contributions. Company contributions to these plans were $6.5 million and $7.7 million for the years ended 31 December 2016 and 2015, respectively.

The assets of the defined contribution plans are held separately in independently administered funds. The charge in respect of these plans is calculated on the basis of contributions payable by the Company during the fiscal year.

Defined Benefit Pension Plans

The Company’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any fund assets is deducted.

The discount rate is the yield at the balance sheet date on high quality corporate bonds that have maturity dates approximating the terms of the Company’s defined benefit obligations. The calculation is performed by a qualified actuary using the projected unit credit method. Actuarial gains and losses arising from experience adjustments and related changes in actuarial assumptions are charged or credited to retained earnings.

The Company provides defined contribution and defined benefit pension plans for the majority of its employees. It also provides post-retirement medical arrangements in North America.

The Company’s accounting policy for defined benefit pension plans requires management to make annual estimates and assumptions about future returns on classes of assets, future remuneration changes, employee attrition rates, administration costs, changes in benefits, inflation rates, exchange rates, life expectancy and expected remaining periods of service of employees. In making these estimates and assumptions, management considers advice provided by external advisers, such as actuaries. Where actual experience differs to these estimates, actuarial gains and losses are recognised directly in equity.

Full actuarial valuations of the defined benefit pension plans were performed as at various dates and updated to 31 December 2016 by qualified independent actuaries. The estimated market value of the assets of the funded pension plans was $185.5 million and $180.5 million at 31 December 2016, and 2015, respectively. The market value of assets was used to determine the funding level of the plans. The market value of the assets of the funded plans was sufficient to cover 90% in 2016 and 2015, of the benefits that had accrued to participants after allowing for expected increases in future earnings and pensions. Entities within the Company are paying contributions as required by statutory requirements and in accordance with local actuarial advice.

The majority of the defined benefit pension plans are funded in accordance with minimum funding requirements by local regulators. The assets of these plans are held separately from those of the Company, in independently administered funds, in accordance with statutory requirements or local practice throughout the world.

The majority of the defined benefit pension plans are closed to new participants. Under the projected unit credit method, service cost will increase as the participant ages until retirement when it goes to zero. In addition, changes to the discount rate can increase or decrease service cost.

 113

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

23. PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)

Defined Benefit Pension Plans (Continued)

Company contributions to these plans were $6.8 million and $7.0 million during the years ended 31 December 2016 and 2015, respectively. Contributions in 2017 are expected to be $10.1 million.

The principal assumptions used to determine the actuarial present value of benefit obligations and pension costs are detailed below (shown in weighted averages):

	2016						2015
	North						North
	America			Europe			America			Europe
Discount rates		4.0	%		1.4	%		4.3	%		2.2	%
Expected Average Rate Increases:
Salaries		3.5	%		3.0	%		3.5	%		3.5	%
Pensions in payment		-			1.5	%		-			1.6	%
Healthcare costs (initial)		5.0	%		-			5.0	%		-
Healthcare costs (ultimate)		5.0	%		-			5.0	%		-

Amounts recognised in profit or loss in respect of these defined benefit plans are as follows:

	2016								2015
				Post-								Post-
	Pension			retirement					Pension			retirement
	Plan			medical Plan		Total			Plan			medical Plan		Total
	US$’000			US$’000		US$’000			US$’000			US$’000		US$’000
Current service cost		1,173			-		1,173			1,372			-		1,372
Net interest expense		669			13		682			1,006			15		1,021
Past service cost		(518	)		-		(518	)		(49	)		-		(49	)
Total charge to profit and loss account		1,324			13		1,337			2,329			15		2,344

For the financial years ended 31 December 2016 and 2015, charges of approximately $1.1 million and $1.8 million, respectively, have been included in cost of goods sold and the remainder in general and administrative or sales and marketing expenses.

 114

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

23. PENSION AND POST-RETIREMENT BENEFITS (CONTINUED)

Changes in the present value of the defined benefit obligations were as follows:

	2016									2015
				Post-									Post-
	Pension			retirement						Pension			retirement
	Plan			Medical Plan			Total			Plan			Medical Plan			Total
	US$’000			US$’000			US$’000			US$’000			US$’000			US$’000
Opening defined benefit obligation		201,488			356			201,844			238,258			476			238,734
Current service cost		1,173			-			1,173			1,372			-			1,372
Interest cost		7,049			13			7,062			7,115			15			7,130
Actuarial gains arising from demographic assumptions		(802	)		-			(802	)		(4,192	)		-			(4,192	)
Actuarial losses (gains) arising from financial assumptions		10,925			5			10,930			(6,507	)		-			(6,507	)
Assets distributed on settlements		-			-			-			-			-			-
Past service cost		(518	)		-			(518	)		(49	)		-			(49	)
Exchange differences on foreign plans		(1,145	)		10			(1,135	)		(23,465	)		(73	)		(23,538	)
Benefits paid		(10,517	)		(60	)		(10,577	)		(11,044	)		(62	)		(11,106	)
Closing defined benefit obligation		207,653			324			207,977			201,488			356			201,844

Changes in the fair value of the plan assets were as follows:

	2016									2015
				Post-									Post-
	Pension			retirement						Pension			retirement
	Plan			Medical Plan			Total			Plan			Medical Plan			Total
	US$’000			US$’000			US$’000			US$’000			US$’000			US$’000
Opening fair value plan of assets		180,529			-			180,529			200,405			-			200,405
Expected return on plan assets		6,380			-			6,380			6,108			-			6,108
Actuarial gains arising from financial assumptions		4,079			-			4,079			257			-			257
Administrative expenses paid from the trust		(1,028	)		-			(1,028	)		(1,024	)		-			(1,024	)
Exchange differences on foreign plans		(729	)		-			(729	)		(21,157	)		-			(21,157	)
Contributions from the employer		6,828			60			6,888			6,984			62			7,046
Benefits paid		(10,517	)		(60	)		(10,577	)		(11,044	)		(62	)		(11,106	)
Closing fair value of plan assets		185,542			-			185,542			180,529			-			180,529

Assumed healthcare cost trend rates impact the amounts recognised in profit or loss. A one percentage point change in assumed healthcare cost trend rates would have the following effects:

	2016			2015
	US$’000			US$’000
One percentage point increase
Effect on the aggregate of the service cost and interest cost		-			-
Effect on accumulated post-employment benefit obligation		7			8
One percentage point decrease
Effect on the aggregate of the service cost and interest cost		-			-
Effect on accumulated post-employment benefit obligation		(7	)		(8	)

 115

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

24. ISSUED CAPITAL

	2016						2015
	Shares						Shares
	’000			US$’000			’000			US$’000
Ordinary shares
Share capital
Ordinary shares, fully paid		940,585			1,204,291			929,062			1,202,924
Movements in ordinary shares
Balance at beginning of year		929,062			1,202,924			634,065			1,159,069
Issued to Directors		11,243			717			-			-
Issued under capital raising program1		-			-			293,374			40,225
Vesting of LTIP rights, restricted shares		2,209			650			3,950			3,816
Purchase of shares for LTIP		(1,929	)		-	2		(2,327	)		(186	)
Balance at end of the year		940,585			1,204,291			929,062			1,202,924
Total shares outstanding		942,108			1,204,622			930,865			1,204,355
Shares held in trust		(1,523	)		(331	)		(1,803	)		(1,431	)
Balance at end of the year		940,585			1,204,291			929,062			1,202,924

	2016				2015
	Shares				Shares
	’000		US$’000		’000		US$’000
Convertible Preference shares
Share capital
Preferred shares, fully paid		434,002		59,507		434,002		59,507
Balance at end of the year		434,002		59,507		434,002		59,507
Total ordinary and convertible preference shares				1,263,798				1,262,431

(1) Issued under capital raising program. Centerbridge Partners, L.P. received, in lieu of any ordinary shares it would have otherwise received, 434,002 non-voting preference shares that are convertible into ordinary shares at the ratio of one-to-one (subject to customary adjustments). Centerbridge may not convert the preference shares to the extent the conversion would result in Centerbridge beneficially acquiring in excess of 49.9% of the voting power of the Company’s voting stock.

(2) The Company purchased 1,928,806 shares of the Company’s stock with accumulated dividends held within the trust and accordingly, there is no cost associated with this purchase.

Transaction costs on the issue of equity instruments

Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

25. DIVIDENDS

No dividend has been determined for any of the half-years ended 30 June 2016, 31 December 2016, 30 June 2015 or 31 December 2015.

There are no franking credits available for the years ended 31 December 2016 or 2015.

 116

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

26. COMMITMENTS FOR EXPENDITURE

The Company has a number of continuing operational and financial commitments in the normal course of business.

	2016		2015
	US$’000		US$’000
Capital commitments
Purchase commitments for capital expenditures		2,030		1,398

Non-cancellable future operating lease commitments as at 31 December 2016 and 2015 consist of the following:

	31 December 2016				31 December 2015
	Land and		Plant and		Land and		Plant and
	buildings		equipment		buildings		equipment
	US$’000		US$’000		US$’000		US$’000
Payments due within:
1 year		10,476		628		8,283		1,773
2 to 5 years		14,999		931		14,550		314
After 5 years		19,333		-		1,476		-
		44,808		1,559		24,309		2,087

Description of operating leases

The Company has operating leases for land, buildings, plant and equipment with the following lease terms:

· 1–30 years for land and buildings with an average lease term of six years

· 1–7 years for machinery and equipment with an average lease term of five years

· 1–7 years for all other property with an average lease term of five years

The Company’s property operating leases generally contain escalation clauses, which are fixed increases generally between 3% and 9%, or increase subject to a national index. The Company does not have any significant purchase options.

Contingent rental payments exist for certain pieces of equipment and are not significant compared with total rental payments. These are based on excess wear and tear and excess use.

 117

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

27. CONTINGENT LIABILITIES

The recognition of provisions for legal disputes is subject to a significant degree of judgment. Provisions are established when (a) the Company has a present legal or constructive obligation as a result of past events, (b) it is probable that an outflow of resources will be required to settle the obligation, and (c) the amount of that outflow has been reliably estimated.

Letters of credit

Standby letters of credit primarily issued in support of commitments or other obligations as at 31 December 2016 are as follows:

		Expiration	Amount
Subsidiary	Purpose	Date	US $’000
Australia	Secure a facility rental	September 2017		572
United States	Secure workers compensation program	January 2017		300
United States	Secure a performance bond	June 2017		11,000
				11,872

Financial guarantee contract liabilities are measured initially at their fair values and subsequently at the higher of the amount recognised as a provision or the amount initially recognised less cumulative amortisation in accordance with the revenue recognition policies described in Note 3.

A summary of the maturity of issued letters of credit is as follows:

	2016		2015
	US$’000		US$’000
Less than 1 year		11,872		11,996

Guarantees

The subsidiaries of the Company provide guarantees within the normal course of business which includes payment guarantees to cover import duties, taxes, performance and completion of contracts. In addition, the Parent and certain subsidiaries are guarantors on the Company’s loans and borrowings. See Note 21.

Legal contingencies

The Company is subject to certain routine legal proceedings that arise in the normal course of its business. Management believes that the ultimate amount of liability, if any, for any pending claims of any type (either alone or combined) will not materially affect the Company’s operations, liquidity, or financial position taken as a whole. However, the ultimate outcome of any litigation is uncertain, and unfavourable outcomes could have a material adverse impact.

Tax and customs audits

The Company is subject to certain tax and customs audits that arise in the normal course of its business. Management believes that the ultimate amount of liability, if any, for any pending assessments (either alone or combined) would not materially affect the Company’s operations, liquidity, or financial position taken as a whole. However, the ultimate outcome of these audits is uncertain and unfavourable outcomes could have a material adverse impact. See additional disclosure in Note 11.

 118

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

27. CONTINGENT LIABILITIES (CONTINUED)

Other contingencies

Other contingent liabilities as at 31 December 2016 and 2015 consist of the following:

	2016		2015
	US$’000		US$’000
Contingent liabilities
Guarantees/counter-guarantees to outside parties		4,495		3,939

Except as detailed in the following table, the carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Company’s maximum exposure to credit risk without taking account of the value of any collateral obtained. See Note 15.

	Maximum credit risk
	2016		2015
Financial assets and other credit exposure	US$’000		US$’000
Performance guarantees provided, including letters of credit		16,367		15,935

 119

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

28. PARENT ENTITY DISCLOSURES

Financial position

	2016			2015
	US$’000			US$’000
Assets
Current assets		311,312			360,993
Non-current assets		-			-
Total assets		311,312			360,993
Liabilities
Current liabilities		56,026			81,046
Non-current liabilities		254,515			127,373
Total liabilities		310,541			208,419
Net Assets		771			152,574
Equity
Issued capital		3,015,893			3,015,332
Reserves		11,690			8,571
Accumulated losses		(3,026,812	)		(2,871,329	)
Total equity		771			152,574

Financial performance

	2016			2015
	US$’000			US$’000
Loss for the year		(155,483	)		(237,161	)
Total comprehensive loss		(155,483	)		(237,161	)

During the years ended 31 December 2016 and 2015, Boart Longyear Limited recorded a provision against intercompany accounts of $253.1 million and $307.8 million, respectively. This provision has no impact on the consolidated financial statements.

Guarantees entered into by the parent entity in relation to debts of its subsidiaries

Other guarantees are described in Note 27.

Contingent liabilities

As at 31 December 2016 and 2015, Boart Longyear Limited did not have any contingent liabilities.

Contractual obligations

As at 31 December 2016 and 2015, Boart Longyear Limited did not have any contractual obligations.

Guarantees entered into by the parent entity in relation to debts of its subsidiaries

The Parent has entered into agreements with the Canada Revenue Agency and Ministry of Finance for the province of Ontario to guarantee the payment of all amounts finally determined to be due and payable by its Canadian affiliates in respect of contested tax assessments for the tax years from 2007 through 2012. See Note 11. Other guarantees are described in Note 27.

 120

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

29. COMPANY SUBSIDIARIES

The Company’s percentage ownership of the principal subsidiaries are as follows:

	Country of		31 Dec	31 Dec
Subsidiaries	incorporation	Business	2016	2015
A.C.N. 066 301 531 Pty Ltd2	Australia	Dormant	100	100
Aqua Drilling & Grouting Pty Ltd.2	Australia	Dormant	100	100
BL Canada DDL Inc.	Canada	Holding Company	100	-
BL Canada Holdings Inc.	Canada	Holding Company	100	-
BL DDL Holdings Pty Ltd	Australia	Holding Company	100	-
BL DDL II Holdings Pty Ltd	Australia	Holding Company	100	-
BL DDL US Holdings Inc.	USA	Holding Company	100	-
BLI Zambia Ltd.	Zambia	Drilling Services	100	100
BLY Cote d’Ivoire S.A.	Ivory Coast	Drilling Services	100	100
BLY EMEA UK Holdings Ltd.	United Kingdom	Holding Company	100	100
BLY Gabon S.A.	Gabon	Drilling Services	100	100
BLY Ghana Limited	Ghana	Drilling Services	100	100
BLY Guinea S.A.2	Guinea	Dormant	100	100
BLY IP Inc.	USA	Holding Company	100	100
BLY Madagascar S.A.	Madagascar	Drilling Services	100	100
BLY Mali S.A.	Mali	Drilling Services	100	100
BLY Mexico Servicios S.A. de C.V.2	Mexico	Dormant	100	100
BLY Senegal S.A.	Senegal	Drilling Services	100	100
BLY Sierra Leone Ltd.	Sierra Leone	Drilling Services	100	100
Boart Longyear (Cambodia) Ltd.	Cambodia	Drilling Services	100	100
Boart Longyear (D.R.C.) S.A.	Dem. Rep. of Congo	Drilling Services	100	100
Boart Longyear (Holdings) Ltd.1	United Kingdom	Dormant	-	100
Boart Longyear (Hong Kong) Limited1	Hong Kong	Dormant	-	100
Boart Longyear (NZ) Limited	New Zealand	Drilling Services	100	100
Boart Longyear (Vic) No. 1 Pty Ltd	Australia	Holding Company	100	100
Boart Longyear (Vic) No. 2 Pty Ltd	Australia	Holding Company	100	100
Boart Longyear Alberta Limited	Canada	Holding Company	100	100
Boart Longyear Argentina S.A.	Argentina	Drilling Services	100	100
Boart Longyear Australia Holdings Pty Limited	Australia	Holding Company	100	100
Boart Longyear Australia Pty Ltd	Australia	Drilling Services	100	100
Boart Longyear Bermuda Limited2	Bermuda	Holding Company	100	100
Boart Longyear Burkina Faso Sarl	Burkina Faso	Drilling Services	100	100
Boart Longyear B.V.	Netherlands	Drilling Products	100	100
Boart Longyear Canada	Canada	Drilling Products and Services	100	100
Boart Longyear Chile Limitada	Chile	Drilling Products and Services	100	100
Boart Longyear Colombia S.A.S.	Colombia	Drilling Services	100	100
Boart Longyear Comercializadora Limitada	Chile	Drilling Products	100	100
Boart Longyear Company	USA	Drilling Products and Services	100	100
Boart Longyear Consolidated Holdings, Inc.	USA	Holding Company	100	100
Boart Longyear de Mexico, S.A. de C.V.	Mexico	Drilling Services	100	100
BLY Drilling Services and Products Mexico, S.A. de C.V.2	Mexico	Dormant	100	100
Boart Longyear Drilling Products (Wuxi) Co., Ltd.	China	Drilling Products and Services	100	100
Boart Longyear Drilling Services KZ LLP	Kazakhstan	Drilling Services	100	100
Boart Longyear Eritrea Ltd.	Eritrea	Drilling Services	100	100
Boart Longyear Global Holdco, Inc	USA	Holding Company	100	100
Boart Longyear GmbH & Co., KG	Germany	Drilling Products and Services	100	100
Boart Longyear Holdings (Thailand) Co., Ltd.	Thailand	Drilling Services	100	100
Boart Longyear International B.V.	Netherlands	Holding Company	100	100
Boart Longyear International Holdings, Inc.	USA	Holding Company	100	100
Boart Longyear Investments Pty Ltd	Australia	Holding Company	100	100
Boart Longyear Liberia Corporation	Liberia	Drilling Services	100	100

 121

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

29. COMPANY SUBSIDIARIES (CONTINUED)

Subsidiaries	Country of incorporation	Business	31 Dec 2016	31 Dec 2015
Boart Longyear Limitada	Brazil	Drilling Products	100	100
Boart Longyear Limited	Ireland	Drilling Products	100	100
Boart Longyear Limited	Thailand	Drilling Services	100	100
Boart Longyear LLC	Russia Federation	Drilling Products	100	100
Boart Longyear Management Pty Ltd	Australia	Holding Company	100	100
Boart Longyear Manufacturing Canada Ltd.	Canada	Drilling Products	100	100
Boart Longyear Manufacturing and Distribution Inc.	USA	Drilling Products	100	100
Boart Longyear Netherlands BV	Netherlands	Holding Company	100	100
Boart Longyear Poland Spolka Z.o.o.	Poland	Drilling Products and Services	100	100
Boart Longyear Products KZ LLP	Kazakhstan	Drilling Products	100	100
Boart Longyear RUS	Russia Federation	Drilling Services	100	100
Boart Longyear S.A.C.	Peru	Drilling Products and Services	100	100
Boart Longyear Saudi Arabia LLC2	Saudi Arabia	Drilling Services	100	100
Boart Longyear Sole Co., Limited	Laos	Drilling Services	100	100
Boart Longyear Suisse Sàrl	Switzerland	Holding Company	100	100
Boart Longyear Ventures Inc.	Canada	Holding Company	100	100
Boart Longyear Vermogensverwaltung GmbH	Germany	Holding Company	100	100
Boart Longyear Zambia Limited	Zambia	Drilling Products	100	100
Cooperatief Longyear Holdings UA	Netherlands	Holding Company	100	100
Dongray Industrial Limited 2	United Kingdom	Dormant	100	100
Drillcorp Pty Ltd	Australia	Drilling Services	100	100
Geoserv Pesquisas Geologicas S.A.	Brazil	Drilling Services	100	100
Grimwood Davies Pty Ltd	Australia	Drilling Services	100	100
Inavel S.A.	Uruguay	Drilling Services	100	100
J&T Servicios, S.C.1	Mexico	Dormant	-	100
Longyear Canada, ULC	Canada	Drilling Products	100	100
Longyear Global Holdings, Inc.	USA	Holding Company	100	100
Longyear Holdings New Zealand, Ltd.2	New Zealand	Dormant	100	100
Longyear Holdings, Inc.	USA	Holding Company	100	100
Longyear South Africa (Pty) Ltd	South Africa	Drilling Products and Services	100	100
Longyear TM, Inc.	USA	Holding Company	100	100
North West Drilling Pty Limited2	Australia	Dormant	100	100
P.T. Boart Longyear	Indonesia	Drilling Services	100	100
Patagonia Drill Mining Services S.A.	Argentina	Drilling Services	100	100
Portezuelo S.A.	Paraguay	Drilling Services	100	100
Prosonic Corporation2	USA	Dormant	100	100
Resources Services Holdco, Inc	USA	Holding Company	100	100
Votraint No. 1609 Pty Ltd	Australia	Drilling Services	100	100

(1) This entity was merged, liquidated or dissolved in 2016.

(2) This entity is currently in liquidation status.

30. Related Party Transactions

Transactions with key management personnel

(i) Key management personnel compensation

Details of key management personnel compensation are disclosed in Note 9.

(ii) Other transactions with key management personnel of the Company

None.

 122

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

31. CASH AND CASH EQUIVALENTS

Included in the cash balance at 31 December 2016 is $6.9 million of restricted cash and at 31 December 2015 $7.0 million of restricted cash. The Company cannot access these cash balances until certain conditions are met. These conditions pertain to the Company’s ABL facility as well as restrictions to secure facility leases.

32. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

The Company has adopted all of the new and revised standards and interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. These standards and interpretations are set forth throughout the notes to the financial statements. The adoption of each standard individually did not have a significant impact on the Company’s financial results or consolidated statement of financial position.

Standards and Interpretations issued not yet effective

The accounting standards and AASB Interpretations that will be applicable to the Company and may have an effect in future reporting periods are detailed below. Apart from these standards and interpretations, management has considered other accounting standards that will be applicable in future periods, however they have been considered insignificant to the Company.

Standard/Interpretation	Effective for annual reporting	Expected to be initially applied in
	periods beginning on or after	the financial year ending
-    AASB 9 (2014) ‘Financial instruments’, and the relevant amending standards	1 January 2018	31 December 2018
-    AASB 15 ‘Revenue from Contracts with Customers’ and the relevant amending standards	1 January 2018	31 December 2018
-    AASB 16 ‘Leases’	1 January 2019	31 December 2019

The potential impact of the initial application of the Standards above is yet to be determined.

The following standards are not expected to have a significant impact on the consolidated financial statements:

Standard/Interpretation	Effective for annual reporting	Expected to be initially applied in
	periods beginning on or after	the financial year ending
-    AASB 2016-1 ‘Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses’	1 January 2017	31 December 2017
-    AASB 2016-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107’	1 January 2017	31 December 2017
-    AASB 2016-5 ‘Amendments to Australian Accounting Standards – Classification and Measurement of Share-Based Payment Transactions’	1 January 2018	31 December 2018

 123

Notes to the Consolidated Financial Statements

For the financial year ended 31 December 2016 BOART LONGYEAR LIMITED

33. SUBSEQUENT EVENTS

On 5 January 2017, the Company entered into a $20 million delayed draw term loan (“DDTL”) with Centerbridge Partners L.P. The DDTL has been established to provide additional financial resources to support ongoing restructuring discussions with the Company’s lenders as well as to provide additional working capital in the first quarter of 2017. The Company drew the available $20 million balance on 13 February 2017.

The material terms of the DDTL are, as follows:

• Commitment of $20 million in aggregate principal amount;

• Secured by $50 million of collateral in the form of certain of the Company’s drilling rigs in the United States, Canada and Australia;

• Maturity date of 31 December 2020;

• Interest Rate of 12% per annum payable in kind or 10% payable in cash at the Company’s option, in each case payable quarterly in arrears; and

• Other customary terms and conditions, including customary covenants and events of default that are substantially the same as those in the Centerbridge Term Loans A and B.

In conjunction with the execution of the DDTL, the Company and Centerbridge have also modified certain terms of Term Loans A and B, which were entered into as part of the Centerbridge-led recapitalisation in 2015, as follows:

• The maturity dates for Term Loans A and B have been amended from 1 October 2020 and 1 October 2018, respectively, to 3 January 2021

• The interest rate for both Terms Loans A and B has been amended from 12% per annum payable in kind to either 12% payable in kind or 10% payable in cash at the Company’s option;

• The period for the make-whole obligations under Term Loans A and B has been extended to 3 January 2021;

• The Company must at all times maintain at least 90% of all its US, Canada and Australia tangible assets, including the collateral for the DDTL, as collateral supporting Term Loans A and B.

 124

Annexure D

Report as to Affairs (ASIC Form 507)

Annex D 

Australian Securities & Investments Commission Form 507 Corporations Act 2001 421A(1) & (2), 429(2)(b) & (c), 475(1) & (7),497(5) Report as to affairs Related forms: 507A Statement verifying report under $475(1) 911 Verification or certification of a document If there is insufficient space in any section of the form, you may photocopy the relevant page(s) and submit as part of this lodgement Company details Company name Boart Longyear Limited ACN/ABN 123 052 728 Lodgement details Who should ASIC contact if there is a query about this form? ASIC registered agent number (if applicable) An image of this form will be available as part of the public register. Firm/organisation Ashurst Australia Contact name/position description Telephone number (during business hours) Ged Kane/ Associate (02) 9258 6808 Email address (optional) Ged.kane@ashurst.com Postal address Ashurst Australia. 5 Martin Place Suburb/City State/Territory Postcode SYDNEY NSW 2000 Directions This report is to be made as at the following dates: (a) where prepared by the managing controller under s421A(1) — a day not later than 30 days before the day when it is prepared (b) where submitted to a controller under s429(2) — the control day, or (c) where submitted to a liquidator or to a provisional liquidator under s475(1) — the date of the winding-up order or, if the liquidator specifies an earlier date, that date. This report is to be submitted by, and verified by a statement in writing made by, the following person, in accordance with Form 507A — where the statement is made out for the purposes of s475(1) — a person referred to in that subsection. Regulation 5.2.01 requires the copy of this report that is lodged with the Australian Securities and Investments Commission to be certified in writing as a true copy of the original report: (a) for a copy lodged for the purposes of s429(2)(c) — by the controller of property of the corporation; or (b) for a copy lodged for the purposes of s475(7) — by the liquidator/provisional liquidator of the company. NOTE: Form 911 is prescribed for this purpose. ASIC Form 507 30 January 2012 Page 1 of 12 

1 Reason for report To be completed by the external administrator or person who must lodge this form with ASIC Managing controller of property—s421A(1) ASIC internal form code if a receiver and manager Date of appointment 507G / / [D D] [M M] [Y Y] If a person who is in possession, or has control of the property for the purpose of enforcing a security interest Date when person took control 507H / / [D D] [M M] [Y Y] Appointment of controller — s429(2)(b) Under $429(2)(c)(i) a notice setting out any comments relating to the report, or a statement that no comment is made, should accompany the report. A Form 911 Verification or certification of a document should also be lodged Date of receipt of report 507F / / [D D] [M M] [Y Y] Appointment of liquidator/provisional liquidator by the Court—s475(1) A Form 911 Verification or certification of a document should also be lodged. 507C Date of receipt of report / / [D D] [M M] [Y Y] Appointment of liquidator — creditors' voluntary winding–up — s497(5) 507D Date report was received by liquidator / / [D D] [M M] [Y Y] ASIC Form 507 30 January 2012 Page 2 of 12 

2 Assets and liabilities Date specified under the relevant section as the date of report (see Directions on page 1) 3 1 / 0 3 / 1 7 [D D] [M M] [Y Y] Valuation Estimated 2.1 Assets not specifically charged (net book amount) Realisable Values USD USD (a) interest in land as detailed in schedule A Nil Nil (b) sundry debtors as detailed in schedule B 1,153,767,206 Uncertain (c) cash on hand Nil Nil (d) cash at bank Nil Nil (e) stock as detailed in annexed inventory Nil Nil (f) work in progress as detailed in annexed inventory Nil Nil (g) plant and equipment as detailed in inventory Nil Nil (h) other assets as detailed in schedule C Nil Nil Sub Total 1,153,767,206 Uncertain ASIC Form 507 30 January 2012 Page 3 of 12 

2 Continued... Assets and liabilities Valuation (net book amount) USD Estimated Realisable Values USD 2.2 Assets subject to specific security interests, as specified in schedule D 2,408,713,046 Uncertain Less amounts owing as detailed in schedule D Nil Nil Total Assets 2,408,713,046 Uncertain Total Estimated Realisable Values 3,562,480,252 Uncertain 2.3 Less payable in advance of secured creditor(s) Nil Nil Amounts owing for employee entitlements as detailed in schedule E 2.4 Less amounts owing and secured by debenture or circular security interest over assets Nil Nil 2.5 Less preferential claims ranking behind secured creditors as detailed in schedule F Nil Nil 2.6 Balances owing to partly secured creditors as detailed in schedule G Nil Nil Total Claims (Nil) Security Held 3,562,480,252 2.7 Creditors (unsecured) as detailed in schedule H (262,151,107 ) (262,151,107 ) Amount claimed (262,151,107 ) 2.8 Contingent assets Estimated to produce as detailed in schedule I (Uncertain) 735,001,956 Uncertain 2.9 Contingent liabilities Estimated to rank as detailed in schedule J (Uncertain) (738,301,540 ) Uncertain Estimated deficiency or • Estimated surplus • Subject to costs of administration or • Subject to costs of liquidation Share capital AUD 3,356,739 (Ordinary) + AUD 71,610,325 (Preference) Issued 950,617,966 (Ordinary) + 434,001,968 (Preference) Paid Up AUD 3,356,739 (Ordinary) + AUD 71,610,325 (Preference) ASIC Form 507 30 January 2012 Page 4 of 12 

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedules A, B, C are to show the method and manner of arriving at the valuation of the assets. SCHEDULE A—INTERESTS IN LAND Address and description of property (1) Valuation Estimated realisable value Valuation for rating purposes Particulars of tenancy Where possession of deeds may be obtained Short particulars of title USD USD USD N/A SCHEDULE B—SUNDRY DEBTORS (INCLUDING LOAN DEBTORS) Amount Particulars of Amount owing realisable Deficiency security (If Explanation of Name and address of debtor USD USD USD any) held deficiency Inter-company receivables * BLI Zambia Limited 35,384 Uncertain Uncertain Nil Boart Longyear Zambia Limited 23,589 Uncertain Uncertain Nil Boart Longyear Drilling Products Company Wuxi Ltd. 3,500 Uncertain Uncertain Nil Longyear Global Holdings, Inc. 14,814,169 Uncertain Uncertain Nil Boart Longyear Company 11,643 Uncertain Uncertain Nil Inter-company loans* Boart Longyear (Vic) No. 1 Pty Limited 33,612,574 Uncertain Uncertain Nil Boart Longyear Management Pty Ltd 1,061,538,677 Uncertain Uncertain Nil Boart Longyear Australia Pty Ltd 43,685,568 Uncertain Uncertain Nil Miscellaneous Australian Taxation Office 32 Martin PI, Sydney NSW 2000 42,102 Uncertain Uncertain Nil Note*: Address for all Inter-company debtors is 2640 West 1700 South, SALT LAKE CITY UT 84104, UNITED STATES ASIC Form 507 30 January 2012 Page 5 of 12 

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedules A, B, C are to show the method and manner of arriving at the valuation of the assets. SCHEDULE C—OTHER ASSETS Cost Realisable Description of deposit or investment Amount USD USD Deposits Nil Nil Nil Investments Nil Nil Nil ASIC Form 507 30 January 2012 Page 6 of 12 

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedule D is to show the method and manner of arriving at the valuation of the assets. SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS * Date security Estimated Amount owing interest Description of Holder of security Terms of realisable under security Description of asset given security interest interest repayment Valuation vale interest USD USD USD Assets subject to specific security interests Shareholdings in Votraint No. 1609 Pty Ltd., Boart Longyear Alberta Limited, Boart Longyear Investments Pty Ltd, Boart Longyear Australia Pty Ltd. Grimwood Davies Pty Limited, Drillcorp Pty Limited, Boart Longyear Management Pty Ltd and BL DDL Holdings Pty Ltd Australia 24-Oct-14 First ranking charge over non-working capital assets ("NWCA”) Willington Trust, National Association as Administrative Agent for the Term Loan B Securities Agreement Guarantor of the obligations of Boart Longyear Management Pty Ltd. ("BLYM") 2.408,713,046 Uncertain Nil As above 27-Sep-13 First ranking charge over NWCA U.S Bank National Association as Trustee and Collateral Agent of the 10% Senior Secured Notes Guarantor of the obligations of BLYM Nil As above 21-Oct-14 Second ranking charge over NWCA Willington Trust, National Association as Administrative Agent for the Term Loan A Securities Agreement Guarantor of the obligations of BLYM Nil As above 01-May-15 16-Mar-17 Third ranking charge over NWCA PNC Bank, National Association in its capacity as ABL Agent for the Asset Back Loan Intercreditor Agreement Willington Trust, National Association Guarantor of the obligations of BLYM Guarantor of the obligations of BLYM Nil Nil ASIC Form 507 30 January 2012 Page 7 of 12 

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedule D is to show the method and manner of arriving at the valuation of the assets. SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS (CONTINUED) Amount Date Estimated owing under security Description of realisable security Description of asset interest given security interest Holder of security interest Terms of repayment Valuation value interest USD USD USD Amounts owing and secured by debenture or circular security interest Sundry Debtors (Para 2.1(b)) 01-May-15 First ranking charge over working capital assets ("WCA") PNC Bank, National Association in its capacity as ABL Agent for the Asset Back Loan Guarantor of the obligations of BLYM 1,153,767,206 Uncertain Nil As above 21-Oct-14 Second ranking charge over WCA Willington Trust, National Association as Administrative Agent for the Term Loan A Securities Agreement Guarantor of the obligations of BLYM Nil As above 27-Sep-13 Third ranking charge over WCA U.S Bank National Association as Trustee and Collateral Agent of the 10% Senior Secured Notes Guarantor of the obligations of BLYM Nil As above 24-Oct-14 16-Mar-17 Third ranking charge over WCA Willington Trust, National Association as Administrative Agent for the Term Loan B Securities Agreement Willington Trust, National Association Guarantor of the obligations of BLYM Guarantor of the obligations of BLYM Nil Nil ASIC Form 507 30 January 2012 Page 8 of 12 

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedule D is to show the method and manner of arriving at the valuation of the assets. SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS (CONTINUED) Amount Date Estimated owing under security realisable security interest Description of Terms of Valuation value interest Description of asset given security interest Holder of security interest repayment USD USD USD PPSR Motor Vehicle 30-Jan-12 PPSR 201112190294340 Orix Australia Corporation Limited N/A N/A N/A Nil Motor Vehicle 12-Feb-13 PPSR 201302120026540 Orix Australia Corporation Limited N/A N/A N/A Nil Motor Vehicle 12-Sep-16 PPSR 201609120056258 W.A. Truck And Machinery Repairs Pty Ltd N/A N/A N/A Nil Other Goods 14-Feb-12 PPSR 201202140082486 A.P. Eagers Limited N/A N/A N/A Nil Other Goods 29-May-13 PPSR 201305290107088 Fiexit Australia Pty Ltd, Wildcat Chemicals Australia Pty Ltd, Reflex Instruments Asia Pacific Pty Ltd, Australian Mud Company Pty Ltd, Imdex International Pty Ltd, Imdex Ltd, Reflex Technology International Pty Ltd N/A N/A N/A Nil Other Goods 25-Feb-15 PPSR 201502250030031 Lubricon Hydrive Pty Ltd N/A N/A N/A Nil Other Goods 28-Apr-15 PPSR 201504280031293 The Trustee For D & H Trust & The Trustee For J & T Family Trust N/A N/A N/A Nil Other Goods 12-Sep-16 PPSR 201609120055955 W.A. Truck And Machinery Repairs Pty Ltd N/A N/A N/A Nil Note *: Security interests shown under the “PPSR" subheading are registered on the Personal Property Securities Register. The company considers that those reqistrations were made erroneously. The company does not own nor have possession of any of the assets. SCHEDULE E-CLAIMS BY EMPLOYEES Employee’s name and address Wages Holiday pay Long service leave Estimated liability USD USD USD USD N/A SCHEDULE F—PREFERENTIAL CREDITORS (OTHER THAN THOSE DETAILED IN SCHEDULE E) Name and address of preferential creditor Description of amount owing Amount owing USD N/A ASIC Form 507 30 January 2012 Page 9 of 12 

2 Continued... Assets and liabilities SCHEDULE G—PARTLY SECURED CREDITORS Estimated value of Amount owing to Amount estimated Name and address of creditor Particulars of security held Name of security security creditor to rank as unsecured USD USD USD N/A SCHEDULE H—UNSECUREO CREDITORS Amount claimed by creditor Amount admitted as owing Reasons for difference between Name and address of creditor USD USD amount claimed and admitted (if any) Grimwood Davies Pty Limited* (29,080,260 ) (29,080,260 ) N/A Drillcorp Pty Limited* (70,404,840 ) (70,404,840 ) N/A Aqua Drilling & Grouting Pty Limited* (311,781 ) (311,781 ) N/A Boart Longyear Investments Pty Ltd* (132,935,255 ) (132,935,255 ) N/A Votraint No. 1609 Pty Ltd.* (28,474,063 ) (28,474,063 ) N/A Deloitte Touche Tohmatsu Limited 225 George St. Sydney NSW 2000 (904,019 ) (904,019 ) N/A Directors (ESAP) (40,833 ) (40.833 ) N/A Australian Taxation Office 32 Martin PI, Sydney NSW 2000 (55 ) (55 ) N/A Note*: Address for all Inter-company and director creditors is 2640 West 1700 South, SALT LAKE CITY UT 84104, UNITED STATES SCHEDULE l—CONTINGENT ASSETS Estimated to Description of asset Gross asset produce USD USD Potential claims against Boart Longyear Management Pty Ltd (“BLYM’) as the principal creditor and the co-guarantors of BLYM's obligations under the 7s, 10s, ABL, TLA and TLB debt facilities. A list of the co-guarantors and the facilities are shown in Schedule J. No more than $735,001,956 Uncertain ASIC Form 507 30 January 2012 Page 10 of 12 

2 Continued… Assets and liabilities SCHEDULE J—CONTINGENT LIABILITIES Gross liability Estimated rank for Name and address of creditor Nature of liability USD USD Debt facilities U.S Bank National Association 170 South Main Street, Suite 200 Sait Lake City, Utah 84101 Unsecured guarantee of Boart Longyear Management Pty Ltd's ("BLYM") obligations under the 7% Senior Notes ("7s") debt facility 281,672,475 Uncertain U.S Bank National Association 170 South Main Street, Suite 200 Salt Lake City, Utah 84101 Secured guarantee of BLYM's obligations under the 10% Senior Secured Notes ("10s") debt facility 193,745,047 Uncertain PNC Bank, National Association, 2100 Ross Avenue, Suite 1850 Dallas, Texas 75201 Secured guarantee of BLYM's obligations under the Asset Backed Loan ("ABL") debt facility 17,396,571 Uncertain Willington Trust, National Association, c/- Minter Ellison Lawyers, Aurora Place, 88 Phillip Street, Sydney NSW 2000 Partly secured guarantee of BLYM's obligations under the Term Loan A ("TLA") debt facility 109,456,642 Uncertain Willington Trust, National Association, cl- Minter Ellison Lawyers, Aurora Place, 88 Phillip Street, Sydney NSW 2000 Partly secured guarantee of BLYM's obligations under the Term Loan B (“TLB”) debt facility 132,731,221 Uncertain Related entities - all debt facilities * Boart Longyear Management Pty Limited Votraint No. 1609 Pty Limited Boart Longyear Australia Pty Limited Longyear Holdings, Inc. Longyear TM, Inc. Longyear TM, Inc. Boart Longyear Company Boart Longyear Manufacturing and Distribution Inc. (f/k/a Boart Longyear Manufacturing USA Inc.) Boart Longyear Canada Longyear Canada, ULC Boart Longyear Manufacturing Canada Ltd. Boart Longyear Suisse Sarl Boart Longyear Chile Limitada Boart Longyear Comercializadora Limitada Boart Longyear SAC. Potential claims for contribution by co-guarantor of BLYM's obligations under the 7s, 10s, ABL, TLA and TLB debt facilities No more than 735,001,956 Uncertain Related entities - limited debt facilities * BLY IP, Inc Potential claim for contribution by co-guarantor of BLYM's obligations under the TLA and TLB debt facilities No more than 242,187,864 Uncertain Miscellaneous * Various Long term incentive plan 3,299,583 Uncertain Note *: Address for all related entity and miscellaneous contingent creditors is 2640 West 1700 South, SALT LAKE CITY UT 84104, UNITED STATES ASIC Form 507 30 January 2012 Page 11 of 12 

3 Annexure For the purposes of the statement in Form 507A only.*Strike out whichever is inapplicable This is the annexure of ___ pages marked "A" referred to in the Statement verifying report signed by me*/us* and dated as follows. Date of the Statement verifying report / / [D D] [M M] [Y Y] Each signatory must complete Name and sign a copy of Form 507A Statement verifying report under s475(1) to be lodged with Signature Form 507 Name Signature Name Signature Certification I certify that the particulars contained in the above report as to affairs are true to the best of my knowledge and belief. Name FABRIZIO RASETTI Capacity SECRETARY Signature /s/ FABRIZIO RASETTI Date signed 2 1 / 0 4 / 1 7 [D D] [M M] [Y Y] Lodgement Send completed and signed forms to: For more information Australian Securities and Investments Commission, Web www.asic.gov.au PO Box 4000, Gippsland Mail Centre VIC 3841. Need help? www.asic.gov.au/question Telephone 1300 300 630 Or lodge the form online by visiting the ASIC website www.asic.gov.au ASIC Form 507 30 January 2012 Page 12 of 12 

Australian Securities & Investments Commission Form 507 Corporations Act 2001 421A(1) & (2), 429(2)(b) & (c), 475(1) & (7),497(5) Report as to affairs Related forms: 507A Statement verifying report under s475(1) 911 Verification or certification of a document If there is insufficient space in any section of the form, you may photocopy the relevant page(s) and submit as part of this lodgement Company details Company name Boart Longyear Management Pty Limited ACN/ABN 123 283 545 Lodgement details Who should ASIC contact if there is a query about this form? ASIC registered agent number (if applicable) An image of this form will be available as part of the public register . Firm/organisation Ashurst Australia Contact name/position description Telephone number (during business hours) Ged Kane/ Associate (02) 9258 6808 Email address (optional) Ged.kane@ashurst.com Postal address Ashurst Australia, 5 Martin Place Suburb/City State/Territory Postcode SYDNEY NSW 2000 Directions This report is to be made as at the following dates: (a) where prepared by the managing controller under s421A(1) — a day not later than 30 days before the day when it is prepared (b) where submitted to a controller under s429(2) — the control day. or (c) where submitted to a liquidator or to a provisional liquidator under s475(1) — the date of the winding-up order or, if the liquidator specifies an earlier date, that date This report is to be submitted by, and verified by a statement in writing made by, the following person. In accordance with Form 507A — where the statement is made out for the purposes of s475(1) — a person referred to in that subsection. Regulation 5.2.01 requires the copy of this report that is lodged with the Australian Securities and Investments Commission to be certified in writing as a true copy of the original report: (a) for a copy lodged for the purposes of s429(2)(c) — by the controller of property of the corporation; or (b) for a copy lodged for the purposes of s475(7) — by the liquidator/provisional liquidator of the company. NOTE: Form 911 is prescribed for this purpose. ASIC Form 507 30 January 2012 Page 1 of 11  

1 Reason for report To be completed by the external administrator or person who must lodge this form with ASIC Managing controller of property—s421A(1) ASIC internal form code if a receiver and manager Date of appointment 507G / / [D D] [M M] [Y Y] If a person who is in possession, or has control of the property for the purpose of enforcing a security interest Date when person took control 507H / / [D D] [M M] [Y Y] Appointment of controller — s429(2)(b) Under $429(2)(c)(i) a notice setting out any comments relating to the report, or a statement that no comment Is made, should accompany the report. A Form 911 Verification or certification of a document should also be lodged Date of receipt of report 507F / / [D D] [M M] [Y Y] Appointment of liquidator/provisional liquidator by the Court—s475(1) A Form 911 Verification or certification of a document should also be lodged. 507C Date of receipt of report / / [D D] [M M] [Y Y] Appointment of liquidator — creditors' voluntary winding-up — s497(5) 507D Date report was received by liquidator / / [D D] [M M] [Y Y] ASIC Form 507 30 January 2012 Page 2 of 11  

2 Assets and Liabilities Date Specified under the relevant section as the date of report (see Directions on page 1) 3 1 / 0 3 / 1 7 [D D] [M M] [Y Y] Valuation Estimated (net book amount) Realisable Values 2.1 Assets not specifically charged USD USD (a) interest in land as detailed in schedule A Nil Nil (b) sundry debtors as detailed in schedule B 2,654,376,387 Uncertain (c) cash on hand Nil Nil (d) cash at bank 2,027,286 2,027,286 (e) stock as detailed in annexed Inventory Nil Nil (f) work in progress as detailed in annexed inventory Nil Nil (g) plant and equipment as detailed in inventory Nil Nil (h) other assets as detailed in schedule C Nil Nil Sub total 2,656,403,673 Uncertain ASIC Form 507 30 January 2012 Page 3 of 11  

2 Continued... Assets and liabilities Valuation (net book amount) USD Estimated Realisable Values USD 2.2 Assets subject to specific security interests, as specified in schedule D 6,386,954 Uncertain Less amounts owing as detailed in schedule D (400,232,312 ) (400,232,312 ) Total Assets Nil Nil Total Estimated Realisable Values 2,656,403,673 Uncertain 2.3 Less payable in advance of secured creditor(s) Nil Nil Amounts owing for employee entitlements as detailed in schedule E Nil Nil 2.4 Less amounts owing and secured by debenture or circular security interest as specified in schedule D (393,845,358 ) Uncertain 2.5 Less preferential claims ranking behind secured creditors as detailed in schedule F Nil Nil 2.6 Balances owing to partly secured creditors as detailed in schedule G Nil Nil Total Claims (393,845,358 ) Security Held 2,656,403,673 2.7 Creditors (unsecured) as detailed in schedule H (1,887,458,364 ) (1,887,458,364 ) Amount claimed (2,281,303,722 ) 2.8 Contingent assets Estimated to produce as detailed in schedule I (Nil) Nil 2.9 Contingent liabilities Estimated to rank as detailed in schedule J (735,001,956 ) Uncertain (Uncertain) x Estimated deficiency or ¨ Estimated surplus ¨ Subject to costs of administration or ¨ Subject to costs of liquidation Share capital AUD 193,380,417 Issued 159,913,001 Paid Up AUD 193,380,417 ASIC Form 507 30 January 2012 Page 4 of 11  

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedules A, B, C are to show the method and manner of arriving at the valuation of the assets. SCHEDULE A—INTERESTS IN LAND Address and Where possession description of Estimated Valuation for Particulars of of deeds may be Short particulars property (1) Valuation realisable value rating purposes tenancy obtained of title USD USD USD N/A ASIC Form 507 30 January 2012 Page 5 of 11

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedules A, B, C are to show the method and manner of arriving at the valuation of the assets. SCHEDULE B—SUNDRY DEBTORS (INCLUDING LOAN DEBTORS) Amount owing Amount realisable Deficiency Particulars of security (if any) Explanation of Name and address of debtor * USD USD USD held deficiency Intercompany receivable Geoserv Pesquisas Geologicas S.A. 1,894 Uncertain Uncertain Nil Intercompany loans Boart Longyear Limitada 16,300,966 Uncertain Uncertain Nil Geoserv Pesquisas Geologicas S.A. 22,677,719 Uncertain Uncertain Nil Boart Longyear Colombia S.A.S. 5,341,909 Uncertain Uncertain Nil Boart Longyear International B.V. 1,758,149 Uncertain Uncertain Nil BLY Ghana Limited 19,966,357 Uncertain Uncertain Nil Boart Longyear Liberia Corporation 2,755,798 Uncertain Uncertain Nil Boart Longyear Holdings (Thailand) Co., Ltd. 277,059 Uncertain Uncertain Nil Votraint No. 1609 Pty Ltd. 275,734,683 Uncertain Uncertain Nil Boart Longyear B.V. 9,913,607 Uncertain Uncertain Nil Boart Longyear GmbH & Co., KG 495,533 Uncertain Uncertain Nil Boart Longyear Limited (Ireland) 1,088,726 Uncertain Uncertain Nil Boart Longyear Suisse Sarl (Switzerland) 11,822,782 Uncertain Uncertain Nil Boart Longyear Saudi Arabia LLC 14,117,700 Uncertain Uncertain Nil BLY Mali S.A. 3,280,386 Uncertain Uncertain Nil Boart Longyear (DRC) S.A. 21,859,425 Uncertain Uncertain Nil Boart Longyear Burkina Faso Sarl 199,923 Uncertain Uncertain Nil BLY Gabon S.A. 74,588 Uncertain Uncertain Nil BLY Senegal S.A. 1,871,364 Uncertain Uncertain Nil BLY Sierra Leone Ltd. 6,409,620 Uncertain Uncertain Nil BLY Madagascar S.A. 194,072 Uncertain Uncertain Nil BLY Guinea S.A. 636,776 Uncertain Uncertain Nil Boart Longyear Zambia Limited 20,111 Uncertain Uncertain Nil Boart Longyear Australia Pty Ltd 16,838,250 Uncertain Uncertain Nil Boart Longyear (NZ) Limited 2,687,697 Uncertain Uncertain Nil Boart Longyear (Cambodia) Ltd. 1,488,055 Uncertain Uncertain Nil Boart Longyear Sole Co., Ltd. 445,087 Uncertain Uncertain Nil Boart Longyear Investments Pty Ltd 2,061,967,775 Uncertain Uncertain Nil Boart Longyear Netherlands B.V. 295,159 Uncertain Uncertain Nil Coöperatief Longyear Holdings U.A. 680,691 Uncertain Uncertain Nil Boart Longyear (Vic) No. 2 Pty Limited 149,999,908 Uncertain Uncertain Nil BLY EMEA UK Holdings Ltd. 1,521,285 Uncertain Uncertain Nil Boart Longyear Suisse Sarl (CE Belgium) 1,653,334 Uncertain Uncertain Nil Note*: Address for all sundry debtors is 2640 West 1700 South, SALT LAKE CITY UT 84104, UNITED STATES ASIC Form 507 30 January 2012 Page 6 of 11  

 2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedules A, B, C are to show the method and manner of arriving at the valuation of the assets. SCHEDULE C—OTHER ASSETS Amount Description of deposit or investment Cost USD Realisable USD Deposits Nil Nil Nil Investments Nil Nil Nil SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS Date security Description of Estimated Amount owing Description of interest security Holder of security Terms of realisable under security asset given interest interest repayment Valuation value interest USD USD USD Assets subject to specific security interests 90% shareholding in Boart Longyear Saudi Arabia LLC 24-Oct-14 First ranking charge over non-working capital assets ("NWCA") Willington Trust, National Association as Administrative Agent for the Term Loan B Securities Agreement Principal repayable on 1-Oct-18 or on an event of default 1,364,412 Uncertain 104,666,052 As above 27-Sep-13 First ranking charge over NWCA U.S Bank National Association as Trustee and Collateral Agent of the 10% Senior Secured Notes Principal repayable on 1-Oct-18 or on an event of default 193,745,046 As above 21-Oct-14 Second ranking charge over NWCA Willington Trust, National Association as Administrative Agent for the Term Loan A Securities Agreement Principal repayable on 22-Oct-20 or on an event of default 84,424,642 As above plus Restricted cash in A/c 1029025759 01-May-15 Third ranking charge over NWCA PNC Bank, National Association in its capacity as ABL Agent for the Asset Back Loan Intercreditor Agreement 5,022,541 5,022,541 17,396,571 16-Mar-17 Willington Trust, National Association N/A Nil ASIC Form 507 30 January 2012 Page 7 of 11  

 2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedule D is to show the method and manner of arriving at the valuation of the assets. SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS (CONTINUED) Date Amount security Description of Estimated owing under Description of interest security Holder of security Terms of realisable security asset given interest interest repayment Valuation value interest USD USD USD Amounts owing and secured by debenture or circular security interest Sundry Debtors (Para 2.1(b)) 01-May-15 First ranking charge over PNC Bank, National Association in its capacity as 2,654,376,387 Uncertain 12,374,029 Cash at bank (Para 2.1(d)) working capital assets ("WCA") ABL Agent for the Asset Back Loan 2,027,285 2,027,285 As above 21-Oct-14 Second ranking charge over WCA Willington Trust, National Association as Administrative Agent for the Term Loan A Securities Agreement Principal repayable on 22-Oct-20 or on an event of default 84,424,642 As above 27-Sep-13 Third ranking charge over WCA U.S Bank National Association as Trustee and Collateral Agent of the 10% Senior Secured Notes Principal repayable on 1-Oct-18 or on an event of default 193,745,046 As above 24-Oct-14 Third ranking charge over WCA Willington Trust, National Association as Administrative Agent for the Term Loan B Securities Agreement Principal repayable on 1-Oct-18 or on an event of default 104,666,052 16-Mar-17 Willington Trust, National Association N/A Nil SCHEDULE E—CLAIMS BY EMPLOYEES Employee’s name and address Wages Holiday pay Long service leave Estimated liability USD USD USD USD N/A SCHEDULE F—PREFERENTIAL CREDITORS (OTHER THAN THOSE DETAILED IN SCHEDULE E) Name and address of preferential creditor Description of amount owing Amount owing USD N/A ASIC Form 507 30 January 2012 Page 8 of 11  

 2 Continued... Assets and liabilities SCHEDULE G—PARTLY SECURED CREDITORS Estimated value of Amount owing to Amount estimated to rank as Name and address of creditor Particulars of security held Name of security security creditor unsecured USD USD USD N/A SCHEDULE H—UNSECURED CREDITORS Name and address of creditor * Amount claimed by creditor USD Amount admitted as owing USD Reasons for difference between amount claimed and admitted (if any) Debt facilities U.S. Bank National Association as Trustee of the 7% Senior Notes Due 2021 170 Main Street, Suite 200 Salt Lake City, Utah 84101 (281,672,475 ) (281,672,475 ) N/A Willington Trust, National Association as Administrative Agent for the Term Loan A and B c/- Minter Ellison Lawyers, Aurora Place, 88 Phillip Street, Sydney NSW 2000 (53,097,169 ) (53,097,169 ) N/A Interest Charges (19,978,080 ) (19,978,080 ) N/A Related entities * Aqua Drilling & Grouting Pty Limited (2,210,423 ) (2,210,423 ) N/A Boart Longyear Argentina S.A. (2,202,928 ) (2,202,928 ) N/A Boart Longyear Australia Pty Ltd (3,075,795 ) (3,075,795 ) N/A BL Company (US) (2,259,426 ) (2,259,426 ) N/A Boart Longyear (Vic) No. 1 Pty Limited (331,700,001 ) (331,700,001 ) N/A Boart Longyear Limited (1,062,580,218 ) (1,062,580,218 ) N/A BLY Drilling Services and Products Mexico S,A. de C.V. (In Liquidation) (932,939 ) (932,939 ) N/A Boart Longyear Manufacturing Canada Ltd, (16,687,193 ) (16,687,193 ) N/A Boart Longyear Suisse Sarl (CE Canada) (1,057,051 ) (1,057,051 ) N/A Boart Longyear Poland Sp. z o.o. (417,365 ) (417,365 ) N/A Boart Longyear Suisse Sarl (CE USA) (303,143 ) (303,143 ) N/A Boart Longyear Chile Limitada (5,892 ) (5,892 ) N/A Boart Longyear GmbH & Co., KG (41,265,364 ) (41,265,364 ) N/A Longyear Global Holdings, Inc. (48,607,152 ) (48,607,152 ) N/A Boart Longyear Suisse Sarl (Switzerland) (1,120,684 ) (1,120,684 ) N/A Boart Longyear Drilling Products Company Wuxi Ltd. (7,824,555 ) (7,824,555 ) N/A Boart Longyear Suisse Sarl (1,190 ) (1,190 ) N/A Boart Longyear Canada (9,654,538 ) (9,654,538 ) N/A Boart Longyear B.V. (9,445 ) (9,445 ) N/A Miscellaneous Australian Taxation Office 32 Martin Pl, Sydney NSW 2000 (802,293 ) (802,293 ) N/A Various (11,854 ) (924 ) N/A Note *:Address for all related entity creditors is 2640 West 1700 South, SALT LAKE CITY UT 84104, UNITED STATES ASIC Form 507 30 January 2012 Page 9 of 11  

SCHEDULE l—CONTINGENT ASSETS Estimated to Description of asset Gross asset produce USD USD N/A SCHEDULE J—CONTINGENT LIABILITIES Name and address of creditor * Nature of liability Gross liability Estimated rank for USD USD Related entities - all debt facilities Boart Longyear Management Pty Limited Boart Longyear Limited Votraint No. 1609 Pty Limited Boart Longyear Australia Pty Limited Longyear Holdings, Inc. Potential claims by guarantors of the company’s obligations under the 7% Senior Notes, 10% Senior Secured Notes, the Term Loan A and B Securities Agreements and the Asset Bank Loan (735,001,956 ) Uncertain Longyear TM, Inc. Boart Longyear Company Boart Longyear Manufacturing and Distribution Inc. (f/k/a Boart Longyear Manufacturing USA inc.) Boart Longyear Canada Longyear Canada, ULC Boart Longyear Manufacturing Canada Ltd. Boart Longyear Suisse Sarl Boart Longyear Chile Limitada Boart Longyear Comercializadora Limitada Boarl Longyear S.A.C. Related entitiy - limited debt facilities BLY IP, Inc Potential claim by the guarantor of the company's obligations under the Term Loan A and B Securities Agreements (242,187,864 ) Uncertain Note*: Address for all contingent creditors is 2640 West 1700 South, SALT LAKE CITY UT 84104, UNITED STATES ASIC Form 507 30 January 2012 Page 10 of 11  

 3 Annexure For the purposes of the statement in Form 507A only. *Strike out whichever is inapplicable This is the annexure of ___ pages marked "A" referred to in the Statement verifying report signed by me*/us* and dated as follows. Date of the Statement verifying report / / [D D] [M M] [Y Y] Each signatory must complete Name and sign a copy of Form 507A Statement verifying report under s475(1) to be lodged with Signature Form 507 Name Signature Name Signature Certification I certify that the particulars contained in the above report as to affairs are true to the best of my knowledge and belief. Name FABRIZIO RASETTI Capacity DIRECTOR + SECRETARY Signature /s/ FABRIZIO RASETTI Date signed 2 1 / 0 4 / 1 7 [D D] [M M] [Y Y] Lodgement Send completed and signed forms to: For more information Australian Securities and Investments Commission, Web www.asic.gov.au PO Box 4000, Gippsland Mail Centre VIC 3841. Need help? www.asic.gov.au/question Telephone 1300 300 630 Or lodge the form online by visiting the ASIC website www.asic.gov.au ASIC Form 507 30 January 2012 Page 11 of 11  

Australian Securities & Investments Commission Form 507 Corporations Act 2001 421A(1) & (2), 429(2)(b) & (c), 475(1) & (7),497(5) Report as to affairs Related forms: 507A Statement verifying report under s475(1) 911 Verification or certification of a document If there is insufficient space in any section of the form, you may photocopy the relevant page(s) and submit as part of this lodgement Company details Company name Votraint No. 1609 Pty Limited ACN/ABN 119 244 272 Lodgement details Who should ASIC contact if there is a query about this form? ASIC registered agent number (if applicable) An image of this form will be available as part of the public register . Firm/organisation Ashurst Australia Contact name/position description Telephone number (during business hours) Ged Kane/Associate (02) 9258 6808 Email address (optional) Ged.kane@ashurst.com Postal address Ashurst Australia, 5 Martin Place Suburb/City State/Territory Postcode SYDNEY NSW 2000 Directions This report is to be made as at the following dates: (a) where prepared by the managing controller under s421A(1) — a day not later than 30 days before the day when it is prepared (b) where submitted to a controller under s429(2) — the control day, or (c) where submitted to a liquidator or to a provisional liquidator under s475(1) — the date of the winding-up order or, if the liquidator specifies an earlier date, that date This report is to be submitted by, and verified by a statement in writing made by, the following person, in accordance with Form 507A — where the statement is made out for the purposes of s475(1) — a person referred to in that subsection. Regulation 5.2.01 requires the copy of this report that is lodged with the Australian Securities and Investments Commission to be certified in writing as a true copy of the original report: (a) for a copy lodged for the purposes of s429(2)(c) — by the controller of property of the corporation; or (b) for a copy lodged for the purposes of s475(7) — by the liquidator/provisional liquidator of the company. NOTE: Form 911 is prescribed for this purpose. ASIC Form 507 30 January 2012 Page 1 of 11  

1 Reason for report To be completed by the external administrator or person who must lodge this form with ASIC Managing controller of property—s421A(1) ASIC internal form code if a receiver and manager Date of appointment 507G / / [D D] [M M] [Y Y] If a person who is in possession, or has control of the property for the purpose of enforcing a security interest Date when person took control 507H / / [D D] [M M] [Y Y] Appointment of controller — s429(2)(b) Under $429(2)(c)(i) a notice setting out any comments relating to the report, or a statement that no comment is made, should accompany the report. A Form 911 Verification or certification of a document should also be lodged Date of receipt of report 507F / / [D D] [M M] [Y Y] Appointment of liquidator/provisional liquidator by the Court—s475(1) A Form 911 Verification or certification of a document should also be lodged. 507C Date of receipt of report / / [D D] [M M] [Y Y] Appointment of liquidator — creditors' voluntary winding-up — s497(5) 507D Date report was received by liquidator / / [D D] [M M] [Y Y] ASIC Form 507 30 January 2012 Page 2 of 11  

2 Assets and Liabilities Date Specified under the relevant section as the date of report (see Directions on page 1) 3 1 / 0 3 / 1 7 [D D] [M M] [Y Y] Valuation Estimated (net book amount) Realisable Values 2.1 Assets not specifically charged USD USD (a) interest in land as detailed in schedule A Nil Nil (b) sundry debtors as detailed in schedule B 28,476,546 Uncertain (c) cash on hand Nil Nil (d) cash at bank Nil Nil (e) stock as detailed in annexed Inventory Nil Nil (f) work in progress as detailed in annexed inventory Nil Nil (g) plant and equipment as detailed in inventory Nil Nil (h) other assets as detailed in schedule C 5,960,510 Uncertain Sub total 34,437,056 Uncertain ASIC Form 507 30 January 2012 Page 3 of 11 

2 Continued... Assets and liabilities Valuation (net book amount) USD Estimated Realisable Values USD 2.2 Assets subject to specific security interests, as specified in schedule D 539,427,133 Uncertain Less amounts owing as detailed in schedule D Nil Nil Total Assets 539,427,133 Uncertain Total Estimated Realisable Values 573,864,189 Uncertain 2.3 Less payable in advance of secured creditor(s) Nil Nil Amounts owing for employee entitlements as detailed in schedule E 2.4 Less amounts owing and secured by debenture or circular security interest over assets Nil Nil 2.5 Less preferential claims ranking behind secured creditors as detailed in schedule F Nil Nil 2.6 Balances owing to partly secured creditors as detailed in schedule G Nil Nil Total Claims (Nil) Security Held 573,864,189 2.7 Creditors (unsecured) as detailed in schedule H (452,941,359 ) (452,941,359 ) Amount claimed (452,941,359 ) 2.8 Contingent assets Estimated to produce as detailed in schedule I (Uncertain) 717,605,385 Uncertain 2.9 Contingent liabilities Estimated to rank as detailed in schedule J (Uncertain) (717,605,385 ) Uncertain x Estimated deficiency or ¨ Estimated surplus ¨ Subject to costs of administration or ¨ Subject to costs of liquidation Share capital AUD 243,196,660 Issued 207,767,660 Paid Up AUD 243,196,660 ASIC Form 507 30 January 2012 Page 4 of 11  

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedules A, B, C are to show the method and manner of arriving at the valuation of the assets. SCHEDULE A—INTERESTS IN LAND Address and description of property (1) Valuation Estimated realisable value Valuation for rating purposes Particulars of tenancy Where possession of deeds may be obtained Short particulars of title USD USD USD N/A SCHEDULE B—SUNDRY DEBTORS (INCLUDING LOAN DEBTORS) Amount Particulars of Amount owing realisable Deficiency security (If Explanation of Name and address of debtor* USD USD USD any) held deficiency Receivables Miscellaneous debtors 2,519 Uncertain Uncertain Nil Inter-company loans Boart Longyear Limited 28,474,027 Uncertain Uncertain Nil Note*: Address for all debtors is 2640 West 1700 South, SALT LAKE CITY UT 84104, UNITED STATES SCHEDULE C—OTHER ASSETS Amount Cost Realisable Description of deposit or investment USD USD Deposits Other long term deposits 2,611,881 Uncertain Investments Other long term notes 3,348,629 Uncertain ASIC Form 507 30 January 2012 Page 5 of 11 

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedule D is to show the method and manner of arriving at the valuation of the assets. SCHEDULE D-ASSETS SUBJECT TO SECURITY INTERESTS Description of asset Date security interest given Description of security interest Holder of security interest Terms of repayment Valuation Estimated realizable value Amount owing under security interest USD USD USD Assets subject to specific security interests Shareholdings in the companies specified in Table 1 of Appendix 1 24-Oct-14 First ranking charge over non-working capital assets (“NWCA”) Willington Trust, National Association as Administrative Agent for the Term Loan B Securities Agreement Guarantor of the obligations of Boart Longyear Management Pty Ltd. (“BLYM") 539,427.133 Uncertain Nil As above 27-Sep-13 First ranking charge over NWCA U.S Bank National Association as Trustee and Collateral Agent of the 10% Senior Secured Notes Guarantor of the obligations of BLYM Nil As above 21-Oct-14 Second ranking charge over NWCA Willington Trust, National Association as Administrative Agent for the Term Loan A Securities Agreement Guarantor of the obligations of BLYM Nil ASIC Form 507 30 January 2012 Page 6 of 11  

 2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedule D is to show the method and manner of arriving at the valuation of the assets. SCHEDULE D-ASSETS SUBJECT TO SECURITY INTERESTS (CONTINUED) Description of asset Date security interest given Description of security interest Holder of security interest Terms of repayment Valuation Estimated realizable value Amount owing under security interest Amounts owing and secured by debenture or circular security interest Sundry Debtors (Para 2.1(b)) 21-Oct-14 First ranking charge over WCA Willington Trust, National Association as Administrative Agent for the Term Loan A Securities Agreement Guarantor of the obligations of BLYM 28,476,546 Uncertain Nil Other Assets (Para 2.1(h)) 5,960,510 Uncertain As above 27-Sep-13 Second ranking charge over WCA U.S Bank National Association as Trustee and Collateral Agent of the 10% Senior Secured Notes Guarantor of the obligations of BLYM Nil As above 24-Oct-14 Second ranking charge over WCA Willington Trust, National Association as Administrative Agent for the Term Loan B Securities Agreement Guarantor of the obligations of BLYM Nil Employee’s name and address Wages Holiday pay Long service leave Estimated liability USD USD USD USD N/A SCHEDULE F—PREFERENTIAL CREDITORS (OTHER THAN THOSE DETAILED IN SCHEDULE E) Name and address of preferential creditor Description of amount owing Amount owing USD N/A ASIC Form 507 30 January 2012 Page 7 of 11

2 Continued... Assets and liabilities SCHEDULE G—PARTLY SECURED CREDITORS Name and address of creditor Particulars of security held Name of security Estimated value of security Amount owing to creditor Amount estimated to rank as unsecured N/A USD USD USD SCHEDULE H-UNSECURED CREDITORS Name and address of creditor * Amount claimed by creditor USD Amount admitted as owing USD Reasons for difference between amount claimed and admitted (if any) Intercompany accounts payable Boart Longyear Company (3,535,625) (3,535,625) N/A Boart Longyear Limited (900,791) (900,791) N/A Boart Longyear Suisse Sarl (2,464,193) (2,464,193) N/A Longyear South Africa (Pty) Ltd (782,077) (782,077) N/A Longyear TM, Inc, (322,540) (322,540) N/A Intercompany loans Boart Longyear Management Pty Limited (275,735,024) (275,735,024) N/A Boart Longyear Australia Pty Ltd (166,957,608) (166,957,608) N/A Other intercompany liabilities Patagonia Drill Mining Services S.A. (2,233,892) (2,233,892) N/A Other Miscellaneous creditors (9,609) (9,609) N/A Note *: Address for all creditors is 2640 West 1700 South, SALT LAKH CITY UT 84104, UNITED STATES SCHEDULE l-CONTINGENT ASSETS Description of asset Gross asset Estimated to produce USD USD Potential claims against Boart Longyear Management Pty Ltd (“BLYM") as the principal creditor and the co-guarantors of BLYM's obligations under the 7s, 10s, TLA and TLB debt facilities. A list of the co-guarantors and the facilities are shown in Schedule J. No more than 717,605,385 Uncertain ASIC Form 507 30 January 2012 Page 8 of 11

2 Continued... Assets and liabilities SCHEDULE J-CONTINGENT LIABILITIES Name and address of creditor Nature of liability Gross liability Estimated rank for USD USD Debt facilities U.S Bank National Association 170 South Main Street, Suite 200 Salt Lake City, Utah 84101 Unsecured guarantee of Boart Longyear Management Pty Ltd's ("BLYM") obligations under the 7% Senior Notes ("7s") debt facility 281,672,475 Uncertain U.S Bank National Association 170 South Main Street, Suite 200 Salt Lake City, Utah 84101 Secured guarantee of BLYM's obligations under the 10% Senior Secured Notes ("10s") debt facility 193,745,047 Uncertain Willington Trust, National Association. c/- Minter Ellison Lawyers, Aurora Place, 88 Phillip Street, Sydney NSW 2000 Partly secured guarantee of BLYM's obligations under the Term Loan A ("TLA") debt facility 109,456,642 Uncertain Willington Trust, National Association, cl- Minter Ellison Lawyers, Aurora Place, 88 Phillip Street, Sydney NSW 2000 Partly secured guarantee of BLYM’s obligations under the Term Loan B (“TLB") debt facility 132,731,221 Uncertain Related entities – all debt facilities * Boart Longyear Management Pty Limited Boart Longyaer Limited Boart Longyear Australia Pty Limited Potential claims for contribution by co-guarantor of BLYM's obligations under the 7s, 10s, TLA and TLB debt facilities No more than 717,605,385 Uncertain Longyear Holdings, Inc. Longyear TM, Inc. Longyear TM, Inc. Boart Longyear Company Boart Longyear Manufacturing and Distribution Inc. (f/k/a Boart Longyear Manufacturing USA Inc.) Boart Longyear Canada Longyear Canada, ULC Boart Longyear Manufacturing Canada Ltd. Boart Longyear Suisse Sarl Boart Longyear Chile Limitada Boart Longyear Comercializadora Limitada Boart Longyear S.A.C. Related entities – limited debt facilities * BLY IP, Inc Potential claim for contribution by co-guarantor of BLYM's obligations under the TLA and TLB debt facilities No more than 242,187,863 Uncertain Note *: Address for all related entity and miscellaneous contingent creditors is 2640 West 1700 South, SALT LAKE CITY UT 84104, UNITED STATES ASIC Form 507 30 January 2012 Page 9 of 11  

3 Annexure For the purposes of the statement in Form 507A only. *Strike out whichever is inapplicable This is the annexure of ______ pages marked "A" referred to in the Statement verifying report signed by me*/us’ and dated as follows. Date of the Statement verifying report ¨ [D ¨ D] / ¨ [M ¨ M] / ¨ [Y ¨ Y] Each signatory must complete and sign a copy of Form 507A Statement verifying report under s475(1) to be lodged with Form 507 Name Signature Name Signature Name Signature Certification I certify that the particulars contained in the above report as to affairs are true to the best of my knowledge and belief. Name FABRIZIO RASETTI Capacity DIRECTOR & SECRETARY Signature Date signed 21 / 04 / 17 [D D] [M M] [Y Y] Lodgement Send completed and signed forms to: Australian Securities and Investments Commission, PO Box 4000, Gippsland Mail Centre VIC 3841. For more information Web www.asic.gov.au Need help? www.asic.gov.au/question Telephone 1300 300 630 Or lodge the form online by visiting the ASIC website www.asic.gov.au ASIC Form 507 30 January 2012 Page 10 of 11  

Appendix 1 SCHEDULE D–ASSETS SUBJECT TO SECURITY INTERESTS (Investment in subsidiaries) Name of subsidiary Valuation Estimated realisable value USD USD Boart Longyear Manufacturing Canada Ltd 2,496,203 Uncertain Aqua Drilling & Grouting Pty Limited 1,608,020 Uncertain NorthWest Drilling Pty Limited 11,560,790 Uncertain Boart Longyear Zambia Limited 1,363,311 Uncertain Boart Longyear Argentina S.A. 5,345,210 Uncertain Boart Longyear de Mexico S.A de C.V. 16,353,358 Uncertain Boart Longyear Products KZ LLP 126 Uncertain Boart Longyear Drilling Services KZ LLP 126 Uncertain Longyear South Africa (Pty) Limited 10,976,434 Uncertain BLY Gabon S.A. 755,567 Uncertain BLY Sierra Leone Ltd 126 Uncertain BLY Cote d'Ivoire S.A. 126 Uncertain Boart Longyear Liberia Corporation 127 Uncertain BLY Madagascar S.A. 126 Uncertain BLY Senagal S.A. 126 Uncertain BLY EMEA UK Holdings Ltd 62,357,278 Uncertain Boart Longyear Columbia S.A.S. 1,579,868 Uncertain Boart Longyear (Cambodia) Ltd 1,406 Uncertain Boart Longyear Company 192,543,392 Uncertain Boart Longyear Comercializadora Limitada 24,164,417 Uncertain Boart Longyear Chile Limitada 6,601,127 Uncertain Boart Longyear BV 18,454,192 Uncertain Boart Longyear Suisse Sarl 74,956 Uncertain Boart Longyear Financial Services SAR 20,414 Uncertain Boart Longyear Saudi Arabia Ltd 27,863 Uncertain Grimwood Davies Pty Ltd 53,115,861 Uncertain Drillcorp Pty Limited 130,006,583 Uncertain ASIC Form 507 30 January 2012 Page 11 of 11  

Australian Securities & Investments Commission Form 507 Corporations Act 2001 421A(1) & (2), 429(2)(b) & (c), 475(1) & (7), 497(5) Report as to affairs Related forms: 507A Statement verifying report under s475(1) 911 Verification or certification of a document If there is Insufficient space in any section of the form, you may photocopy the relevant page(s) and submit as part of this lodgement Company details Company name Boart Longyear Australia Pty Ltd ACN/ABN 000 401 025 Lodgement details Who should ASIC contact if there is a query about this form? ASIC registered agent number (if a applicable) An image of this form will be available as part of the public register. Firm/organisation Ashurst Australia Contact name/position description Telephone number (during business hours) Ged Kane/ Associate (02) 9258 6808 Email address (optional) Ged.kane@ashurst.com Postal address Ashurst Australia, 5 Martin Place Suburb/City State/Territory Postcode SYDNEY NSW 2000 Directions This report is to be made as at the following dates: (a) where prepared by the managing controller under s421 A(1) — a day not later than 30 days before the day when it is prepared (b) where submitted to a controller under s429(2) — the control day, or (c) where submitted to a liquidator or to a provisional liquidator under s475(1) — the date of the winding–up order or, if the liquidator specifies an earlier date, that date. This report is to be submitted by, and verified by a statement in writing made by, the following person, in accordance with Form 507A — where the statement is made out for the purposes of s475(1) — a person referred to In that subsection. Regulation 5.2.01 requires the copy of this report that is lodged with the Australian Securities and Investments Commission to be certified in writing as a true copy of the original report: (a) for a copy lodged for the purposes of s429(2)(c) — by the controller of property of the corporation: or (b) for a copy lodged for the purposes of s475(7) — by the liquidator/provisional liquidator of the company. NOTE: Form 911 is prescribed for this purpose. ASIC Form 507 30 January 2012  

1 Reason for report To be completed by the external administrator or □ Managing controller of property—s421A(1) ASIC internal form code person who must lodge this form with ASIC If a receiver and manager Date of appointment 507G [D D] [M M] [Y Y] If a person who is in possession, or has control of the property for the purpose of enforcing a security interest Date when person took control 507H [D D] [M M] [Y Y] Appointment of controller — s429(2)(b) Under s429(2)(c)(i) a notice setting out any comments relating to the report, or a statement that no comment is made, should accompany the report. A Form 911 Verification or certification of a document should also be lodged. Date of receipt of report 507F [D D] [M M] [Y Y] Appointment of liquidator/provisional liquidator by the Court — s475(1) A Form 911 Verification or certification of a document should also be lodged Date of receipt of report 507C [D D] [M M] [Y Y] Appointment of liquidator — creditors voluntary winding-up — s497(5) 507D Date report was received by liquidator [D D] [M M] [Y Y] ASIC Form 507 30 January 2012  

2 Assets and liabilities Date specified under the relevant section as the date of report (see Directions on page 1) 31 / 03 / 17 [D D] [M M] [Y Y] 2.1 Assets not specifically charged Valuation Estimated (net book amount) Realisable Values USD USD (a) interest in land as detailed in schedule A Nil Nil (b) sundry debtors as detailed in schedule B 195,770,018 Uncertain (c) cash on hand 129 Uncertain (d) cash at bank 3,566,872 Uncertain (e) stock as detailed in annexed inventory 26,945,550 Uncertain (f) work in progress as detailed in annexed inventory 893,066 Uncertain (g) plant and equipment as detailed in inventory Nil Nil (h) other assets as detailed In schedule C 82,497 Uncertain Sub Total 227,258,132 Uncertain ASIC Form 507 30 January 2012  

2 Continued… Assets and liabilities Valuation Estimated (net book amount) Realisable Values USD USD 2.2 Assets subject to specific security interests, as specified in schedule D excluding PPSR security assets 16,347,941 Uncertain Less amounts owing as detailed in schedule D excluding amounts owed to PPSR security creditors Nil Nil Total Assets 16,347,941 Uncertain Total Estimated Realisable Values 243,606,073 Uncertain 2.3 Less payable in advance of secured creditor(s) (6,604,056) (6,604,056) Amounts owing for employee entitlements as detailed in schedule E 2.4 Less amounts owing and secured by debenture or circular security interest over assets Nil Nil 2.5 Less preferential claims ranking behind secured creditors as detailed in schedule F Nil Nil 2.6 Balances owing to partly secured creditors as detailed in schedule G Nil Nil Total Claims (6,604,056) Security Held 237,002,017 2.7 Creditors (unsecured) as detailed in schedule H including creditors with PPSR security interests (99,413,496) (99,400,674) Amount claimed (99,413,496) 2.8 Contingent assets Estimated to produce as detailed in schedule I (Uncertain) 735,001,960 Uncertain 2.9 Contingent liabilities Estimated to rank as detailed in schedule J (Uncertain) (737,052,676) Uncertain Estimated deficiency or Estimated surplus Subject to costs of administration or Subject to costs of liquidation Share capital AUD 296,559,926 Issued 296,559,926 Paid Up AUD 296,559,926 ASIC Form 507 30 January 2012  

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedules A, B, C are to show the method and manner of arriving at the valuation of the assets. SCHEDULE A—INTERESTS IN LAND Address and (1) Valuation Estimated Valuation for Particulars of Where possession Short particulars description of realisable value rating purposes tenancy of deeds may be of title property obtained USD USD USD N/A SCHEDULE B-SUNDRY DEBTORS (INCLUDING LOAN DEBTORS) Name and address of debtor Amount owing Amount realisable Deficiency Particulars of security Explanation of USD USD USD (if any) held deficiency Trade receivables * The name and address of each trade debtor is set out in Appendix 1 14,667,192 14,667,192 Uncertain Nil Trade receivable adjustment 3,482,747 3,482,747 Uncertain Nil Inter-company receivables ** Boart Longyear Burkina Faso Sarl 1,808,945 Uncertain Uncertain Nil BLY Mali SA 1,336,458 Uncertain Uncertain Nil PT Boart Longyear 827,586 Uncertain Uncertain Nil Boart Longyear Manufacturing And Distribution Inc. 681,622 Uncertain Uncertain Nil Boart Longyear Limitada (Brazil) 524,029 Uncertain Uncertain Nil Boart Longyear Chile Ltda 491,869 Uncertain Uncertain Nil Boart Longyear Canada. ULC 261,906 Uncertain Uncertain Nil Geoserv Pesquisas Geologicas SA 233,887 Uncertain Uncertain Nil Boart Longyear (Drc) Sprl 153,137 Uncertain Uncertain Nil BLY Ghana Limited 67,811 Uncertain Uncertain Nil Boart Longyear Senegal Sarl 56,665 Uncertain Uncertain Nil Longyear South Africa (Pty) Ltd 51,935 Uncertain Uncertain Nil Boart Longyear (NZ) Limited 32,238 Uncertain Uncertain Nil Boart Longyear Drilling Products (Wuxi) Co Ltd 9,131 Uncertain Uncertain Nil Boart Longyear International BV 2,553 Uncertain Uncertain Nil Boart Longyear Company 2,228 Uncertain Uncertain Nil Boart Longyear Suisse Sarl (Singapore) 53,955 Uncertain Uncertain Nil Boart Longyear Limited 1,164 Uncertain Uncertain Nil ASIC Form 507 30 January 2012  

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedules A, B, Care to show the method and manner of arriving at the valuation of the assets. SCHEDULE B-SUNDRY DEBTORS (INCLUDING LOAN DEBTORS) (CONT) Name and address of debtor Amount owing USD Amount realisable USD Deficiency USD Particulars of security (if any) held Explanation of deficiency Inter-company receivables (cont) ** Boart Longyear LLC - Russia 607 Uncertain Uncertain Nil Boart Longyear Sac 549 Uncertain Uncertain Nil Boart Longyear Suisse Sarl (Belgium) 519 Uncertain Uncertain Nil Boart Longyear Suisse Sarl (Switzerland) 942 Uncertain Uncertain Nil Boart Longyear Zambia Ltd 1,982 Uncertain Uncertain Nil FX Revaluation 978,216 Uncertain Uncertain Nil Inter-company loans** Votraint No. 1609 Pty Ltd 166.964,350 Uncertain Uncertain Nil Boart Longyear Management Pty Ltd 3,075,795 Uncertain Uncertain Nil Note *: Amount realisable from trade receivables is an estimate only Note**: Address for all Inter-company debtors is 2640 West 1700 South. SALT LAKE CITY UT 84104, UNITED STATES SCHEDULE C-OTHER ASSETS Description of deposit or investment Amount Cost Realisable USD USD Miscellaneous GST on bad debt provisions 31,899 Uncertain Long term financial assets 50,598 Uncertain ASIC Form 507 30 January 2012  

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedule D is to show the method and manner of arriving at the valuation of the assets. SCHEDULE D–ASSETS SUBJECT TO SECURITY INTERESTS Description of Date Description of Holder of Terms of Valuation Estimated Amount owing asset security security interest security interest repayment realisable under security interest value interest given USD USD USD Assets subject to specific security interests Shareholdings in ACN 066 301 531 Pty Ltd and Boart Longyear Holdings (Thailand) Co. Ltd 24-Oct-14 First ranking charge over non-working capital assets ("NWCA") Willington Trust, National Association as Administrative Agent for the Term Loan B Guarantor of the obligations of Boart Longyear Management Pty Ltd. 586,330 Uncertain Nil Plant and equipment detailed in Appendix 2 Securities Agreement ("BLYM") 15,761,611 Uncertain As above 27-Sep-13 First ranking charge over NWCA U.S Bank National Association as Trustee and Collateral Agent of the 10% Senior Secured Notes Guarantor of the obligations of BLYM Nil As above 21-Oct-14 Second ranking charge over NWCA Willington Trust, National Association as Administrative Agent for the Term Loan A Securities Agreement Guarantor of the obligations of BLYM Nil As above 1-May-15 Third ranking charge over NWCA PNC Bank, National Association in its capacity as ABL Agent for the Asset Back Loan Intercreditor Agreement Guarantor of the obligations of BLYM Nil 16-Mar-17 Willington Trust, National Association Guarantor of the obligations of BLYM Nil ASIC Form 507 30 January 2012

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedule D is to show the method and manner of arriving at the valuation of the assets. SCHEDULE D–ASSETS SUBJECT TO SECURITY INTERESTS (CONTINUED) Description of asset Date security interest given Description of security interest Holder of security interest Terms of repayment Valuation USD Estimated realisable value USD Amount owing under security interest USD Amounts owing and secured by debenture or circular security interest The assets specified at paragraph 2.1 1-May-15 First ranking charge over working capital assets ("WCA") PNC Bank, National Association in its capacity as ABL Agent for the Asset Back Loan Guarantor of the obligations of BLYM 227,258,132 Uncertain Nil As above 21-Oct-14 Second ranking charge over WCA Willington Trust, National Association as Administrative Agent for the Term Loan A Securities Agreement Guarantor of the obligations of BLYM Nil As above 27-Sep-13 Third ranking charge over WCA U.S Bank National Association as Trustee and Collateral Agent of the 10% Senior Secured Notes Guarantor of the obligations of BLYM Nil As above 24-Oct-14 Third ranking charge over WCA Willington Trust, National Association as Administrative Agent for the Term Loan B Securities Agreement Guarantor of the obligations of BLYM Nil 16-Mar-17 Willington Trust, National Association Guarantor of the obligations of BLYM Nil ASIC Form 507 30 January 2012

2 Continued... Assets and liabilities SCHEDULES If this report is made for the purposes of subsection 497(5), Schedule D is to show the method and manner of arriving at the valuation of the assets. SCHEDULE D–ASSETS SUBJECT TO SECURITY INTERESTS (CONT) Description of asset Date security interest given Description of security interest Holder of security interest Terms of repayment Valuation Estimated realisable value Amount owing under security interest USD USD USD PPSR* Motor Vehicles Various Various Various Unavailable Unavailable Unavailable Unavailable Other goods Various Various Various Unavailable Unavailable Unavailable Unavailable Note*: PPSR Each "Motor Vehicle" and "Other Goods" security interest as registered on the Personal Property Securities Register is set out in Appendices 3 and 4 SCHEDULE E–CLAIMS BY EMPLOYEES Employee’s name and address Wages * Holiday pay Long service leave Estimated liability USD USD USD USD The name and place of residence of each employee is set out in Appendix 5 (1,719,099) (1,904,256) (2,980,701) (6,604,056) Note*: Wages Includes wages, bonuses and superannuation SCHEDULE F—PREFERENTIAL CREDITORS (OTHER THAN THOSE DETAILED IN SCHEDULE E) Name and address of preferential creditor Description of amount owing Amount owing USD N/A ASIC Form 507 30 January 2012

2 Continued... Assets and liabilities Name and address of creditor Particulars of security held Name of security Estimated value of security Amount owing to creditor Amount estimated to rank as unsecured USD USD USD AC Adelaide Industrial CT Pty Limited 16 Eagle Drive, Jandakot WA Bank Guarantee 995,037 Nil Nil SCHEDULE H–UNSECURED CREDITORS Name and address of creditor* Amount claimed by creditor USD Amount admitted as owing USD Reasons for difference between amount claimed and admitted (if any) Trade payables The name and address of each trade creditor is set out in Appendix 6 (4,168,584) (4,168,584) N/A Intercompany payables* BLY Mali SA (35,671) (35,671) N/A Boart Longyear (NZ) Limited (1,224) (1,224) N/A Boart Longyear Burkina Faso Sarl (691) (691) N/A Boart Longyear Company (74,749) (74,749) N/A Boart Longyear Drilling Products (Wuxi) Co Ltd (270) (270) N/A Boart Longyear Manufacturing And Distribution Inc. (1,372,847) (1,372,847) N/A Boart Longyear Manufacturing And Distribution Inc. (802,471) (802.471) N/A (Canada) Boart Longyear Manufacturing And Distribution Inc. (307,064) (307,064) N/A (Germany) Boart Longyear Manufacturing And Distribution Inc. (966,169) (966,169) N/A (Poland) Boart Longyear Saudi Arabia Ltd (4,361) (4,361) N/A Boart Longyear Senegal Sarl (2,215) (2,215) N/A Pt Boart Longyear (22,307) (22,307) N/A Boart Longyear Bv (7,617) (7,617) N/A Boart Longyear Llc - Russia Ooo (2,563) (2,563) N/A Boart Longyear Suisse Sarl (Poland) (1,674) (1,674) N/A Boart Longyear Suisse Sarl (Belgium) (525) (525) N/A Bly Sierra Leone Ltd (293) (293) N/A Boart Longyear Poland Spolka Zoo (81) (81) N/A Boart Longyear Canada (69) (69) N/A Accounts payable intercompany adjustment (1,733,002) (1,733,002) N/A ASIC Form 507 30 January 2012

2 Continued... Assets and liabilities Name and address of creditor* Amount claimed by creditor USD Amount admitted as owing USD Reasons for difference between amount claimed and admitted (if any) Intercompany loans* Boart Longyear Management Pty Ltd (16,838,255) (16,838,255) N/A Boart Longyear Limited (Thailand) (2,773,472) (2,773,472) N/A North West Drilling Pty Limited (23,194,612) (23,194,612 N/A Boart Longyear Limited (43,685,569) (43,685,569) N/A Accrued liabilities Audit Fees (78,825) (78,825) N/A Commissions - Third Party (49,311) (49,311) N/A Deferred Revenue (93,000) (93,000) N/A Drilling Svc Job Costs (129,238) (129,238) N/A Liabilities - Other GRNI (794,404) (794,404) N/A Liability - Inventory Received (121,035) (121,035) N/A Materials & Supplies (111,445) (111,445) N/A Sales Volume Rebates (145,174) (145,174) N/A Workers Compensation (303,812) (303,812) N/A Office of State Revenue (Multiple) (548,176) (548,176) N/A ATO, 32 Martin Place, Sydney (795,579) (795,579) N/A Advance Payments Received (247,142) (247,142) N/A Note*: Address for all group creditors is 2640 West 1700 South, SALT LAKE CITY UT 84104. UNITED STATES SCHEDULE I—CONTINGENT ASSETS Description of asset Gross asset Estimated to produce USD USD Potential claims against Boart Longyear Management Pty Ltd ("BLYM'') as the principal creditor and the co-guarantors of BLYM's obligations under the 7s, 10s, ABL, TLA and TLB debt facilities. A list of the co-guarantors and the facilities are shown in Schedule J. No more than 735,001,960 Uncertain ASIC Form 507 30 January 2012

2 Continued... Assets and liabilities SCHEDULE J—CONTINGENT LIABILITIES Name and address of creditor Nature of liability Gross liability Estimated rank for USD USD Debt facilities U.S Bank National Association 170 South Main Street, Suite 200 Salt Lake City, Utah 84101 Unsecured guarantee of Boart Longyear Management Pty Ltd’s ("BLYM") obligations under the 7% Senior Notes ("7s") debt facility 281,672,476 Uncertain U.S Bank National Association 170 South Main Street, Suite 200 Salt Lake City, Utah 84101 Secured guarantee of BLYM's obligations under the 10% Senior Secured Notes ("10s") debt facility 193,745,047 Uncertain PNC Bank, National Association, 2100 Ross Avenue, Suite 1850 Dallas, Texas 75201 Secured guarantee of BLYM's obligations under the Asset Backed Loan ("ABL") debt facility 17,396,571 Uncertain Willington Trust, National Association, c/- Minter Ellison Lawyers, Aurora Place, 88 Phillip Street, Sydney NSW 2000 Partly secured guarantee of BLYM's obligations under the Term Loan A (“TLA") debt facility 109,456,643 Uncertain Willington Trust, National Association, c/- Minter Ellison Lawyers, Aurora Place, 88 Phillip Street, Sydney NSW 2000 Partly secured guarantee of BLYM's obligations under the Term Loan B (“TLB") debt facility 132,731,223 Uncertain Related entities - all debt facilities * Votraint No. 1609 Pty Limited Boart Longyear Limited Longyear Holdings, Inc. Potential claims for contribution by co-guarantors of BLYM's obligations under the 7s, 10s, ABL, TLA and TLB debt facilities No more than 735,001,960 Uncertain Longyear TM, Inc. Longyear TM, Inc. Boart Longyear Company Boart Longyear Manufacturing and Distribution Inc. (f/k/a Boart Longyear Manufacturing USA Inc.) Boart Longyear Canada Longyear Canada, ULC Boart Longyear Manufacturing Canada Ltd, Boart Longyear Suisse Sarl Boart Longyear Chile Limitada Boart Longyear Comercializadora Limitada Boart Longyear S.A.C. Related entities – limited debt facilities * BLY IP, Inc Potential claim for contribution by co- guarantor of BLYM's obligations under the TLA and TLB debt facilities No more than 242,187,866 Uncertain Miscellaneous Various Rent for residual term of properly leases 2,050,716 Uncertain Note *: Address for all related entity and miscellaneous contingent creditors is 2640 West 1700 South, SALT LAKE CITY UT 84104, UNITED STATES ASIC Form 507 30 January 2012

3 Annexure For the purposes of the statement in Form 507A only. *Strike out whichever is inapplicable This is the annexure of ___ pages marked "A" referred to in the Statement verifying report signed by me*/us* and dated as follows. Date of the Statement verifying report / / [D D] [M M] [Y Y] Each signatory must complete Name and sign a copy of Form 507A Statement verifying report under s475(1) to be lodged with Signature Form 507 Name Signature Name Signature Certification I certify that the particulars contained in the above report as to affairs are true to the best of my knowledge and belief. Name FABRIZIO RASETTI Capacity DIRECTOR + SECRETARY Signature Date signed 2 1 / 0 4 / 1 7 [D D] [M M] [Y Y] Lodgement Send completed and signed forms to: For more information Australian Securities and Investments Commission, Web www.asic.gov.au PO Box 4000, Gippsland Mail Centre VIC 3841. Need help? www.asic.gov.au/question Telephone 1300 300 630 Or lodge the form online by visiting the ASIC website www.asic.gov.au ASIC Form 507 30 January 2012  

Inventory

INVENTORY —STOCK AND WORK IN PROGRESS

				Estimated
				reaslisable
	Valuation			value
Inventory class	USD			USD
Raw Materials		176,878		Uncertain
Finished Goods		19,637,642		Uncertain
Inventory in Transit		7,860,830		Uncertain
Coring Rods		786,669		Uncertain
Inventory Reserve		(1,516,469	)	Uncertain

				Estimated
				reaslisable
	Valuation			value
Work in progress class	USD			USD
Standard Manufacturing		1,246		Uncertain
Material		675,236		Uncertain
Material Overhead		76,411		Uncertain
Resource		96,929		Uncertain
Outside Processing		(11,753	)	Uncertain
Resource Overheads		54,997		Uncertain

ASIC Form 507 30 January 2012 Page 1 of 1

Appendix 1

SCHEDULE B—SUNDRY DEBTORS (INCLUDING LOAN DEBTORS)

(Trade receivables)

				Amount
				realisable				Particulars of
		Amount owing		(estimate)		Deficiency		security (if any)		Explantion of
Name	Address	USD		USD		USD		held		deficiency
Abc Products (Rocky) Pty Ltd	Po Box 5749 Central Queensland QLD 4702		129,373		129,373		Nil		Nil		N/A
Atlas Copco Australia Pty Ltd	Po Box 6444 Blacktown NSW 2148		6,968		6,968		Nil		Nil		N/A
Australian Contract Mining Pty Ltd	Po Box 1063 West Perth WA 6872		74,014		74,014		Nil		Nil		N/A
Barminco Ltd	Locked Bag 2500 WA 6936		189,491		189,491		Nil		Nil		N/A
Endeavour Coal Pty Ltd	Gpo Box 2352 Adelaide SA 5001		260		260		Nil		Nil		N/A
D & B Supplies	Po Box 2490 Boulder WA 6432		24,820		24,820		Nil		Nil		N/A
Drillers World Aust Pty Ltd	Po Box 142 Berowra NSW 2081		9,945		9,945		Nil		Nil		N/A
Titeline Drilling Pty Ltd	Po Box 1189 Wendouree Village VIC 3355		97,745		97,745		Nil		Nil		N/A
Ground Test Pty Ltd	Po Box 472 West Ryde NSW 2114		45		45		Nil		Nil		N/A
Metropolitan Collieries Pty Ltd	Gpo Box 5101 Brisbane QLD 4000		3,640		3,640		Nil		Nil		N/A
Lennard Drilling Pty Ltd	8 Bonnick Road Gympie QLD 4570		7,209		7,209		Nil		Nil		N/A
Foraco Australia Pty Ltd	Po Box 173 Welshpool Dc WA 6986		890		890		Nil		Nil		N/A
Mount Isa Mines Ltd	Private Mail Bag 6 Mount Isa QLD 4825		32,317		32,317		Nil		Nil		N/A
Perilya Broken Hill Ltd	Po Box 5001 Broken Hill NSW 2880		9,834		9,834		Nil		Nil		N/A
Starwest Pty Ltd	Po Box 677 Heathcote VIC 3523		5,853		5,853		Nil		Nil		N/A
Swick Mining Services Pty Ltd	Po Box 74 Guildford WA 6935		1,571,869		1,571,869		Nil		Nil		N/A
T & C Hedges Consulting Pty Ltd T A Cks Engineerin	Po Box 422 Stawell		8,430		8,430		Nil		Nil		N/A
Wallis Drilling Co Pty Ltd	54 Beaconsfield Av Midvale WA 6056		2,319		2,319		Nil		Nil		N/A
Numac Drilling Services Pty Ltd	Po Box 502 Altona North VIC 3025		4,561		4,561		Nil		Nil		N/A
South Western Drilling Pty Ltd	59-63 Wood Street South Geelong VIC 3220		3,586		3,586		Nil		Nil		N/A
Ddh1 Drilling Pty Ltd	123 Stirling Highway North Fremantle WA 6159		735,938		735,938		Nil		Nil		N/A
Sandvik Mining And Construction Australia Pty Ltd	Locked Bag 6 Milton Bc QLD 4064		56,646		56,646		Nil		Nil		N/A
West Core Drilling Pty Ltd	Po Box 3035 Bassendean WA 6942		1,446		1,446		Nil		Nil		N/A
Hagstrom Drilling Pty Ltd	29 Sorbonne Crescent Canningvale WA 6155		4,698		4,698		Nil		Nil		N/A
Terra Drilling Pty Ltd	Po Box 2529 Boulder WA 6432		11,090		11,090		Nil		Nil		N/A
Petersons Industries Pty Ltd	1 Gumbowie Avenue Edwardstown SA 5039		94		94		Nil		Nil		N/A
Drilltec Pty Ltd	Po Box 401 Morwell VIC 3840		1,593		1,593		Nil		Nil		N/A
Ausdrill Northwest Pty Ltd	20-22 Gauge Circuit Canning Vale WA 6155		1,343		1,343		Nil		Nil		N/A
A J Lucas Coal Technologies	Locked Bag 1670 North Ryde Be NSW 2113		184,542		184,542		Nil		Nil		N/A
Central Queensland Exploration Drilling	Po Box 1027 Yeppoon QLD 4703		454		454		Nil		Nil		N/A
Drill Equip Pty Ltd	Unit 5/42 Banksia Road Welshpool WA 6106		2,244		2,244		Nil		Nil		N/A
Edm Supplies Pty Ltd	Po Box 9861 Frenchville QLD 4701		371		371		Nil		Nil		N/A
Ausdrill Ltd	Po Box 2131 Boulder WA 6432		24,543		24,543		Nil		Nil		N/A

ASIC Form 507 30 January 2012 Page 1 of 5

Appendix 1

SCHEDULE B—SUNDRY DEBTORS (INCLUDING LOAN DEBTORS)

(Trade receivables)

Amount

realisable

Particulars of

Amount owing

(estimate)

Deficiency

security (if any)

Explantion of

Name

Address

USD

USD

USD

held

deficiency

Core Drilling Services Pty Ltd

24 Emerald Rd Maddington WA 6109

33,392

33,392

Nil

Nil

N/A

Australian Mineral & Waterwell Drilling

193 Yambil St Griffith NSW 2680

(61

)

(61

)

Nil

Nil

N/A

National Drilling Equipment Pty Ltd

27 Walters Way Forrestfield WA 6058

14,502

14,502

Nil

Nil

N/A

Australian Exploration Engineering

404 Orrong Road Welshpool WA 6106

6,269

6,269

Nil

Nil

N/A

Gn Drill-Tech Trading Sdn Bhd

30-1-2, Jalan 1/101C, Cheras Business Centre Kuala Lumpur SA 56100

(10,037

)

(10,037

)

Nil

Nil

N/A

Pt Indoboreq

Jalan Wahid Hasyim 42 Jakarta 10340

27,618

27,618

Nil

Nil

N/A

Msm Group Llc

Po Box 154 Ulaanbaatar NSW 211213

135,210

135,210

Nil

Nil

N/A

Porgera Joint Venture

Po Box 7050 Cairns QLD 4870

30,637

30,637

Nil

Nil

N/A

Pt Pontil Indonesia

Gedung 18 Office Park, 21St Floor Unit 21C Pasar Minggu-Jakarta Selatan 12520

562,707

562,707

Nil

Nil

N/A

Semirara Mining & Power Corporation

Semirara, Caluya, Antique 5700 Makati City

96,532

96,532

Nil

Nil

N/A

Super Abrasive Diamond Tools Ltd

Po Box 1326 Pukekohe NSW 2340

11,666

11,666

Nil

Nil

N/A

Foraco Pacifique

5 Rue Saint Pierre Noumea Cedex 98863

788

788

Nil

Nil

N/A

Major Drilling Mongolia Xxk

Po Box - 28/462, 1St Floor, Ulaanbaatar 15140

4,762

4,762

Nil

Nil

N/A

Pre-Mat Drilling Supplies Pte Ltd

48 Toh Guan Road East 06-107 Enterprise Singapore WA 608586

2,553

2,553

Nil

Nil

N/A

Construction Mining Solutions Pte Ltd

31 Cantonment Road Singapore 89747

8,594

8,594

Nil

Nil

N/A

C. Melchers & Co.(Thailand) Ltd.

15Th Floor, Sorachai Building, Bangkok 10110

2,833

2,833

Nil

Nil

N/A

International Purveyors Inc

Po Box 616 Cairns QLD 4870

50

50

Nil

Nil

N/A

Hirado Kinzoku Kogyo Co Ltd

6-22-37 Tsukiguma, Hakata-Ku Fukuoka 812-0858

2,117

2,117

Nil

Nil

N/A

Kcgm Pty Ltd

Accounts Payable D Kalgoorlie WA 6430

63,020

63,020

Nil

Nil

N/A

Quarry Mining & Construction Equipment Pty Ltd

9/14 Yangan Drive Beresfield NSW 2322

109,144

109,144

Nil

Nil

N/A

Cream Mining Pty Ltd

Po Box 1801 Broome WA 6725

1,237

1,237

Nil

Nil

N/A

Nifty Copper Pty Ltd

Po Box 1959 West Perth WA 6872

122,228

122,228

Nil

Nil

N/A

Pybar Mining Services Pty Ltd

1668-1670 Forest Road Orange NSW 2800

398,348

398,348

Nil

Nil

N/A

Carpentaria Gold Pty Ltd

Level 4 Perth WA 6000

36,723

36,723

Nil

Nil

N/A

Hoang Viet Equip & Tech Service Co Ltd

1013 Giai Phong Hanoi

32,816

32,816

Nil

Nil

N/A

Bhp Billiton Olympic Dam Corp Pty Ltd

Shared Services Centre Adelaide SA 5001

776,770

776,770

Nil

Nil

N/A

Hmr Drilling Services Pty Ltd

Po Box 1657 Kalgoorlie WA 6433

83,395

83,395

Nil

Nil

N/A

ASIC Form 507 30 January 2012 Page 2 of 5

Appendix 1

SCHEDULE B—SUNDRY DEBTORS (INCLUDING LOAN DEBTORS)

(Trade receivables)

				Amount
				realisable				Particulars of
		Amount owing		(estimate)		Deficiency		security (if any)		Explantion of
Name	Address	USD		USD		USD		held		deficiency
Fmr Investments Pty Ltd	Suite 11, Level 2 South Perth WA 6951		52,117		52,117		Nil		Nil		N/A
Superior Pump Technologies	23/31 Governor Macquarie Drive Chipping Norton NSW 2170		344		344		Nil		Nil		N/A
East West Drilling & Mining Supplies Pty Ltd	1 Spratt Road Caboolture QLD 4510		574,346		574,346		Nil		Nil		N/A
Radco Group Australia Pty Ltd	27 Carlisle Row Fishing Point NSW 2283		2,133		2,133		Nil		Nil		N/A
Australian Underground Drilling	132 Point Walter Road Bicton WA 6157		87,583		87,583		Nil		Nil		N/A
Oz Minerals Prominent Hill Operations Pty Ltd	Level 1, 162 Greenhill Road Parkside SA 5063		296,425		296,425		Nil		Nil		N/A
Pilbara Iron Company (Services) Pty Ltd	Accounts Payable Pilbara Iron Co Tuggerranong NSW 2091		2,094,656		2,094,656		Nil		Nil		N/A
Action Drill & Blast	Po Box 592 Welshpool WA 6986		18,191		18,191		Nil		Nil		N/A
Fugro Geotechnical Services Limited	8-10, 10/F., Worldwide Industrial Centre, 43- 47 Shan Mei Street Fo Tan		277		277		Nil		Nil		N/A
Industrea Mining Equipment	Lot 3 Corner Of Tyson Road And Capricorn Hwy Emerald QLD 4720		43,485		43,485		Nil		Nil		N/A
Deep Exploration Technologies Crc	26 Butler Boulevard SA 5950		301,889		301,889		Nil		Nil		N/A
Quickturn Engineering	32 Harris Rd Malaga WA 6090		4,707		4,707		Nil		Nil		N/A
Minexplore Trading Services Inc.	Minexplore Trading Services Inc. BIk.2 Lot 5 Gumamela Street Paranaque City 1713		460		460		Nil		Nil		N/A
First Drilling Group	38 Truganina Road Malaga WA 6090		284		284		Nil		Nil		N/A
Quest Exploration Drilling (Philippines) Inc.	Unit 1501 Robinsons Equitable Tower Adb Ave Ortigas Center Pasig City 1605		756		756		Nil		Nil		N/A
Drillmech Pty Ltd	32 Davison Street Maddington WA 6109		9,152		9,152		Nil		Nil		N/A
Maca Mining Pty Ltd	45 Division Street Welshpool WA 6106		5,707		5,707		Nil		Nil		N/A
Srg Mining (Australia) Pty Ltd	Level 1, 338 Barker Road Subiaco WA 6008		1,186		1,186		Nil		Nil		N/A
Globaltech Corp Pty Ltd	Po Box 1703 Canningvale WA 6970		2,049		2,049		Nil		Nil		N/A
Arrium Mining And Materials	Po Box 21 Whyalla SA 5600		761,352		761,352		Nil		Nil		N/A
Mccullochs Hydraulic Engineers	Po Box 17 Bendigo VIC 3552		3,522		3,522		Nil		Nil		N/A
Mdgi Philippines Inc.	Unit A, Block 10, Lot 1, Golden Mile Ave Corner 6Th St. Carmona QLD 4116		38,077		38,077		Nil		Nil		N/A
Northparkes Mine	Po Box 995 Parkes NSW 2870		259,512		259,512		Nil		Nil		N/A
Rock On Ground Pty Ltd	Po Box 1718 Malaga WA 6944		7,239		7,239		Nil		Nil		N/A
Nqm Gold 2 Pty Ltd	Po Box 1435 Charters Towers QLD 4820		33,663		33,663		Nil		Nil		N/A
Matrix Drilling Pty Ltd	Atft A, M & P Mercuri Unit Trust Wantirna South VIC 3152		1,936		1,936		Nil		Nil		N/A

ASIC Form 507 30 January 2012 Page 3 of 5

Appendix 1

SCHEDULE B—SUNDRY DEBTORS (INCLUDING LOAN DEBTORS)

(Trade receivables)

Amount

realisable

Particulars of

Amount owing

(estimate)

Deficiency

security (if any)

Explantion of

Name

Address

USD

USD

USD

held

deficiency

Ozland Drilling And Blasting Services Pty Ltd

7 Hensbrook Loop Forrestdale WA 6112

20,917

20,917

Nil

Nil

N/A

Strategic Drilling Services

Po Box 98 Ivanhoe VIC 3079

29,519

29,519

Nil

Nil

N/A

Srs Drilling Pty Ltd T/A Star Drilling

184 Holt Parade Thomastown VIC 3074

118,944

118,944

Nil

Nil

N/A

Minexplore Hong Kong Ltd

Unit 1010 Miramar Tower Hong Kong

22,252

22,252

Nil

Nil

N/A

Challenger Gold Operations Pty Ltd

Po Box 453 Torrensville SA 5067

316,651

316,651

Nil

Nil

N/A

Indochina Geotechnics Jsc

Cong Ty Cp Dia Ky Thuat Dong Duong Ha Noi 10000

27,896

27,896

Nil

Nil

N/A

Andy Well Mining Pty Ltd

Po Box 284 West Perth WA 6872

244,785

244,785

Nil

Nil

N/A

Mckay Drilling

42 Prestige Parade Wangara WA 6065

161,820

161,820

Nil

Nil

N/A

Dilong Drilling Services

12 Lysaght St Acacia Ridge QLD 4110

52,014

52,014

Nil

Nil

N/A

Gsm Mining Company Pty Ltd

Locked Bag 15 East Perth WA 6850

416,958

416,958

Nil

Nil

N/A

Axis Mining Technology Pty Ltd

Unit 2, 47 Mccoy St Myaree WA 6154

2,301

2,301

Nil

Nil

N/A

Groundwave Drilling Services Pty Ltd

Po Box 6455 Highton VIC 3216

43,079

43,079

Nil

Nil

N/A

Mitchell Operations Pty Ltd

Po Box 3250 Darra QLD 4076

119,041

119,041

Nil

Nil

N/A

Integrated Industrial Mining Supplies

Po Box 699 Belmont WA 6984

10,604

10,604

Nil

Nil

N/A

Redbeam Enterprises Pty Ltd T/A Wt Hydraulics

Po Box 1452 Bibra Lake Dc WA 6965

10

10

Nil

Nil

N/A

Bm Alliance Coal Operations Pty Ltd

Bma Crinum Mine Emerald QLD 4170

1,235,596

1,235,596

Nil

Nil

N/A

Flexidrill Construction Ltd

28B Washdyke Flat Road Timaru TAS 7910

(4,133

)

(4,133

)

Nil

Nil

N/A

Stock Xchange

Po Box 1106 West Perth

1,462

1,462

Nil

Nil

N/A

Eternal Mining Co. Ltd.

40, Shwe Thara Phee Yeik Mon Housing

35,264

35,264

Nil

Nil

N/A

Bgc Contracting Pty Ltd

Bgc Koolyanobbing Mining Services Osborne Park WA 6017

54,587

54,587

Nil

Nil

N/A

Titeline Drilling International Pty Ltd

3 Production Drive Alfredton VIC 3350

2,765

2,765

Nil

Nil

N/A

Downhole Surveys

Po Box 357 Bentley WA 6982

50,163

50,163

Nil

Nil

N/A

Murchison Blasting Services

41 Carra Place Wanneroo WA 6065

20,834

20,834

Nil

Nil

N/A

Westauz Mining Pty Ltd

3 O'Byrne Crescent Broadwood WA 6430

4,049

4,049

Nil

Nil

N/A

Berendsen Fluid Power Pty Ltd (Australia)

31 Powers Road Seven Hills

25,601

25,601

Nil

Nil

N/A

Drc Drilling Pty Ltd

Po Box 8 Dubbo NSW 2830

36,230

36,230

Nil

Nil

N/A

Terratest

81 Egerton Street Silverwater NSW 2128

3,201

3,201

Nil

Nil

N/A

Jarahfire Drilling

62 Oroya Street Boulder WA 6432

23,530

23,530

Nil

Nil

N/A

Hahn Electrical Contracting Pty Ltd

Po Box 1624 Kalgoorlie WA 6430

4,580

4,580

Nil

Nil

N/A

Ausdrill International & Management Services Pty L

Po Box 1540 Canning Vale

19,997

19,997

Nil

Nil

N/A

ASIC Form 507 30 January 2012 Page 4 of 5

Appendix 1

SCHEDULE B—SUNDRY DEBTORS (INCLUDING LOAN DEBTORS)

(Trade receivables)

Amount

realisable

Particulars of

Amount owing

(estimate)

Deficiency

security (if any)

Explantion of

Name

Address

USD

USD

USD

held

deficiency

Evolution Mining Pty Ltd

Level 28 Sydney NSW 2000

642,673

642,673

Nil

Nil

N/A

St Ives Gold Mining Company Pty Ltd

Level 5, 50 Colin Street West Perth WA 6005

153,165

153,165

Nil

Nil

N/A

Budd Exploration Drilling

181 Anderson Road Echunga SA 5251

20,368

20,368

Nil

Nil

N/A

Australian Nickel Investments Pty Ltd

Level 2, 2 Kings Park Road West Perth WA 6005

942

942

Nil

Nil

N/A

Topdrill Core Pty Ltd

Po Box 10310 Kalgoorlie WA 6433

88,589

88,589

Nil

Nil

N/A

Xnavitech

Po Box 51 Perth WA 6984

16,555

16,555

Nil

Nil

N/A

K92 Mining Ltd

Po Box 1290 Lae, Morobe Province QLD 411

(81,265

)

(81,265

)

Nil

Nil

N/A

Hampton Transport Services Pty Ltd

Po Box 1660 Kalgoorlie WA 6430

12,694

12,694

Nil

Nil

N/A

Heathgate Resources

Level 7 25 Grenfell Street Adelaide SA 5000

7,506

7,506

Nil

Nil

N/A

Wallis Drilling (Kenya) Limited

C/- Cosec Associates, 1St Floor,Chaka Place, Nairobi

5,531

5,531

Nil

Nil

N/A

Salt Lake Mining

Po Box 221 Kambalda WA 6442

38,131

38,131

Nil

Nil

N/A

Mass Drill And Blast

15 Draper Place Kewdale WA 6105

13,435

13,435

Nil

Nil

N/A

Wa Drill Hire Solutions Pty Ltd

19 Muscat Terrace The Vines WA 6069

(917

)

(917

)

Nil

Nil

N/A

Dynamic Drill And Blast

Po Box 1617 Wangara WA 6947

18,166

18,166

Nil

Nil

N/A

Mt Magnet Drilling

Po Box 200 Wanneroo WA 6946

976

976

Nil

Nil

N/A

Xcel Drilling Pty Ltd

Po Box 2268 Boulder WA 6432

13,321

13,321

Nil

Nil

N/A

Australasian Mining Services Pty Ltd

Po Box 2380 Midland WA 6936

15,528

15,528

Nil

Nil

N/A

T&N Drilling

2 Berry Way Kagoorlie WA 6430

303

303

Nil

Nil

N/A

Msd Mining Solutions Pty Ltd

60 Harpin Street Bendigo

9,319

9,319

Nil

Nil

N/A

General Petroleum Oil Tools

Po Box 333 Carina QLD 4405

11,968

11,968

Nil

Nil

N/A

Quest Exploration Drilling (Png) Ltd

Hbs Compound, 11 Mile-Okuk Highway Lae Mp

412

412

Nil

Nil

N/A

Jsw Australia Pty Ltd

5 Corokia Way Bibra Lake WA 6430

13,445

13,445

Nil

Nil

N/A

Ssab Megastore

Togafu’Afu’A Apia, Samoa Po Box 667 Apia

12,204

12,204

Nil

Nil

N/A

Mmg Dugald River Pty Ltd

Po Box 069 Cloncurry QLD 4824

75,617

75,617

Nil

Nil

N/A

Laserbond Limited

112 Levels Road Cavan SA 5094

114,977

114,977

Nil

Nil

N/A

ASIC Form 507 30 January 2012 Page 5 of 5

Appendix 2

SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS

(Plant and Equipment)

			Estimated
			reaslisable
	Valuation *		value
Description of asset class	USD		USD
Building & Improvements		1,585,654	Uncertain
Machinery & Equipment		11,299,438	Uncertain
Furniture & Fixtures		54,636	Uncertain
Computer Hardware		130,459	Uncertain
Software		19,252	Uncertain
Transport Equipment		875,637	Uncertain
Rods & Casing-Rotary		3,042	Uncertain
Construction in Progress		1,793,493	Uncertain

Note * Valuation

Includes accumulated depreciation

ASIC Form 507 30 January 2012 Page 1 of 1

Appendix 3

SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS

(Motor vehicles)

							Estimated		Amount
							realisable		owing under security
Date security	Description of		Terms of		Valuation		value		interest
interest given	security interest	Holder of security interest	repayment		USD		USD		USD
2012
30-Jan-12	PPSR 201112201520594	Coates Hire Operations Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201201050340853	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201201050341503	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201112190294340	Orix Australia Corporation Limited		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201201120858897	Toyota Material Handling Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201201120872631	Toyota Material Handling Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201201120878579	Toyota Material Handling Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201201120898628	Toyota Material Handling Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201201300229017	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201201300237452	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
2-Feb-12	PPSR 201202020000813	Energy Power Systems Australia Pty. Limited.		Unavailable		Unavailable		Unavailable		Unavailable
10-Feb-12	PPSR 201202100056738	Hastings Deering (Australia) Limited		Unavailable		Unavailable		Unavailable		Unavailable
3-Apr-12	PPSR 201204030057522	Commonwealth Bank Of Australia		Unavailable		Unavailable		Unavailable		Unavailable
28-Jun-12	PPSR 201206280050861	Dexalaw Pty. Ltd.		Unavailable		Unavailable		Unavailable		Unavailable
28-Jun-12	PPSR 201206280051152	Dexalaw Pty. Ltd.		Unavailable		Unavailable		Unavailable		Unavailable
12-Feb-13	PPSR 201302120026540	Orix Australia Corporation Limited		Unavailable		Unavailable		Unavailable		Unavailable
14-May-13	PPSR 201305140064076	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
14-May-13	PPSR 201305140065595	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
5-Jun-13	PPSR 201306050058494	Hastings Deering (Australia) Limited		Unavailable		Unavailable		Unavailable		Unavailable
2013
14-Oct-13	PPSR 201310140021569	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
14-Oct-13	PPSR 201310140039332	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
14-Oct-13	PPSR 201310140046785	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
14-Oct-13	PPSR 201310140048633	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
14-Oct-13	PPSR 201310140052583	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
14-Oct-13	PPSR 201310140052596	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
14-Oct-13	PPSR 201310140054131	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
15-Oct-13	PPSR 201310150015670	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
22-Oct-13	PPSR 201310220018952	Crown Equipment Pty. Limited		Unavailable		Unavailable		Unavailable		Unavailable
7-Dec-13	PPSR 201312070012183	GCS Personnel Services Pty Ltd, BFA Investments Pty Ltd, GCS integrated Services Pty Ltd, GCS Facades Pty Ltd, GCS Hire Pty Ltd, C.A.S.C. Constructions Pty. Ltd., Global Construction Services Limited, Safe And Sound Scaffolding Pty Ltd, GCS Access Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
20-Dec-13	PPSR 201312200131648	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
20-Dec-13	PPSR 201312200131669	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
20-Dec-13	PPSR 201312200131682	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
20-Dec-13	PPSR 201312200131703	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
20-Dec-13	PPSR 201312200131885	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
20-Dec-13	PPSR 201312200131956	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable

ASIC Form 507 30 January 2012 Page 1 of 3

Appendix 3

SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS

(Motor vehicles)

							Estimated		Amount
							realisable		owing under security
Date security	Description of		Terms of		Valuation		value		interest
interest given	security interest	Holder of security interest	repayment		USD		USD		USD
2014
14-Apr-14	PPSR 201404140066184	Hertz Australia Pty. Limited		Unavailable		Unavailable		Unavailable		Unavailable
1-May-14	PPSR 201405010080415	Rentco Transport Equipment Rentals Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
24-Oct-14	PPSR 201410240080594	Toyota Material Handling Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
2015
12-Feb-15	PPSR 201502120071101	Hubtex Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
3-Mar-15	PPSR 201503030003531	Kingmill Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
20-Aug-15	PPSR 201508200016152	Crown Equipment Pty. Limited		Unavailable		Unavailable		Unavailable		Unavailable
7-Oct-15	PPSR 201510070039353	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
15-Oct-15	PPSR 201510150080294	Drilling Tools Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
15-Oct-15	PPSR 201510150080633	Drilling Tools Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
19-Nov-15	PPSR 201511190072752	Brooks Hire Service Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
26-Nov-15	PPSR 201511260038349	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-Nov-15	PPSR 201511300015010	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-Nov-15	PPSR 201511300022948	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-Nov-15	PPSR 201511300044728	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-Nov-15	PPSR 201511300065191	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
2-May-16	PPSR 201605020032347	Allightsykes Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
2016
20-Jul-16	PPSR 201607200049844	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
20-Jul-16	PPSR 201607200049871	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
17-Aug-16	PPSR 201608170049650	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
17-Aug-16	PPSR 201608170049700	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
17-Aug-16	PPSR 201608170049716	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
17-Aug-16	PPSR 201608170049744	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
17-Aug-16	PPSR 201608170049763	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
17-Aug-16	PPSR 201608170049904	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
17-Aug-16	PPSR 201608170049927	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
18-Aug-16	PPSR 201608180046735	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
24-Aug-16	PPSR 201608240053730	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
24-Aug-16	PPSR 201608240054482	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
24-Aug-16	PPSR 201608240059749	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-Aug-16	PPSR 201608300054785	Goldfields Crane Hire Pty Ltd, Cranecorp Australia Pty Ltd, Cranecorp Australia (Nt) Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
12-Sep-16	PPSR 201609120056258	WA. Truck And Machinery Repairs Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
26-Sep-16	PPSR 201609260013721	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
26-Sep-16	PPSR 201609260014095	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
10-Oct-16	PPSR 201610100014415	Freo Group Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
12-Oct-16	PPSR 201610120047625	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
21-Oct-16	PPSR 201610210022429	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
21-Oct-16	PPSR 201610210028563	Boart Longyear Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
21-Oct-16	PPSR 201610210028571	Boart Longyear Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
21-Oct-16	PPSR 201610210028585	Boart Longyear Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable

ASIC Form 507 30 January 2012 Page 2 of 3

Appendix 3

SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS

(Motor vehicles)

							Estimated		Amount
							realisable		owing under security
Date security	Description of		Terms of		Valuation		value		interest
interest given	security interest	Holder of security interest	repayment		USD		USD		USD
21-Oct-16	PPSR 201610210028592	Boart Longyear Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
21-Oct-16	PPSR 201610210028626	Boart Longyear Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
3-Nov-16	PPSR 201611030072377	Sime Darby Fleet Services Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
4-Nov-16	PPSR 201611040058916	Energy Drilling Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
4-Nov-16	PPSR 201611040058937	Energy Drilling Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
1-Dec-16	PPSR 201612010044141	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
29-Dec-16	PPSR 201612290052316	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
29-Dec-16	PPSR 201612290052328	Custom Service Leasing Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
2017
17-Jan-17	PPSR 201701170011369	BL DDL II Holdings Pty. Ltd.		Unavailable		Unavailable		Unavailable		Unavailable
17-Jan-17	PPSR 201701170011526	BL DDL II Holdings Pty. Ltd.		Unavailable		Unavailable		Unavailable		Unavailable

ASIC Form 507 30 January 2012 Page 3 of 3

Appendix 4

SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS

(Other goods)

							Estimated		Amount
							realisable		owing under
Date security	Description of		Terms of		Valuation		value		security interest
interest given	security interest	Holder of security interest	repayment		USD		USD		USD
2012
30-Jan-12	PPSR 201201101143974	B P Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201201101177209	CastroI Australia Pty. Limited		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201112230886703	Centrel Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201112201520709	Coates Hire Operations Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201201101124864	Global Metals Pty. Limited		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201112203263773	Royal Wolf Trading Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-12	PPSR 201201300026555	Sandvik Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
1-Feb-12	PPSR 201202010261360	Imdex International Pty Ltd, Flexit Australia Pty Ltd, Australian Mud Company Pty Ltd, Reflex Technology International Pty Ltd, Reflex Instruments Asia Pacific Pty Ltd, Imdex Ltd, Wildcat Chemicals Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
2-Feb-12	PPSR 201202020000639	Energy Power Systems Australia Pty. Limited.		Unavailable		Unavailable		Unavailable		Unavailable
2-Feb-12	PPSR 201202020045101	Ryco Hydraulics Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
2-Feb-12	PPSR 201202020129977	Ausco Modular Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
9-Feb-12	PPSR 201202090016610	Onsite Rental Group Operations Pty Ltd, Redstar Equipment Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
10-Feb-12	PPSR 201202100056423	Hastings Deering (Australia) Limited		Unavailable		Unavailable		Unavailable		Unavailable
11-Feb-12	PPSR 201202110019080	Atlas Specialty Metals Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
14-Feb-12	PPSR 201202140074440	A.P. Eagers Limited		Unavailable		Unavailable		Unavailable		Unavailable
14-Feb-12	PPSR 201202140082486	A.P. Eagers Limited		Unavailable		Unavailable		Unavailable		Unavailable
20-Feb-12	PPSR 201202200024821	MTU Detroit Diesel Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
20-Feb-12	PPSR 201202200024832	MTU Detroit Diesel Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
22-Feb-12	PPSR 201202220071705	Fuelfix Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
27-Feb-12	PPSR 201202270049149	Phoenix Steel Sales Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
28-Feb-12	PPSR 201202280091782	Metal Manufactures Limited		Unavailable		Unavailable		Unavailable		Unavailable
1-Mar-12	PPSR 201203010012563	AW Distribution Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
9-Mar-12	PPSR 201203090000649	Ausco Modular Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
21-Mar-12	PPSR 201203210042969	Bluescope Distribution Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-Mar-12	PPSR 201203300045652	Citi-Steel Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
13-Apr-12	PPSR 201204130042504	Msa (Aust.) Pty. Limited		Unavailable		Unavailable		Unavailable		Unavailable
19-Apr-12	PPSR 201204190052443	Applied Industrial Technologies Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
11-May-12	PPSR 201205110020636	Royal Wolf Trading Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
16-May-12	PPSR 201205160080784	Acrow Formwork And Scaffolding Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
21-May-12	PPSR 201205210041683	Dotmar Epp Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
22-May-12	PPSR 201205220009932	Onsite Rental Group Operations Pty Ltd, Redstar Equipment Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
22-May-12	PPSR 201205220018639	Cevol Industries Pty. Limited		Unavailable		Unavailable		Unavailable		Unavailable
27-Jun-12	PPSR 201206270029679	Adsteel Brokers Pty. Ltd.		Unavailable		Unavailable		Unavailable		Unavailable
28-Jun-12	PPSR 201206280037785	Totalrubber Ltd		Unavailable		Unavailable		Unavailable		Unavailable
28-Jun-12	PPSR 201206280050583	Dexalaw Pty. Ltd.		Unavailable		Unavailable		Unavailable		Unavailable
28-Jun-12	PPSR 201206280050738	Dexalaw Pty. Ltd.		Unavailable		Unavailable		Unavailable		Unavailable
10-Aug-12	PPSR 201208100046387	Protector Alsafe Pty Ltd, Lawvale Pty. Ltd., J. Blackwood & Son Pty Ltd, Coregas Pty Ltd, Bullivants Pty Limited, Meredith Distribution Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable

ASIC Form 507 30 January 2012 Page 1 of 5

Appendix 4

SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS

(Other goods)

							Estimated		Amount
							realisable		owing under
Date security	Description of		Terms of		Valuation		value		security interest
interest given	security interest	Holder of security interest	repayment		USD		USD		USD
23-Aug-12	PPSR 201208230019378	Sandvik Mining And Construction Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
23-Aug-12	PPSR 201208230019846	Sandvik Mining And Construction Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
27-Aug-12	PPSR 201208270065962	Ullrich Aluminium Pty. Limited, Wintec Aluminium Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
31-Oct-12	PPSR 201210310154598	Pacific Brands Holdings Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
2013
14-Jan-13	PPSR 201301140017647	Sullair Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
27-Feb-13	PPSR 201302270093036	Data#3 Limited.		Unavailable		Unavailable		Unavailable		Unavailable
27-Feb-13	PPSR 201302270093058	Data#3 Limited.		Unavailable		Unavailable		Unavailable		Unavailable
3-May-13	PPSR 201305030017112	Coventry Group Limited		Unavailable		Unavailable		Unavailable		Unavailable
29-May-13	PPSR 201305290107088	Reflex Instruments Asia Pacific Pty Ltd, Flexit Australia Pty Ltd, Australian Mud Company Pty Ltd, Imdex Ltd, Reflex Technology International Pty Ltd, Wildcat Chemicals Australia Pty Ltd, Imdex International Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-May-13	PPSR 201305300020627	Blastone International (Aust) Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
5-Jun-13	PPSR 201306050020354	Coventry Group Limited		Unavailable		Unavailable		Unavailable		Unavailable
5-Jun-13	PPSR 201306050058345	Hastings Deering (Australia) Limited		Unavailable		Unavailable		Unavailable		Unavailable
25-Jun-13	PPSR 201306250040736	Red Dale Holdings Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
28-Jun-13	PPSR 201306280020700	B.L. Shipway & Co Pty. Ltd		Unavailable		Unavailable		Unavailable		Unavailable
28-Jun-13	PPSR 201306280035740	B.L. Shipway & Co Pty. Ltd		Unavailable		Unavailable		Unavailable		Unavailable
28-Jun-13	PPSR 201306280051750	B.L. Shipway & Co Pty. Ltd		Unavailable		Unavailable		Unavailable		Unavailable
28-Jun-13	PPSR 201306280057039	B.L. Shipway & Co Pty. Ltd		Unavailable		Unavailable		Unavailable		Unavailable
31-Jul-13	PPSR 201307310040343	Sealed Air Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
23-Aug-13	PPSR 201308230206040	PFERD Australia Pty. Ltd.		Unavailable		Unavailable		Unavailable		Unavailable
23-Aug-13	PPSR 201308230213310	PFERD Australia Pty. Ltd.		Unavailable		Unavailable		Unavailable		Unavailable
6-Sep-13	PPSR 201309060064738	Bullivants Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
9-Sep-13	PPSR 201309090093951	Metal Manufactures Limited		Unavailable		Unavailable		Unavailable		Unavailable
19-Sep-13	PPSR 201309190071961	APS Adelaide Profile Services Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
23-Sep-13	PPSR 201309230062220	Goodyear & Dunlop Tyres (Aust) Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
9-Oct-13	PPSR 201310090016165	Ricoh Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
16-Oct-13	PPSR 201310160070313	Global Metals Pty. Limited		Unavailable		Unavailable		Unavailable		Unavailable
22-Oct-13	PPSR 201310220056220	DDH 1 Drilling Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
22-Nov-13	PPSR 201311220025351	Atco Structures & Logistics Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
27-Nov-13	PPSR 201311270084333	Ricoh Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
5-Dec-13	PPSR 201312050029565	Coventry Group Limited		Unavailable		Unavailable		Unavailable		Unavailable
7-Dec-13	PPSR 201312070011911	GCS Access Pty Ltd, GCS Hire Pty Ltd, Global Construction Services Limited, C.A.S.C. Constructions Pty. Ltd., BFA Investments Pty Ltd, GCS Personnel Services Pty Ltd, Safe And Sound Scaffolding Pty Ltd, GCS Integrated Services Pty Ltd, GCS Facades Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
23-Dec-13	PPSR 201312230051023	Automotive Holdings Group Limited		Unavailable		Unavailable		Unavailable		Unavailable

ASIC Form 507 30 January 2012 Page 2 of 5

Appendix 4

SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS

(Other goods)

							Estimated		Amount
							realisable		owing under
Date security	Description of		Terms of		Valuation		value		security interest
interest given	security interest	Holder of security interest	repayment		USD		USD		USD
2014
15-Jan-14	PPSR 201401150172675	ID Warehouse Pty. Limited, A.C.N. 076 986 171 Pty Ltd, Brady Australia Pty Ltd, Carroll Australasia Pty Ltd, Accidental Health & Safety Pty Ltd, A.C.N. 065 227 894 Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
15-Jan-14	PPSR 201401150173248	ID Warehouse Pty. Limited, Accidental Health & Safety Pty Ltd, Brady Australia Pty Ltd, Carroll Australasia Pty Ltd, A.C.N. 065 227 894 Pty Ltd, A.C.N. 076 986 171 Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
20-Jan-14	PPSR 201401200063341	Xylem Water Solutions Australia Limited		Unavailable		Unavailable		Unavailable		Unavailable
20-Jan-14	PPSR 201401200063599	Xylem Water Solutions Australia Limited		Unavailable		Unavailable		Unavailable		Unavailable
29-Jan-14	PPSR 201401290351729	Cook Industrial Minerals Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
29-Jan-14	PPSR 201401290581025	Boc Limited		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-14	PPSR 201401300220556	Mason Duflex Displays Pty. Limited, Build Run Repair (Australia) Pty Ltd, Visy Paper Pty. Ltd., MPC Quikpak Pty Ltd, Visypet Pty. Ltd., Visy Recycling Australia Pty Ltd, Ace Print And Display Pty Limited, Regional Recyclers Pty Ltd, Salvage Paper Pty Ltd, Visy Tech Systems Pty. Ltd., Visy Logistics Pty Ltd, Visy Glama Pty Ltd, Visy Board Proprietary Limited, Visy Cartons Pty Ltd, Visy Trading Singapore Pte Ltd, Visy Technology Systems Pty Ltd, Visy Pulp And Paper Pty. Ltd., Visy Packaging Pty. Ltd., Visy CDL Services Pty Ltd, , P & I Pty. Ltd., Build Run Repair Pte Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-Jan-14	PPSR 201401300220637	Visy Packaging Pty. Ltd., Regional Recyclers Pty Ltd, Visy Recycling Australia Pty Ltd, Salvage Paper Pty Ltd, Visy Trading Singapore Pte Ltd, Visy CDL Services Pty Ltd, Visy Cartons Pty Ltd, Build Run Repair (Australia) Pty Ltd, Visy Paper Pty. Ltd., Visy Glama Pty Ltd, Visypet Pty. Ltd., Visy Board Proprietary Limited, Visy Technology Systems Pty Ltd, Visy Tech Systems Pty. Ltd., Visy Pulp And Paper Pty. Ltd., MPC Quikpak Pty Ltd, Build Run Repair Pte Ltd, Mason Duflex Displays Pty. Limited, P & I Pty. Ltd., Visy Logistics Pty Ltd, Ace Print And Display Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
31-Jan-14	PPSR 201401310239503	Caps Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
28-Feb-14	PPSR 201402280079292	Bridgestone Earthmover Tyres Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
2015
5-Feb-15	PPSR 201502050047432	Komatsu Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
19-Feb-15	PPSR 201502190010061	Ricoh Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
25-Feb-15	PPSR 201502250029976	Lubricon Hydrive Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
25-Feb-15	PPSR 201502250030031	Lubricon Hydrive Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
2-Apr-15	PPSR 201504020030493	Cadia Group Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
28-Apr-15	PPSR 201504280031293	The Trustee For D & H Trust & The Trustee For J & T Family Trust		Unavailable		Unavailable		Unavailable		Unavailable

ASIC Form 507 30 January 2012 Page 3 of 5

Appendix 4

SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS

(Other goods)

							Estimated		Amount
							realisable		owing under
Date security	Description of		Terms of		Valuation		value		security interest
interest given	security interest	Holder of security interest	repayment		USD		USD		USD
12-May-15	PPSR 201505120042518	Reflex Technology International Pty Ltd, Wildcat Chemicals Australia Pty Ltd, Imdex International Pty Ltd, Australian Mud Company Pty Ltd, Flexit Australia Pty Ltd, Imdex Ltd, Reflex Instruments Asia Pacific Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
13-May-15	PPSR 201505130061973	ERS Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
4-Jun-15	PPSR 201506040013829	Dynamics G-Ex Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
10-Jun-15	PPSR 201506100038281	Acrow Formwork And Scaffolding Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
16-Jun-15	PPSR 201506160041269	S.C.F Group Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
22-Jun-15	PPSR 201506220012649	Mitchell Equipment Hire Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
21-Jul-15	PPSR 201507210019379	Holcim (Australia) Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
20-Aug-15	PPSR 201508200016168	Crown Equipment Pty. Limited		Unavailable		Unavailable		Unavailable		Unavailable
8-Sep-15	PPSR 201509080020538	Fero Reinforcing Pty Ltd, Fero Group Pty Ltd, Fero Group (Queensland) Pty Ltd, Fero Strata Systems Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
22-Sep-15	PPSR 201509220080288	Royal Wolf Trading Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
7-Oct-15	PPSR 201510070039369	Toyota Finance Australia Ltd		Unavailable		Unavailable		Unavailable		Unavailable
12-Oct-15	PPSR 201510120069607	Delta Galvanizing Pty. Ltd., Webforge Australia Pty Ltd, Gratings Dga Pty Ltd, Galvline Tasmania Pty. Ltd., Valmont Group Holdings Pty Ltd, Industrial Galvanizers Corporation Pty Ltd, Hi-Light Industries Pty. Ltd., Valmont Irrigation Australia Pty Ltd, Donhad Pty Ltd, Locker Group Pty Ltd, Valmont Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
15-Oct-15	PPSR 201510150080239	Drilling Tools Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
15-Oct-15	PPSR 201510150080406	Drilling Tools Australia Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
26-Nov-15	PPSR 201511260047449	Automotive Holdings Group Limited		Unavailable		Unavailable		Unavailable		Unavailable
7-Dec-15	PPSR 201512070044687	Beehive Vinyl Products Pty. Ltd.		Unavailable		Unavailable		Unavailable		Unavailable
2016
22-Mar-16	PPSR 201603220058750	Imdex International Pty Ltd, Reflex Instruments Asia Pacific Pty Ltd, Wildcat Chemicals Australia Pty Ltd, Flexit Australia Pty Ltd, Australian Mud Company Pty Ltd, Imdex Ltd, Reflex Technology International Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
22-Mar-16	PPSR 201603220059169	Wildcat Chemicals Australia Pty Ltd, Reflex Instruments Asia Pacific Pty Ltd, Imdex International Pty Ltd, Flexit Australia Pty Ltd, Australian Mud Company Pty Ltd, Imdex Ltd, Reflex Technology International Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
19-Apr-16	PPSR 201604190051359	Hard Metal Industries Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
2-May-16	PPSR 201605020032352	Allightsykes Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
13-May-16	PPSR 201605130058786	Vanrook Unit Trust, Meneghello Nominees Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
30-Aug-16	PPSR 201608300054666	Cranecorp Australia (Nt) Pty Ltd, Cranecorp Australia Pty Ltd, Goldfields Crane Hire Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
12-Sep-16	PPSR 201609120055955	W.A. Truck And Machinery Repairs Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
13-Sep-16	PPSR 201609130029897	Allied Pumps Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
10-Oct-16	PPSR 201610100014458	Freo Group Pty Ltd		Unavailable		Unavailable		Unavailable		Unavailable
4-Nov-16	PPSR 201611040058928	Energy Drilling Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable
4-Nov-16	PPSR 201611040058944	Energy Drilling Australia Pty Limited		Unavailable		Unavailable		Unavailable		Unavailable

ASIC Form 507 30 January 2012 Page 4 of 5

Appendix 4

SCHEDULE D—ASSETS SUBJECT TO SECURITY INTERESTS

(Other goods)

							Estimated		Amount
							realisable		owing under
Date security	Description of		Terms of		Valuation		value		security interest
interest given	security interest	Holder of security interest	repayment		USD		USD		USD
2017
17-Jan-17	PPSR 201701170011104	BL DDL LI Holdings Pty. Ltd.		Unavailable		Unavailable		Unavailable		Unavailable
17-Jan-17	PPSR 201701170011209	BL DDL LI Holdings Pty. Ltd.		Unavailable		Unavailable		Unavailable		Unavailable

ASIC Form 507 30 January 2012 Page 5 of 5

Appendix 5

SCHEDULE E—CLAIMS BY EMPLOYEES

(Employee's name and address, holiday pay, long service leave)

		Holiday Pay*		Long Service leave *
Employee's name	Address	USD		USD
Van Batenburg, Mr. Aaron Micheal	Pinjarra WA 6208		Nil		1,133
Vande Kamp, Mr. Brock Christian	McCracken SA 5211		Nil		1,681
McLatchey, Mr. Christian James	Reynella SA 5161		Nil		260
Horsman, Mr. Jeffery Wayne Jeff	Langwarrin VIC 3910		Nil		2,645
Cross, Mr. Simon John	St Georges SA 5064		Nil		1,235
Duniam, Mr. Russell Kenneth	Yanchep WA 6035		Nil		1,727
Beatson, Mr. Samuel John Sam	Darwin NT 800		Nil		368
Busbridge, Mr. Adam John	Fingal Head NSW 2487		Nil		673
Taylor, Mr. Geb Geordie geb	Sisters Beach TAS 7321		Nil		383
Waipara, Mr. Justin Paul	Sippy Downs QLD 4556		Nil		615
McKinnon, Mr. David Amos Dave	Launceston TAS 7250		Nil		429
Bartlett, Mr. Kit Joseph	Port Melbourne Vic 3207		Nil		908
Evans, Mr. Christopher Michael Chris	Gladstone SA 5473		Nil		2,218
Palmer, Mr. Keith Loutuna	Scarborough WA 6019		Nil		578
Duthie, Mr. Shane Lee	Muchea WA 6501		Nil		313
Mitchell, Mr. Michael Barry	Pacific Pines QLD 4211		Nil		4,940
Davis, Mr. Jaret	Amamoor QLD 4570		Nil		28
Cox, Mr. Shayne Andrew Shayne	Albany Creek QLD 4035		Nil		576
Simkin, Mr. David John	Bayview Heights QLD 4868		Nil		540
de Groot, Mr. Matthew John	Wannanup WA 6210		Nil		449
Gibson, Mr. Benjamin James Ben	Happy Valley SA 5159		Nil		620
Hills, Mr. Andrew	High Wycombe WA 6057		Nil		1,380
Bremner, Mr. Ricky Frederick	Spearwood WA 6163		Nil		908
Jackson, Mr. Michael Lorne Mike	Augusta WA 6290		Nil		2,786
Hunt, Mr. Dane Burton	Yanchep WA 6035		Nil		3,759
Parker, Mr. Michael John Michael	Falcon WA 6210		Nil		206
Rogers, Mr. Daniel Mark Daniel	Hallett Cove SA 5158		Nil		492
Rombouts, Mr. James Robert	Hornsby NSW 2077		Nil		625
Foreman, Mr. Glen Robert	Scarborough WA 6019		Nil		167
Morton, Mr. Jakeb Zane	Cockburn Central WA 6164		Nil		335
Farrell, Mr. Chadd Elliot	Aveley WA 6069		Nil		112
Darwin, Mr. Mark Peter Fortescue	Moranbah QLD 4744		Nil		468
Nissen, Mr. Jason Leslie Jase	Croydon Park SA 5008		Nil		304
Hewitson, Mr. Astin Ashley	Seacliff SA 5049		Nil		3,351
Stapely, Mr. Lee Maurice Stephen	Perth WA 6000		Nil		2,089
Poskitt, Mr. Jarren Christopher	Palmerston NT 830		Nil		3,164
Patton, Mr. Christopher John Chris	Parkes NSW 2870		Nil		1,045
Urwin, Mr. Daniel John	Balaklava SA 5461		Nil		3,104
Wycinka, Mr. Andrzej Wojciech Andre	Seaford Meadows SA 5169		Nil		1,318
Baggs, Ms. Chelsea Jean	Roxby Downs SA 5725		Nil		2,535
Young, Mr. Jason Lee	Morphett Vale SA 5162		Nil		3,047
Rose, Mr. Allan	Whyalla SA 5608		Nil		3,047

ASIC Form 507 30 January 2012 Page 1 of 12

Appendix 5

SCHEDULE E—CLAIMS BY EMPLOYEES

(Employee's name and address, holiday pay, long service leave)

		Holiday Pay*		Long Service leave *
Employee's name	Address	USD		USD
Byrne, Mr. Luke Anthony	Parkes NSW 2870		Nil		2,040
Jenkins, Mr. Scott Derek	Elizabeth North SA 5113		Nil		2,974
Nur, Mr. Ismail Abdi	West Beach SA 5024		Nil		2,833
Rayner, Mr. Jesse Thomas	Mallala SA 5502		Nil		2,934
Whittaker, Mr. Hayden Ian Kenneth	West Wyalong NSW 2671		Nil		1,817
Ngatamariki, Mr. Tuainetai Cookie	Port Pirie SA 5540		Nil		1,755
Anderton-Purcell, Mr. Nicholas James Nick	East Victoria Park WA 6101		Nil		513
Fletcher, Mr. Graham Ross	Currambine WA 6028		Nil		334
Head, Mr. Alexander Michael Alex	Numurkah VIC 3636		Nil		208
Nicosia, Mr. Giuseppe James Jesse	Cobram VIC 3644		Nil		419
Bougen, Mr. Matthew David Matt	Scarborough WA 6019		Nil		963
Jones, Mr. Kyle	Traralgon VIC 3844		Nil		1,041
Stowers, Mr. Uelese John Les	Myaree WA 6154		Nil		280
Smith, Mr. Tane Reneta	Eastlakes NSW 2018		Nil		212
Le Cornu, Mr. Ben Daniel	White Gum Valley WA 6162		Nil		1,068
Sutton, Mr. Jason Brett	Deception Bay QLD 4508		Nil		1,549
Watson, Mr. Steven Anthony Steve	Yeppoon QLD 4703		Nil		2,132
Kotzur, Mr. Shane Kenneth	Burwood VIC 3125		Nil		2,159
Scully, Mrs. Kahlia Brooke	Capella QLD 4723		Nil		1,540
Lawson, Mr. Johny Sean Raymon	Ocean Reef WA 6027		Nil		431
Rae, Mr. Elliot Bruce	Victoria Park WA 6100		Nil		1,283
Wyborn, Mr. Timothy David Tim	The Vines WA 6069		Nil		557
Kable, Mr. Craig William	Meadowbrook QLD 4131		Nil		1,225
Manley, Mr. Nigel Aaron	Thornlie WA 6108		Nil		398
Nielsen, Mr. Glen Douglas	Charters Towers QLD 4820		Nil		1,179
Fletcher, Mr. Jarrod Ashley	Baldivis WA 6171		Nil		233
Karaitiana-Harmon, Ms. Angeline Tracey Ange	Banksia Grove WA 6031		Nil		1,028
Ross, Mr. Joseph Philip Joey	Bridgewater SA 5155		Nil		1,503
Castle, Mr. Bradley Robert Brad	Sellicks Beach SA 5174		Nil		1,413
Carter, Mr. Reed Anthony	Parkes NSW 2870		Nil		945
Coulthard, Mr. Ross Dwayne	Port Augusta SA 5700		Nil		1,394
Griffiths, Mr. Peter John Michael	Parkes NSW 2870		Nil		730
Watkinson, Mr. William Max Bill	Moonta Bay SA 5558		Nil		1,338
Perryman, Mr. Glen James	Bunbury WA 6230		Nil		214
Matthews, Mr. Kehuoterangi Darryn Kehu	Port Kennedy WA 6172		Nil		841
Smith, Mr. Beau Beresford	Balga WA 6061		Nil		841
Bunt, Mr. Timothy Michael Tim	Dubbo NSW 2830		Nil		855
Lee, Mr. Jason David	Seaton SA 5023		Nil		1,215
Smith-Prime, Mr. Shaun Joshua William shaun	Morphett Vale SA 5162		Nil		489
Sands, Mr. Clinton Kevin Clint	Scarborough WA 6442		Nil		803
Tauranga, Mr. Johnathan loane	Piara Waters WA 6112		Nil		Nil
Lenon, Mr. Matthew Albert Matt	Lake Haven NSW 2263		Nil		245

ASIC Form 507 30 January 2012 Page 2 of 12

Appendix 5

SCHEDULE E—CLAIMS BY EMPLOYEES

(Employee's name and address, holiday pay, long service leave)

		Holiday Pay*		Long Service leave *
Employee's name	Address	USD		USD
Burns, Mr. Raymond Alexander Ray	Padbury WA 6025		Nil		723
Willingale, Mr. Michael Robert	Devonport Tas 7310		Nil		1,079
Kirk, Mr. Jason Scott	Aldinga Beach SA 5173		Nil		1,028
L'Etang, Mr. Karl Nathan	Spearwood WA 6163		Nil		110
Palin, Mr. Tom Alan	PERTH W.A 6000		Nil		78
Wooding, Mr. Brady Neal	Ellenbrook WA 6069		Nil		208
Freitas, Mr. Mark Adam	Casuarina WA 6167		Nil		675
Lord, Mr. Christopher John Chris	Parkes NSW 2870		Nil		699
Carter, Mr. Carl Wayne Carl	West Wyalong NSW 2671		Nil		666
Edwards, Mr. Timothy Tim	Midvale WA 6056		Nil		620
Braunberger, Mr. Christopher Michael Chris	Howlong NSW 2643		Nil		610
Johnstone, Mr. William Ross Will	East Cannington WA 6107		Nil		769
Hooper, Mr. Charlie	Piara Waters WA 6112		Nil		217
Reid, Mr. Robert McDonald Rob	Narromine NSW 2821		Nil		566
Barry, Mr. Michael Patrick	Willunga South SA 5172		Nil		844
Croker, Mr. Matthew Kingsley Matt	Floreat WA 6014		Nil		509
Livingstone, Mr. Dane Matthew	Ellenbrook WA 6069		Nil		512
Sederkenny, Mr. Peter	Mt Sheridan QLD 4868		Nil		489
Ryan, Mr. Jesse Noonie	Forbes NSW 2871		Nil		489
Usher, Mr. Jason Charles	St Helens TAS 7216		Nil		758
Watts, Mr. Christopher John Chris	Athelstone SA 5076		Nil		758
Ruffo, Mr. Kieran James	Secret Harbour WA 6173		Nil		462
Rothe, Mr. Daniel Gary	Noarlunga Downs SA 5168		Nil		687
Mann, Mr. Travis Andrew Travis	Sandgate QLD 4017		Nil		102
Yarrow, Mr. Justin Allan	Bundaberg North QLD 4670		Nil		472
Kearns, Mr. Bryce John	Victor Harbor SA 5211		Nil		647
Laherty, Mr. Philip John Phil	Glenelg East SA 5045		Nil		557
Pearce, Mr. Michael James	Greenwith SA 5125		Nil		557
Cousins, Mr. Dion Micheal	Maddington WA 6109		Nil		310
Aynsley-Todd, Mr. Hayden John	Joondalup WA 6027		Nil		307
Chaplin, Mr. Scott Jason	Lakelands WA 6180		Nil		307
Ireland, Mr. Samuel Alister Sam	Gawler East SA 5118		Nil		446
Fitzgerald, Mr. Benjamin Daniel Ben	West Wyalong NSW 2671		Nil		301
Matthies, Mr. Kyle Mark	Caboolture QLD 4510		Nil		322
Jones, Mr. Steven Paul	North Mackay QLD 4740		Nil		322
Madex, Mr. Anthony Raymond	Little Mountain QLD 4551		Nil		312
Leavesley, Mr. Dale Anthony Dale	Morphett Vale SA 5162		Nil		409
Stevens, Mr. Andrew Robert	Hillbank SA 5112		Nil		507
Fisher, Mr. Declan Kevin	Aubin Grove WA 6164		Nil		271
Turpin, Mr. Noel Lee Noel	Redland Bay QLD 4165		Nil		367
Parkes, Mr. Andrew Ryan	Alkimos WA 6038		Nil		271
Tyrrell, Mr. Joshua Caleb Josh	Sellicks Beach SA 5174		Nil		420

ASIC Form 507 30 January 2012 Page 3 of 12

Appendix 5

SCHEDULE E—CLAIMS BY EMPLOYEES

(Employee's name and address, holiday pay, long service leave)

		Holiday Pay*		Long Service leave *
Employee's name	Address	USD		USD
Long, Mr. Evan Ge Suhn	Woodcraft SA 5162		Nil		387
Ferguson, Mr. Daniel Alan Dan	Grovedale VIC 3216		Nil		271
Treacy, Mr. Jake Thomas	Moonta Bay SA 5558		Nil		456
Turner, Mr. Neville Thomas	Conder ACT 2906		Nil		220
McLean, Mr. Jake Craig	West Perth WA 6005		Nil		346
Nation, Mr. Luke Ryan Luke	Adelaide SA 5159		Nil		346
Boakes, Mr. Samuel Ryan Sam	Balaklava SA 5461		Nil		304
Grover, Mr. Anthony Kevin Anthony	Charters Towers QLD 4820		Nil		153
Birtles, Mr. Matthew John Matt	Scarborough WA 6019		Nil		96
Leister, Mr. Frank Harley Adam	Kenwick WA 6107		Nil		132
Head, Mr. Mark Roland	Hamilton Valley NSW 2641		Nil		117
Melville, Mr. Benjamin Thomas Ben	Booragoon WA 6154		Nil		117
Money, Mr. Brett Jason	Geraldton WA 6530		Nil		134
Reid, Mr. James Ross	Halls Head WA 6210		Nil		117
Arnold, Mr. Richard Karl Richie	Perth WA 6164		Nil		117
Strang, Mr. Benjamin William	Clontarf QLD 4019		Nil		56
Thomas, Mr. Timothy Allen Timothy	Charmhaven NSW 2263		Nil		43
MacMillan, Mr. Jay Michael	Salisbury North SA 5108		Nil		11
Marchinton, Mr. William Derek Will	Parkes NSW 2870		Nil		31
Leishman, Mr. Tyler	Cairns QLD 4870		Nil		4
Swiecinski, Mr. Marcin	Oakden SA 5086		Nil		11
King, Mr. Stephen James Steve	Seaford Rise SA 5169		Nil		11
Ainslie, Mr. Rory Michael	Armadale WA 6112		Nil		16
Utkin, Mr. Michael Lonnie	Adelaide SA 5024		Nil		11
Norris, Mr. Colin Colin	Eglinton WA 6034		Nil		7
Turner, Mr. Lee Cristian	Hayborough SA 5211		Nil		Nil
Bowes, Mr. Harrison Merrill	Adelaide SA 5022		Nil		11
Abbott, Mr. Jarrod Manning	Port Pirie SA 5504		3,876		18,431
Barbagallo, Mr. Guy Richard	Orange NSW 2800		4,205		10,471
Barnes, Mr. Matthew Terence Matt	South Lake WA 6164		19,335		20,430
Barrett, Mr. David James Dave	Albany WA 6330		7,341		11,497
Bayao, Mr. Reynaldo Amindalan	Maddington WA 6109		376		2,719
Boyd, Mr. Leigh Robert	Somerset TAS 7322		3,475		8,667
Butcher, Mr. Mathew Grant	Somerset TAS 7322		3,363		13,408
Cantrill, Mr. Scott Matthew	Narrabri NSW 2390		3,936		9,788
Cook, Mr. Shaun	Seaford Meadows SA 5169		3,750		3,366
Coombes, Mr. Luke Earl	Trott Park SA 5158		1,964		9,256
Crabb, Mr. Benjamin Alan	Hewett SA 5118		2,817		1,119
Eden, Mr. Cameron Alan	High Wycombe WA 6057		6,131		4,168
Edwards, Mr. Michael John	Novar Gardens SA 5040		11,116		30,818
Elborough, Ms. Tanya Lea	Flagstaff Hill SA 5159		6,229		8,484
Gilbert, Ms. Carolyn Anne	Strathalbyn SA 5255		7,363		15,085

ASIC Form 507 30 January 2012 Page 4 of 12

Appendix 5

SCHEDULE E—CLAIMS BY EMPLOYEES

(Employee's name and address, holiday pay, long service leave)

		Holiday Pay*		Long Service leave *
Employee's name	Address	USD		USD
Giong-An, Mr. Elpedio Rimando	Thornlie WA 6108		1,704		1,654
Giuliani, Mr. Joshua John Josh	Zeehan TAS 7469		2,632		12,894
Hewatt, Mr. Wayne Andrew Gordon	Charters Towers QLD 4820		6,482		7,465
Higgs, Mr. Jason Lee	Lockleys SA 5032		14,459		31,516
Hillier, Ms. Heidi N	Coromandel Valley SA 5051		3,746		15,156
Hines, Mr. David John	Happy Valley SA 5159		13,255		30,656
Hobbs, Mr. Maurie Edward	Doonside NSW 2767		6,744		19,614
Hodgetts, Mr. Neville Chad	Newnham TAS 7248		12,094		35,223
Isaac, Mr. David Ronald	Brighton SA 5048		10,747		7,465
Jahnig, Mr. Alfred Robert	Wynyard TAS 7325		215		9,364
Jones, Mr. Luke Gordon	Paradise SA 5075		13,560		18,994
Kanck, Mr. Peter Alan	Belair SA 5052		7,581		28,687
Kiel, Mr. Brian Sansom	Rose Park South Australia 5067		47,977		61,498
Kirkwood, Mr. John Geoffrey	Duncraig WA 6023		13,690		70,600
Kolev, Mr. Emil	Morphett Vale SA 5162		8,938		25,069
Kube, Mr. Martin Stanley	Brooklyn TAS 7320		3,598		9,625
Kumawat, Mr. Deependra Kumar	North Plympton SA 5037		17,493		25,989
Layton, Mr. Scott Damion	Mandurah WA 6210		5,709		11,596
Leaney, Mr. James Thomas	Seaford Rise SA 5169		11,675		30,118
Light, Mr. Trevor Lyndon	Longwood SA 5153		862		47,815
Lister, Mr. Vaughan Richard	Kwinana WA 6966		4,084		8,275
Livesey, Mr. John	Aberfoyle Park SA 5159		15,674		9,929
Manners, Mr. Brenton Neil	Daw Park SA 5041		6,435		20,521
Masiero, Mr. Gastone Joseph	Edwardstown SA 5039		23,585		49,150
Menzies, Mr. Gary B	Seaford SA 5169		6,222		14,158
Moroney, Mr. Geoffrey J Geoff	Ellenbrook WA 6069		34,595		46,837
Morrison, Mr. Paul Waverley	Aldinga Beach SA 5173		8,874		22,394
Mountford, Mr. Shaun Leslie	Northbridge WA 6865		66		9,161
Muller, Mr. Stephen Alfred	Clearview SA 5085		4,796		21,647
Norton, Mr. Benjamin Scott Ben	Port Pirie SA 5540		1,544		7,147
Papadimas, Mr. Christos Chris	Highgate SA 5063		8,769		16,958
Perry, Mr. Damien M	Queenstown SA 5014		25,919		24,227
Ryan, Mr. Michael John	Lewiston SA 5501		6,686		4,867
Santiago, Mr. Arnold Sindayen	Maddington WA 6109		2,445		2,689
Skilling, Mr. Adam Lindsay	Reynella SA 5161		13,581		15,381
Smith, Mr. Lucas Ryan	Lakelands WA 6180		447		5,132
Sturzaker, Mr. Daniel Roy	Ridgley TAS 7321		21,404		24,170
Tansing, Mr. John Winston	Hillcrest SA 5086		6,279		17,556
Tester, Mr. Graham Frederick	Warradale SA 5046		2,408		11,816
Turnbull, Mr. Eric Leslie	Mt Compass SA 5210		27,566		16,969
Wilkinson, Mr. Michael Denis	West Wyalong NSW 2671		8,678		15,630
Withers, Mr. Jeffrey Malcolm	Flinders Park South Australia 5025		13,035		35,124

ASIC Form 507 30 January 2012 Page 5 of 12

Appendix 5

SCHEDULE E—CLAIMS BY EMPLOYEES

(Employee's name and address, holiday pay, long service leave)

		Holiday Pay*		Long Service leave *
Employee's name	Address	USD		USD
Woore, Mr. Gregory James	Nietta TAS 7315		5,105		14,147
Worner, Mr. Stuart William	West Wyalong NSW 2671		1,351		207
Marshall, Mr. Paul David	Ocean Reef WA 6027		21,993		23,284
Oxnam, Mr. Desmond John Des	Rockingham WA 6167		1,507		1,864
Bartle, Mr. Richard Shannon Rothon	Wanneroo WA 6065		933		2,686
Tulk, Mr. Peter John	Victoria Park WA 6979		4,304		22,201
Armstrong, Mr. Brenton Geoffrey	Woodvale WA 6026		4,942		5,298
Aspoen, Mr. Raymond Simon	East Victoria Park WA 6101		686		6,472
Beazley, Mr. Corey Jason	Secret Harbour WA 6167		1,301		6,988
Chaplain, Mr. Loke	Byford WA 6122		1,388		5,978
Davidson, Mr. Troy Melville	Kalbarri WA 6536		7,193		26,760
Di-Lallo, Mr. Nicholas Mitchell	Menora WA 6050		3,651		8,575
Doubikin, Mr. Michael John	Hillarys WA 6025		8,198		9,395
Fletcher, Mr. Jason Neil	Manly West QLD 4179		37,321		25,735
Gurney, Mr. Shane	Lower Chittering WA 6084		21,160		20,782
Gwaze, Mr. Mark Munyaradzi	Beeliar WA 6164		2,431		6,104
Hopkins, Mr. Christopher David Chris	Quinns Rock WA 6030		32,101		25,691
Humble, Mr. Adrian Phillip	Banksia Grove WA 6031		422		677
Keene, Mr. Barry Anthony	Guilderton WA 6041		5,101		4,862
Macdonald, Mr. Scott James	Banksia Grove WA 6031		12,652		18,729
Minchin, Mr. Paul James	Muchea WA 6501		14,507		8,288
O'Neil, Ms. Tara Naomi	Ridgewood WA 6030		11,596		18,319
Pedersen, Mr. Edric Barton	Ormeau QLD 4208		899		3,134
Snell, Mr. Matthew	Meadow Springs WA 6210		9,630		3,084
Stewart, Mr. Ronald Graham	Butler WA 6036		3,741		4,646
Styles, Mr. Adam Richard Thompson	Lewiston SA 5501		25,018		20,819
Wilson, Mr. Daniel James	Victor Harbor SA 5211		3,725		2,506
Curtis, Mr. Tony	Halls Head WA 6210		20,452		40,599
Kite, Mr. David James	Doubleview WA 6018		7,931		23,197
Harrison, Mr. Troy Alexander	Padbury WA 6025		367		8,974
Broomfield, Mr. Matthew Robert	Clarence Gardens SA 5039		22,897		39,038
Hughes, Mr. Jason Stuart	Ellenbrook WA 6069		1,977		12,456
Price, Ms. Peggy-Anne	BURSWOOD WA 6100		4,009		14,817
Armstrong, Mr. Robert Steven	Bayswater WA 6053		3,244		9,978
Dagdagen, Mr. Brandon Pumegas	Gosnells WA 6110		596		5,667
Grange, Mr. Andrew Phillip	Aberfoyle Park SA 5159		8,523		15,427
Hardy, Mr. Alex John	McLaren Vale SA 5171		3,169		17,559
Harrison, Mr. Benjamin Andrew Ben	Yangebup WA 6164		20,340		23,109
Huyton, Mr. Nigel Robert	Karalee QLD 4306		7,380		3,820
Hargreaves, Mr. Grayson Max	Woodcraft SA 5162		10,202		2,682
Bain, Mr. Daniel Shaun	The Vines WA 6069		447		1,991
Shortland, Mr. Gordon Andrew Andrew	Erskine WA 6210		2,082		5,844

ASIC Form 507 30 January 2012 Page 6 of 12

Appendix 5

SCHEDULE E—CLAIMS BY EMPLOYEES

(Employee's name and address, holiday pay, long service leave)

		Holiday Pay*		Long Service leave *
Employee's name	Address	USD		USD
Seiboth, Mr. Aaron John	Noranda WA 6062		6,565		9,675
Van Rensburg, Mr. Jacques Retief	Netley SA 5037		14,856		21,832
McNeil, Mr. Nicholas Todd Nick	Aberfoyle Park SA 5159		10,652		14,366
Jenkins, Mr. Julian Richard	Seaforth NSW 2092		734		826
Natarajan, Ms. Jayanthy	Mawson Lakes SA 5095		5,215		11,643
Walsh, Mr. Joshua	Currambine WA 6028		13,581		20,307
Ledesma, Mrs. Marina	Seaton SA 5023		738		9,021
Clarkson, Mr. Antone Edward Timothy Anton	South Fremantle WA 6162		21,408		20,191
Hastie, Mr. Rodney Patrick Maclean	Canning Vale WA 6155		6,565		8,491
Andersen, Mr. Gregg	Craigie WA 6025		1,066		471
Brown, Mr. Edward Paul	Hamilton VIC 3300		865		7,128
Maxfield, Mr. Robin Neilson	Modbury Heights SA 5092		15,240		28,743
Cresswell, Mr. Matthew Kile Matt	Capel WA 6271		3,246		8,224
Baldini, Mr. Ron	Kelmscott WA 6111		3,871		8,186
Head, Mr. Philip John	Halls head WA 6210		2,145		8,337
Macdonald, Mr. Cory James	Wellard WA 6170		517		1,387
Watson, Mr. Darren	Christies Beach SA 5165		5,760		13,179
Ross, Mr. Gareth John	Quarry Hill VIC 3550		4,597		4,948
Kontou, Mr. Michael Andreas	Largs Bay SA 5016		1,167		8,984
Kaesler, Mr. Nathan John	Prospect SA 5082		5,981		25,896
Beecroft, Mr. Danny John	Scarborough WA 6019		16,144		16,933
Yalandzhieva, Ms. Siyka Stoeva	Coromandel Valley SA 5051		10,931		19,235
Barlow, Mr. Michael John Mick	Parkes NSW 2870		8,629		15,969
Wurst, Mr. Andrew Simon	North Plympton SA 5037		9,720		11,537
Hovell, Mr. Bradley Eric Brad	Bunbury WA 6230		1,273		5,080
Swift, Mr. Jeff Andrew	Springfield Lakes QLD 4300		1,557		3,362
Callaghan, Mrs. Susan Ann Sue	McLaren Vale SA 5171		4,150		9,581
McNaughton, Mr. Mitchell John	Ballajura WA 6066		5,234		5,246
Turbett, Mr. Craig Justin	Lockridge WA 6054		680		6,436
Boyce, Mr. Jeffrey Mark David Jeff	Byford WA 6122		8,056		18,061
Strong, Mr. Michael Scott	Hocking WA 6065		1,089		8,628
Stafford, Mr. Ashley Julian	Mount Compass SA 5210		782		6,115
Clarke, Ms. Rebecca Anne	Dianella WA 6059		2,082		15,218
Caldwell, Mr. Darren	Hallet Cove SA 5158		5,118		23,161
Carney, Mr. Brendan Francis	Caloundra West QLD 4551		5,286		7,267
Ferrari, Ms. Lyn Debra	Colac VIC 3250		1,857		1,332
Cuthers, Mr. Taratuaau Teokotai	Secret Harbour WA 6173		1,471		5,146
Bradford, Mr. Elliott James	Two Rocks, Perth Western Australia 6037		7,551		7,847
Farthing, Mr. Adam Paul	Ellenbrook WA 6069		2,753		4,698
Gorring, Mr. Shane Colin	tapping wa 6065		1,770		7,277
Parry, Mr. Ross	Wannanup WA 6210		180		4,125
Kokoti, Mr. Chad Martin	Craigie WA 6025		3,227		4,298

ASIC Form 507 30 January 2012 Page 7 of 12

Appendix 5

SCHEDULE E—CLAIMS BY EMPLOYEES

(Employee's name and address, holiday pay, long service leave)

		Holiday Pay*		Long Service leave *
Employee's name	Address	USD		USD
Beauchamp, Mr. Stuart Kenneth	Meadow Springs WA 6210		692		4,198
Buchanan, Mr. Gavin Richard	Eaton WA 6232		2,031		5,389
Straede, Mr. Matthew Richard	Parrearra QLD 4575		1,599		1,530
Knight, Mr. Michael Raymond Mick	Kinross WA 6028		3,202		5,840
McNair, Mr. Garry Ian	Boston SA 5607		9,688		10,362
Sun, Mr. Chenjie Jason	Glenunga SA 5064		7,884		7,347
Stephenson, Mr. Cameron Cam	Mundoolun QLD 4285		12,387		11,840
Bennett, Mr. Daniel Shaun Dan	Norwood SA 5067		2,349		6,045
Turner, Mr. Timothy John Tim	South Ripley QLD 4306		13,169		14,760
Sukasana, Mr. I Made	Margaret River WA 6285		722		3,984
Walker, Mr. Benjamin Max Ben	Aberfoyle Park SA 5159		1,240		7,256
Pearson, Mr. Mathew Ian	Turners Beach TAS 7315		4,303		7,294
Winterburn, Mr. Jay	Charters Towers Qld 4820		1,905		7,385
Merewether, Mr. Luke John	Wellard WA 6170		791		5,052
Haley, Mr. Jamie Colin	Warun Ponds VIC 3216		3,675		8,689
White, Ms. Linda Anne	Morphett Vale SA 5162		3,262		5,321
Stelzer, Mr. Adam Charles	Murrumba Downs QLD 4503		3,925		7,261
Vivian, Mr. Leigh James	Reynella East SA 5161		810		6,183
Saunders, Mr. Peter William	Pimpama QLD 4209		653		3,978
Logan, Mr. Patrick Joseph Pat	Burnie TAS 7320		731		6,479
Hutchesson, Mr. David John	Mount Gambier SA 5290		8,397		13,111
Kahle, Mr. Adam Leigh	Baldivis WA 6171		2,867		1,793
Harwood, Mr. Trevor Brian	Lathlain WA 6163		5,178		1,707
Zwar, Mr. Trevor James	Hallett Cove SA 5158		6,909		10,943
Wilson, Mr. Larry Andrew	Langshaw QLD 4570		2,528		5,212
Krieger, Mr. Damon James	Bracken Ridge QLD 4017		4,819		5,400
Boyes, Mr. Peter Edmund	Springfield QLD 4300		646		2,307
Dogan, Mr. Mark Francis	Henley Beach South SA 5022		42,703		24,554
Anderson, Mrs. Julie Tamsin	Inglewood WA 6932		1,231		4,326
Arnold, Mr. Michael David Mick	Brompton SA 5007		445		845
McBean, Mr. Cameron Victor	Stanthorpe QLD 4380		217		4,706
Glavocich, Mr. Frank Martin	Karragullen WA 6111		2,619		2,637
Horsfall, Mr. Jamie Matthew	IIuka WA 6028		13,648		6,449
Chia, Mr. Bernard Soon Hon Bernie	Somerton Park SA 5044		13,244		14,762
Clausen, Mr. Paul	Klemzig SA 5087		4,313		13,110
Nunan, Mr. David John	Flagstaff Hill SA 5159		9,937		8,763
Tomsett, Mr. Nashe David	Morley WA 6062		6,754		3,573
Avila, Mr. Marco Antonio	Gosnells WA 6110		1,442		3,517
Barns, Mr. Tyson Philip	Currambine WA 6028		1,694		3,699
Cram, Mr. Anthony James	Murwillumbah NSW 2484		5,187		2,864
Zan, Mr. Anthony Nicholas Luke	Margaret River WA 6285		1,753		4,152
Taran, Mr. Dennis Christopher	Morley WA 6062		3,995		5,013

ASIC Form 507 30 January 2012 Page 8 of 12

Appendix 5

SCHEDULE E—CLAIMS BY EMPLOYEES

(Employee's name and address, holiday pay, long service leave)

		Holiday Pay*		Long Service leave *
Employee's name	Address	USD		USD
Gadd, Mr. Edward James	Wanneroo WA 6065		576		3,446
Wilson, Mr. Ritchie	Hillarys Western Australia 6025		17,260		3,785
Clarke, Mr. Christopher Edward Chris	Capel WA 6271		2,925		3,259
West, Mr. Christopher Thomas Chris	Lesmurdie WA 6076		2,613		2,083
Radford, Mr. Jason Allan	Romaine TAS 7320		970		5,847
Smith, Mr. Luciano Ronald	Morley WA 6062		1,093		3,383
Gale, Mr. Andrew Robert	Margaret River WA 6285		326		3,588
Sloan, Mr. Steven John	Dalyellup WA 6230		2,894		3,303
Verrall, Mr. Glen David Glenn	Gulfview Heights SA 5096		21,869		16,535
Wockner, Mr. Ryan Douglas	Moorooka QLD 4105		20,206		11,095
Jones, Mr. Shannon Luke	Parkes NSW 2870		193		5,204
Sanders, Mr. Brenton Paul	Port Augusta West SA 5700		358		4,818
Mafra, Mr. Charles Henrique	Adelaide SA 5000		20,430		15,003
Davies, Mr. Tony Patrick	Kangaroo Flat VIC 3555		2,334		6,343
Johnson, Mr. Christopher Garry Chris	Baldivis WA 6171		669		3,212
Cirocco, Ms. Nadia Donna	Auldana SA 5072		966		6,665
Eves, Mr. Carl William	Brightwaters NSW 2264		1,205		7,353
Offen, Mr. Hayden Ross	Como WA 6152		3,316		4,557
Triggs, Mr. Adam Keith	Kinross WA 6028		692		3,186
Roos, Mr. Axel Johannes	Canning Vale WA 6155		386		3,103
Fox, Mr. Shane Lee	Morphett Vale SA 5162		13,347		8,912
McConchie, Mr. Kim	Bassendean WA 6054		2,943		4,859
McDonald, Mr. James Wallace	Thornlie WA 6108		2,768		4,202
Zanette, Mr. Matthew Matt	Clare SA 5453		3,584		2,231
Lackersteen, Mr. Mark Scott	Alice River QLD 4817		18,467		6,890
Miller, Mr. Daniel Wayne	Mandurah WA 6210		4,029		3,302
Pontikinas, Mr. Nicholas Stergos Nick	Netley SA 5037		3,270		6,050
Walker, Mr. Shannon William	Busselton WA 6280		329		3,002
Knight, Mr. Darren Bruce Darren	Para Hills SA 5096		2,991		4,055
Heath, Ms. Toni Challice	Carseldine QLD 4034		4,406		5,220
Blanckensee, Mr. Neville Thomas	Gympie QLD 4570		471		1,319
Gear, Mr. Ty Adam	Qunaba QLD 4670		1,472		1,877
Prouchandy, Mr. Christian Edmond	Trinity Park QLD 4879		1,492		1,319
Andrews, Mr. Benjamin Lee Ben	Alkimos WA 6038		6,796		4,908
Cameron, Mr. Joshua Brent Josh	Colonel Light Gardens SA 5041		1,569		6,370
Hewgill, Mr. Eden David Ace	Carlisle WA 6101		785		2,837
Jones, Mr. Matthew Troy	Clarendon SA 5157		5,333		4,319
Bennett, Mr. Christopher William Chris	Norwood SA 5067		746		2,644
Bellion, Mr. Daniel	Yanchep WA 6035		8,873		4,962
Rudy, Mr. Adam Nathan	Edgewater WA 6027		245		2,846
Gyles, Mr. Daniel Paul	Wynn Vale SA 5127		1,135		6,274
Lennon, Mr. Peter John	Balaklava SA 5461		9,626		9,621

ASIC Form 507 30 January 2012 Page 9 of 12

Appendix 5

SCHEDULE E—CLAIMS BY EMPLOYEES

(Employee's name and address, holiday pay, long service leave)

		Holiday Pay*		Long Service leave *
Employee's name	Address	USD		USD
Primiero, Mr. Samuel James Sam	Hope Valley SA 5090		7,257		6,274
Hastie, Mr. David Alan	Encounter Bay SA 5211		1,274		5,598
Caraher, Mr. Andrew Michael	Pinjarra WA 6208		4,823		3,248
Parkinson, Mr. Craig Phillip	Greenmount WA 6056		1,637		2,826
Walson, Mr. Ian Samuel	Truganina VIC 3029		14,132		8,299
Beckwith, Mr. Scott Kingsley	Norwood SA 5067		5,426		23,824
Souter, Mr. Wayne Alexander	Stratton WA 6056		6,374		4,419
Coles, Mr. Gary John	perth wa 6105		1,408		2,803
Smyth, Mrs. Lauren Ann	Somerton Park SA 5044		Nil		9,510
McCreadie, Mr. Connor Owen Scott	O'Sullivan Beach SA 5166		3,928		6,133
Anderson, Mr. Mathew Paul	Woodbridge WA 6056		1,017		3,043
Drazenovic, Mr. Jason Leigh	Orelia WA 6167		17,282		7,290
Huth, Mr. Matthew Ian Matt	Mt Warren Park QLD 4207		1,148		1,593
Dwight, Mr. Steven James Steve	Cleveland QLD 4163		413		4,118
Irwin, Mr. Patrick Matthew	Bunbury WA 6230		6,760		4,382
Harding, Mr. Rhys Matthew	Seaford Rise SA 5169		1,938		3,998
Bhaumik, Mr. Deborshi	Plympton Park SA 5038		10,731		10,453
Form, Ms. Kelsey	Currambine WA 6028		1,702		2,242
Salisbury, Mr. Andrew David	Blackwood SA 5051		7,582		10,380
Trevor, Mr. Lucas James	Wandina WA 6530		2,505		6,463
Quin, Mr. Barry James	Baldivis WA 6171		2,181		4,243
O'Neill, Mr. Liam Seamus	Hillarys WA 6025		3,654		4,008
Adams, Mr. Brett Anthony	Dalyellup WA 6230		551		2,932
Green, Mr. Shane Nicholas	Bakers Hill WA 6562		4,072		5,146
Wall, Mr. Christer Lennart	Coolbellup WA 6163		12,269		5,165
Krajina, Mr. Mark Simon	Southbank VIC 3006		1,138		3,890
Lambeth, Mr. Karl Grant	Port Augusta SA 5700		260		3,405
Carling, Mr. Rhys Jonathan	Scarborough WA 6019		759		2,580
Dargie, Mr. Tyler Shane Justin Lee	Tenterden WA 6322		947		2,267
Zammitt, Mr. Daniel John	Karama NT 812		2,708		3,316
Brann, Mr. Thomas Stewart Tom	Highland Park QLD 4211		2,110		2,479
Hooper, Mr. Christopher Brent Chris	Boulder WA 6432		10,487		5,410
Foot, Mr. Nathan John	Woodcroft SA 5162		2,191		5,030
Leuzzi, Mr. Joseph Domenic Joe	Alkimos WA 6038		4,298		2,234
Potts, Ms. Amber Chantelle	Jane Brook WA 6056		4,631		3,571
Dexter, Ms. Rebecca Ann	Kurralta Park SA 5037		2,932		5,108
Davies, Mr. John Steven Charles	Burleigh Heads QLD 4220		2,687		3,049
McMaster, Mr. Taal Roy	Butler WA 6036		5,012		6,465
Grant, Mr. Dean Charles	Morphett Vale SA 5162		751		2,681
Makwembere, Mr. Innocent Tendai Tendai	Maylands WA 6051		11,807		3,803
Martin, Mr. Michael Norman	Banksia Grove WA 6031		7,139		6,312
Patel, Mr. Bharatkumar	STIRLING WA 6061		1,826		1,865

ASIC Form 507 30 January 2012 Page 10 of 12

Appendix 5

SCHEDULE E—CLAIMS BY EMPLOYEES

(Employee's name and address, holiday pay, long service leave)

		Holiday Pay*			Long Service leave *
Employee's name	Address	USD			USD
Kalem, Mr. Rodney James	Bassendean WA 6054		5,680			4,536
Smith, Ms. Jemma Kate	Darch WA 6065		2,439			1,894
Jones, Mr. Stewart Alan	Hilton SA 5033		5,810			4,171
Purcell, Mr. Eugene Piers	Como WA 6152		4,164			5,720
Bartlett, Mr. Sean Mark William	Cobar NSW 2835		4,651			2,963
Johr, Mrs. Rebecca Mae	Beverley SA 5009		4,041			2,774
Agnew, Miss Lauren Rochelle	Wanneroo WA 6065		2,517			1,665
Dean, Mr. Robert Charles	East Victoria Park WA 6101		6,375			2,171
Deegan, Mr. Paul Anthony	South Perth WA 6951		856			1,335
Johnston, Mr. Timothy George Tim	Hamilton Hill WA 6163		502			1,332
Almond, Mr. Michael William Mick	Brinsmead QLD 4870		11,130			3,904
Myatt, Mr. Joshua David Josh	Pine Creek QLD 4670		872			2,076
Callanan, Mr. Daniel Scott Dan	St James WA 6102		8,312			4,641
Brown, Mr. Andrew Stewart	Boddington WA 6390		12,859			3,806
Lenormand, Mr. Quentin Pierre Jean	Claremont WA 6010		(862	)		4,987
Grosser, Mrs. Jennifer Kaye Jen	Grange SA 5022		1,600			2,019
Parfitt, Mr. William James Will	Blackall QLD 4472		1,445			1,684
Oxton, Mr. Daniel James Dan	Caloote SA 5254		2,953			1,826
Shackleton, Mr. Ian	Abbey WA 6280		14,019			4,512
Nuangki, Mr. Simon Swaka	CLOVERDALE WA 6105		1,829			653
Siojo, Ms. Danise Limcangco	Maddington WA 6109		1,473			1,184
Shambrook, Ms. Dannika Louise Danni	Oxley QLD 4075		2,119			1,205
Sutton, Mr. Aaron James	Midland WA 6056		587			663
Denny, Mr. Clayton David	Seaford Rise SA 5169		4,164			4,124
Morris, Mr. Arthur Gordon	Mount Hawthorn WA 6016		6,356			2,516
Rickards, Mr. Vincent Scott	Byford WA 6122		1,475			664
Zawadzki, Mr. Ry Nathaniel	Mariners Cove WA 6210		4,392			1,816
Mandava, Mr. Jagan Mohan	Burswood WA 6100		2,007			666
Ralph, Mr. Adrian David	Cumberland Park SA 5041		7,627			5,345
Mondia, Mr. Lorenzo	Inglewood WA 6052		5,932			2,771
Graham, Mr. Samuel William Sam	Fulham Gardens SA 5024		1,930			1,989
Moehead, Mr. Stephen John Allen Steve	The Gap QLD 4061		9,185			3,563
Gray, Mr. Bayden Earle	Haybrough SA 5211		8,995			4,438
Roy, Mr. Matthew David Matt	Christies Beach SA 5165		5,775			2,861
McCormick, Mrs. Stacey Jane	Paralowie SA 5108		2,198			2,718
Liebelt, Mr. Grant Ashley	Aldinga Beach SA 5173		1,351			1,684
Broughton, Mrs. Scarlet Grace	Noarlunga Downs SA 5168		259			992
Cameron, Mr. Raymond John	Dalby QLD 4405		8,416			2,294
Bray, Ms. Helen Rose	Woodville South SA 5011		1,945			860
Remphrey, Mr. Phillip Adam Phil	Brompton SA 5007		1,751			2,738
Aitchison, Mr. Tharryn Dallas John	Aldinga Beach SA 5173		191			963
Bruce, Mr. Andrew Leonard James	Mardi NSW 2259		323			793

ASIC Form 507 30 January 2012 Page 11 of 12

Appendix 5

SCHEDULE E—CLAIMS BY EMPLOYEES

(Employee's name and address, holiday pay, long service leave)

		Holiday Pay*		Long Service leave *
Employee's name	Address	USD		USD
Finlay, Mr. Jack Lincoln	Quorn SA 5433		191		863
Wholey, Mr. Grant John	Boulder WA 6432		4,560		1,360
Doig, Mr. Anthony James	Mawson Lakes SA 5095		1,777		1,360
Bower, Ms. Theresa Christina	Currambine WA 6028		1,698		614
Emrick, Ms. Shannon Tee	North Adelaide SA 5006		1,171		2,835
Braithwaite, Mrs. Tanya Marie	Ottoway SA 5013		1,364		893
Shah, Ms. Kruti Kirti	Heathridge WA 6027		1,314		786
Hay, Mr. David Christopher Dave	Greenwood WA 6024		4,619		1,037
Rees, Mr. Brendan Luke	Parkes NSW 2870		2,397		904
Novosel, Ms. Ljubica	Findon SA 5023		926		509
Sweeney, Mr. Rory Michael	Mount Barker SA 5251		3,950		1,295
Chinner, Mr. Jason John Jason	Cherry Gardens SA 5157		1,509		334
McDougall, Mr. Kaelin Ross	Strathalbyn SA 5255		832		285
Kelly, Ms. Megan Frances	Landsdale WA 6065		530		113
Rogers, Mr. Andrew Edward Andrew	Hewett SA 5118		433		245
Mann, Mrs. Amelia	Mareeba QLD 4880		1,108		264
Trevarthen, Ms. Nollaig	West Perth WA 6005		674		211
Fox, Mr. Seosamh Joe	Glendalough WA 6016		Nil		Nil
Aisha, Mrs. Ratna Dewi	Henley Beach South SA 5022		Nil		Nil

Note *: Holiday pay & long service leave

AUD amounts owing converted to USD at AUD:USD 0.75

ASIC Form 507 30 January 2012 Page 12 of 12

Appendix 6

SCHEDULE H—UNSECURED CREDITORS

(Trade payables)

		Amount			Amount
		claimed			admitted as			Reason for difference between
		by creditor			owing			amount claimed and admitted (if
Name	Address *	USD**			USD**			any)
600 Cranes Australiasia Pty Ltd	PO Box 180		17,272			17,272			Nil
A Noble & Son Ltd			43,133			43,133			Nil
Abc Products (Rocky) Pty Ltd			55,260			55,260			Nil
Absolute Blast	PO Box 2336		429			429			Nil
Academy Services (Wa) Pty Ltd	14 Carole Road, Maddington 6109		1,414			1,414			Nil
Academy Services Pty Ltd	4 Ferry Avenue		5,187			5,187			Nil
Adelaide Central Electrical Pty Ltd	PO Box 5116 Mail Centre		1,669			1,669			Nil
Adelaide Cleaning Equipment Pty Ltd			942			942			Nil
Adelaide Drill Supplies Pty Ltd			13,931			13,931			Nil
Adelaide Hydraulics Pty Ltd	PO Box 305		24,274			24,274			Nil
Adelaide Packaging			380			380			Nil
Adsteel Brokers	PO Box 691		66			66			Nil
Adtrans Trucks Adelaide Pty Ltd T/A Daimler T rucks	59 Hardy's Road		2,677			2,677			Nil
Advanced Braking Pty Ltd			1,050			1,050			Nil
Advanced Laser Signs			40			40			Nil
Advanced Mine Performance Training Services Pty Ltd	PO Box 352		5,025			5,025			Nil
Advanced Polymer Technology	PO Box 1345		398			398			Nil
Afkos Industries			18,792			18,792			Nil
Air Liquide			(88	)		(88	)		Nil
Air Liquide Wa Pty Ltd	PO Box 853		1,068			1,068			Nil
Airdrill Pty Ltd T/A Schramm Australia	PO Box 415		57,739			57,739			Nil
Airland Logistics Pty Ltd			29,496			29,496			Nil
Aitken Welding Supplies Pty Ltd			151			151			Nil
Aj Couriers And Haulage Pty Ltd			20,213			20,213			Nil
Alcolizer Technology			1,750			1,750			Nil
Alfa Engineering Pty Ltd	PO Box 1256 Mdcreet		556			556			Nil
Alfa Test Pty Ltd	PO Box 2453		4,220			4,220			Nil
All Tig Welding Pty Ltd	PO Box 3188		216			216			Nil
Allied Forklifts Pty Ltd	647 Murray Street		401			401			Nil
Allightsykes Pty Ltd			295			295			Nil
Allmyne Consulting And Training Services Pty Ltd T/A Create A Sign	PO Box 1141		656			656			Nil
Allyn International Services Inc	PO Box 752		29,050			29,050			Nil
Alsco Pty Limited	PO Box 121		997			997			Nil
American Express	PO Box 517		64			64			Nil
Anglogold Ashanti Australia	PO Box 261		5,645			5,645			Nil
Anora Design	10 Lucas Street		13,489			13,489			Nil
Appliance Testing Supplies Pty Ltd			1,078			1,078			Nil
Aramex Canada			882			882			Nil
Arentz & Kkg Engineering Pty Ltd	1 Burgay Court		53,108			53,108			Nil

ASIC Form 507 30 January 2012 Page 1 of 11

Appendix 6

SCHEDULE H—UNSECURED CREDITORS

(Trade payables)

		Amount			Amount
		claimed			admitted as			Reason for difference between
		by creditor			owing			amount claimed and admitted (if
Name	Address *	USD**			USD**			any)
Areon Pty Ltd T/As Brotec Services	PO Box 325		2,211			2,211			Nil
Ashurst Australia	88 Belgravia St		104,614			104,614			Nil
Associated Boiler Inspectors Pty Ltd			1,238			1,238			Nil
Ata Labour Hire Pty Ltd			2,180			2,180			Nil
Atco Structures & Logistics Pty Ltd	PO Box 2440		(60	)		(60	)		Nil
Atom Supply			774			774			Nil
Ausco Modular Pty Ltd	PO Box 480		12,887			12,887			Nil
Aussie Crates Wa Pty Ltd			1,275			1,275			Nil
Austin Engineering Site Services	43 Wallis St		4,078			4,078			Nil
Australasian Mining Services	Unit 7/20 Spine St		13,035			13,035			Nil
Australian Exploration Engineering	6 Orchard Avenue		1,601			1,601			Nil
Australian Mud Co	PO Box 229		187,753			187,753			Nil
Australian Safety Engineers Pty Ltd	PO Box 84		283			283			Nil
Australian Securities & Investments Commission	PO Box 1587		185			185			Nil
Australian Warning Systems Pty Ltd			1,555			1,555			Nil
Autopro Roxby Downs	PO Box 1904		475			475			Nil
Av Truck Services Pty Ltd	PO Box 40		2,774			2,774			Nil
Aveling			3,929			3,929			Nil
Axis Mining Technology Pty Ltd	244 Welshpool Road		12,148			12,148			Nil
Axis Packaging Pty Ltd T/A Axis Industrial Solutions			186			186			Nil
Baker Hydraulics Pty Ltd			12,668			12,668			Nil
Becker Ncs Pty Ltd	6-8 Waddikee Road		318			318			Nil
Bl Shipway & Co Pty Ltd - Ryco Hose	PO Box 557		21,859			21,859			Nil
Black Diamond Drilling Services Australia Pty Ltd	Unit 10 / 210 Star Street		25,837			25,837			Nil
Blastone International (Aust) Pty Ltd			787			787			Nil
Boc Gases	T/A Spitwater Sa		2,765			2,765			Nil
Bollore Logistics Australia Pty Ltd			7,824			7,824			Nil
Boltmasters Pty Ltd	PO Box Z5046		378			378			Nil
Border Express Pty Ltd	PO Box 17		14,136			14,136			Nil
Bosch Rexroth Pty Ltd			51,522			51,522			Nil
Bosnar Engineering Pty Ltd			1,505			1,505			Nil
Bridgestone Australia			4,992			4,992			Nil
Bsc Motion Technology	PO Box 357		413			413			Nil
Bss Employee Assistance Pty Ltd	Ashdown - Ingram		132			132			Nil
Bullivants	PO Box 486		25,047			25,047			Nil
Burson Automotive Pty Ltd	PO Box 47		1,603			1,603			Nil
Bw Truck			25			25			Nil
Cadia Group	Cd Power Pty Ltd		2,654			2,654			Nil
Cafe Corporate			143			143			Nil

ASIC Form 507 30 January 2012 Page 2 of 11

Appendix 6

SCHEDULE H—UNSECURED CREDITORS

(Trade payables)

		Amount		Amount
		claimed		admitted as		Reason for difference between
		by creditor		owing		amount claimed and admitted (if
Name	Address *	USD**		USD**		any)
Cambridge Technologies	P O Box 84		317		317		Nil
Capital Transport Services (Sa) Pty Ltd			14,295		14,295		Nil
Castrol Australia Pty Ltd Sa	PO Box 8251		512		512		Nil
Cavill Power Products Pty Ltd			16,105		16,105		Nil
Cb Richard Ellis	PO Box 1185		2,410		2,410		Nil
Cbc Bearings Power Transmission			15		15		Nil
Cd Power			908		908		Nil
Central West Fluid Power Pty Ltd	Unit 6, 36/38 Tikalara St		701		701		Nil
Centurion Transport			6,472		6,472		Nil
Century Engineering Pty Ltd			310		310		Nil
Challenge Batteries			995		995		Nil
Chandler Macleod Group Limited	208-210 Main Street		428		428		Nil
Charles Sturt Motor Inn			3,363		3,363		Nil
Cheela Plains Contracting	Unit 6		2,694		2,694		Nil
Chris Ives Signs	P O Box 151		420		420		Nil
Chubb Fire Safety	PO Box 1624		3,539		3,539		Nil
Civeo Pty Ltd			105		105		Nil
Clinipath Pathology			1,502		1,502		Nil
Clisby Engineering & The Southern Steel Group T/A Ozcon Engineering Pty Ltd	PO Box 254		3,836		3,836		Nil
Coastal Midwest Transport			11,875		11,875		Nil
Coates Hire			566		566		Nil
Collins Industrial Distributors	118 Rozelle Avenue		175		175		Nil
Comet Transport (Wa) Pty Ltd	69/71 O'Sullivan Beach Road		3,681		3,681		Nil
Complete Envirotest Pty Ltd			763		763		Nil
Compressed Air Repairs & Equipment	34-40 Bennet Avenue		25,014		25,014		Nil
Compressed Air Safety Valve Services	PO Box 1177		363		363		Nil
Compressor Valve Services Pty Ltd			3,694		3,694		Nil
Construction Industry Training Centre Inc	GPO Box 2443		135		135		Nil
Control Devices (Australia) Pty Limited			4,336		4,336		Nil
Cook Industrial Minerals Pty Ltd			25,283		25,283		Nil
Cooper Fluid Systems	PO Box 439		6,941		6,941		Nil
Corelink Pty Ltd	PO Box 152		20,831		20,831		Nil
Crommelins Machinery			1,233		1,233		Nil
Cross Hydraulics	Locked Bag 1020		556		556		Nil
Ctrack Australia Pty Ltd	75 Talavera Road		502		502		Nil
Cts Crane Technical Services			8,503		8,503		Nil
Cummins Diesel Sales & Service			9,322		9,322		Nil
Custom Fluid Power Pty Ltd	5 Darcy Lane		5,912		5,912		Nil

ASIC Form 507 30 January 2012 Page 3 of 11

Appendix 6

SCHEDULE H—UNSECURED CREDITORS

(Trade payables)

		Amount			Amount
		claimed			admitted as			Reason for difference between
		by creditor			owing			amount claimed and admitted (if
Name	Address *	USD**			USD**			any)
Cut Lunch			726			726			Nil
Daimler Trucks Perth And Wa Iveco Trucks	PO Box 23		5,623			5,623			Nil
Data #3			4,770			4,770			Nil
Data Mobility Voice	P O Box 113		4,829			4,829			Nil
David Lowery Diesel Repairs Pty Ltd	Cnr South Rd & Aruma Rd		325			325			Nil
Davies Automotive & Ind'L			100			100			Nil
Dd Grout Plugs	Wheeler Industries		743			743			Nil
Deep Exploration Technologies Crc Ltd			2,214			2,214			Nil
Deloitte Tax Services Pty Ltd	PO Box 103		296,203			296,203			Nil
Dexion Adelaide	U10/44 Buckingham Drive		3,807			3,807			Nil
Dexion Balcatta	10 Williams St		268			268			Nil
Dexion Canning Vale	167-169 South Terrace		388			388			Nil
Dhl Logistics			726			726			Nil
Diesel Exhaust Systems	PO Box 594		188			188			Nil
Dilong Drilling Services Pty Ltd			3,425			3,425			Nil
Dinki Di Enginnering Pty Ltd	PO Box 224		990			990			Nil
Diverse Machining & Tooling	GPO Box 1063		15,616			15,616			Nil
Dotmar Epp Pty Ltd	PO Box 304		37,001			37,001			Nil
Downhole Surveys	PO Box 1050		50,696			50,696			Nil
Downtime Solutions Pty Ltd	PO Box 2164		1,014			1,014			Nil
Draeger Australia			417			417			Nil
Dsv Air & Sea Pty Ltd	Locked Bag 5100		93,076			93,076			Nil
Dynamics G-Ex Pty Ltd	Unit 17/663 Newcastle Street		3,792			3,792			Nil
Dynapumps	64 Audley Street		340			340			Nil
E T M Industries Inc			565			565			Nil
Ebbe Pty Ltd			3,901			3,901			Nil
Element Six Gmbh			2,953			2,953			Nil
Engine Protection Equipment	40 Pilbara Street		1,322			1,322			Nil
Environment Protection Authority	Private Bag 4		1,546			1,546			Nil
Ers Australia			1,077			1,077			Nil
Eureka 4 Wheel Drive Training	23/31 Governor Macquarie Drive		2,565			2,565			Nil
Evolution Drill Rigs Pty Ltd	P O Box 660		1,056			1,056			Nil
Exhaust Covers Pty Ltd	268 Gt Eastern Highway		1,975			1,975			Nil
Explorex Pty Ltd	71 Main Street		495			495			Nil
Extra Mile Tyre Distributors Pty Ltd			14,852			14,852			Nil
Federal Express (Australia) Pty Ltd			13,685			13,685			Nil
Feldcamp Equipment Ltd	P O Box 47		109			109			Nil
Felsax Pty Ltd T/A All-Ways Rigging Gear	57 Catalano Circuit		1,774			1,774			Nil
Ferguson Group Australia Pty Ltd			(734	)		(734	)		Nil
Festo Pty Ltd	PO Box 400		125			125			Nil

ASIC Form 507 30 January 2012 Page 4 of 11

Appendix 6

SCHEDULE H—UNSECURED CREDITORS

(Trade payables)

		Amount			Amount
		claimed			admitted as			Reason for difference between
		by creditor			owing			amount claimed and admitted (if
Name	Address *	USD**			USD**			any)
Fiesta Canvas	87 Norma Road		6,229			6,229			Nil
Fire Alert Pty Ltd	PO Box 6864		479			479			Nil
Fire Suppression Services	PO Box 98900		940			940			Nil
Flexidrill Construction Limited			73,214			73,214			Nil
Fluid Line Services			470			470			Nil
Fmc Corp			4,724			4,724			Nil
Forgacs-Broens Pty Ltd			2,016			2,016			Nil
Fujifilm Holdings Corporation	PO Box 6806		756			756			Nil
Gavin Yeates Consulting Pty Ltd	PO Box 365		14,209			14,209			Nil
Gcs Hire Pty Ltd			321			321			Nil
Gentronics			665			665			Nil
Geodis Wilson Australia Pty Ltd	60 Hume Highway		(2,058	)		(2,058	)		Nil
Geodis Wilson Singapore Pte Ltd	10 Lyonia Court		135,796			135,796			Nil
Geographe Enterprises Pty Ltd	PO Box 5035		2,343			2,343			Nil
Giacci Nt Pty Ltd	PO Box 10475		1,307			1,307			Nil
Gilbert + Tobin	PO Box 132		110,157			110,157			Nil
Globaltech Corp Pty Ltd	50 Pavers Circle		96,506			96,506			Nil
Goldfields Compressor Hire	P O Box 186		10,189			10,189			Nil
Goodyear & Dunlop Tyres (Aust) Pty Ltd T/A Beaurepaires For Tyres	GPO Box 2607		510			510			Nil
Gordon Laing Sales Pty Ltd			583			583			Nil
Gpc Asia Pacific Pty Ltd	62-64 Millers Road		53,625			53,625			Nil
Gt Hoses			9,768			9,768			Nil
Gtn Services	Locked Bag 4		1,623			1,623			Nil
H & M Signs	PO Box 275		401			401			Nil
Hahn Elec Contracting Pty Ltd	T/A Solo Resource Recovery		614			614			Nil
Hallite Seals Australia Pty Ltd T/A Hallite Transeals	97-105 Bedford Street		8,771			8,771			Nil
Hardcore Diamond Products Pty Ltd			9,405			9,405			Nil
Hastings Deering Australia Ltd	16 Ellemsea Circuit		1,022			1,022			Nil
Heat Treatments Limited	71F Matthews Avenue		148			148			Nil
Heller Sable Engineering	PO Box 400		206			206			Nil
Herbert Hall Enterprises Pty Ltd	90 Kurnall Road		824			824			Nil
Herbert Smith Freehills	Unit 1/1 Cressall Road		4,050			4,050			Nil
High Temperature Covers	Unit 6		2,432			2,432			Nil
Hubtex Australia Pty Limited	PO Box 159		2,073			2,073			Nil
Hudson Global Resources	94 Research Road		18,975			18,975			Nil
Hurtownia Kuba Kedzior I S-Ka Spolka Jawna	5 Midera Avenue		12			12			Nil
Hydac Pty Ltd			6,618			6,618			Nil
Hydair Drives Fluid Power Systems	45-53 Davies Road		2,604			2,604			Nil
Hydraulic Component Services Pty Ltd	PO Box 399		29,720			29,720			Nil

ASIC Form 507 30 January 2012 Page 5 of 11

Appendix 6

SCHEDULE H—UNSECURED CREDITORS

(Trade payables)

		Amount			Amount
		claimed			admitted as			Reason for difference between
		by creditor			owing			amount claimed and admitted (if
Name	Address *	USD**			USD**			any)
Hydraulogic Pty Ltd	8 Cromwell Court		659			659			Nil
Hydroil Pty Ltd	P O Box 653		1,155			1,155			Nil
Ian Diffen The Tyre Factory	PO Box 120		3,552			3,552			Nil
Ibd Independent Battery Distributors	P O Box 238		265			265			Nil
Ifm Efector Pty Ltd	PO Box 143		9,282			9,282			Nil
llenon Pty Ltd	PO Box 5087		162			162			Nil
Innovative Automation Solutions Pty Ltd			4,662			4,662			Nil
Innovative Search Consultants Pty Ltd	15 Streiff Road		4,950			4,950			Nil
Inter Smash Repairs	99-105 Mc40Dowell Street		3,119			3,119			Nil
J Blackwood & Son Limited	42 Cooper Road		104,216			104,216			Nil
Jadel Services Pty Ltd	121 Frost Road		264			264			Nil
James Walker Australia Pty Ltd	GPO Box 5072		902			902			Nil
Jani King Wa Pty Ltd	PO Box 1123		423			423			Nil
Japanese Truck & Bus Spares	119 Ewing St		175			175			Nil
Jb Precise Engineering	23 Colin Jamieson Drive		2,479			2,479			Nil
Je & Pk Polsen	T/As Nordon Cylinders		1,568			1,568			Nil
Jemrok Pty Ltd	26 Parkinson Lane		1,275			1,275			Nil
Jj Richards & Sons Pty Ltd	T/As Cks Engineering		833			833			Nil
Jobfit Health Group Pty Ltd	128-134 Great Eastern Hwy		5,667			5,667			Nil
John'S Bins Pty Ltd	2-6 Williams Circuit		94			94			Nil
Joondalup Windscreens			963			963			Nil
K & A Laird Wa Pty Ltd			13,231			13,231			Nil
K Craft Products			2,648			2,648			Nil
K West Haulage	PO Box 2405		7,201			7,201			Nil
Kal Tire (Australia) Pty Ltd	PO Box 440		415			415			Nil
Ken Webster	PO Box 261		3,300			3,300			Nil
King & Wood Mallesons	33 Mainsail Drive		142,301			142,301			Nil
Komatsu Australia Pty Ltd	PO Box 331		(5,339	)		(5,339	)		Nil
Kona Business Consulting Group Pty Ltd	Units 2 & 3 194 Balcatta Road		2,834			2,834			Nil
Konnect Sa			1,482			1,482			Nil
Laser Unit Trust	PO Box 160		81			81			Nil
Leinster Smash Repairs Pty Ltd	PO Box 38		1,155			1,155			Nil
Lfa First Response			2,556			2,556			Nil
Lhs Rocktools	PO Box 257		231			231			Nil
Link Market Services	Unit 6 The Gateway		9,857			9,857			Nil
Lk Diesel Service Pty Ltd	22 Solanum Street		1,083			1,083			Nil
Lkab Wassara Ab	27 Walters Way		1,049			1,049			Nil
Lsa Bernadini Pty Ltd	PO Box 121		39,419			39,419			Nil
Luxottica Retail Australia Pty Ltd	PO Box 876		304			304			Nil
Lyonia Enterprises			44,586			44,586			Nil

ASIC Form 507 30 January 2012 Page 6 of 11

Appendix 6

SCHEDULE H—UNSECURED CREDITORS

(Trade payables)

		Amount			Amount
		claimed			admitted as			Reason for difference between
		by creditor			owing			amount claimed and admitted (if
Name	Address *	USD**			USD**			any)
Mark Worner Auto Electrics Pty Ltd	61 Main Street		700			700			Nil
Marsden Industries Pty Ltd T/A Technical Urethanes	5 Belmont Ave		332			332			Nil
Martins Trailer Parts Pty Ltd	27 Aldenhoven Road		708			708			Nil
Matchtec Hydraulics	Total Laser Cutting Services		3,383			3,383			Nil
Maxwell Geoservices			8,640			8,640			Nil
Mcewan Enterprises Pty Ltd T/A Quick Bits Kalgoorlie			66			66			Nil
Mcintosh & Sons	PO Box 513		596			596			Nil
Mcmahon Burnett Transport	PO Box 115		1,629			1,629			Nil
Mcvh Nominees Pty Ltd T/A Grh Supplies	85 Burswood Rd		171			171			Nil
Meekatharra Corner Store	PO Box 178		60			60			Nil
Mei Group Pty Ltd T/A Mammoth Equipment & Exhausts Pty Ltd	GPO Box 11028		2,504			2,504			Nil
Metzke Engineering	273 Camboon Road		5,567			5,567			Nil
Miller'S Autoglass Pty Ltd			311			311			Nil
Mine Power Solutions Pty Ltd			474			474			Nil
Mining & Construction Supplies			13,375			13,375			Nil
Mining & Hydraulic Supplies	PO Box 720		92			92			Nil
Mining & Industrial Tyre Service	547 Great Eastern H'Way		6,683			6,683			Nil
Mining People International Pty Ltd	4 Katanning Street		(125	)		(125	)		Nil
Minter Ellison			59,550			59,550			Nil
Mm Electrical Merchandising	Unit 3A, 28 Maxwell Rd		1,756			1,756			Nil
Monadelphous Engineering Associates	54 Cavan Road		3,263			3,263			Nil
Moonraker Motor Inn	PO Box 3483		2,175			2,175			Nil
Motion Industries	PO Box 3208		188,518			188,518			Nil
Motor Reconstructions Pty Ltd T/A K&A Engineering	P O Box 96		3,843			3,843			Nil
Mrwed Training And Assessment	36-38 Croydon Rd		113			113			Nil
Mt Barker Caravan Park			4,995			4,995			Nil
Mudex Pty Ltd	P O Box 5254		11,416			11,416			Nil
Mulhern’S Environmental Pty Ltd	Locked Bag 98		1,139			1,139			Nil
Murlaw Pty Ltd T/As Ausco Products	PO Box 547		2,613			2,613			Nil
Nairne Engineering & Hydraulics			10,920			10,920			Nil
National Drilling Equipment			11,352			11,352			Nil
Nautilus Control & Engineering Serv PI	PO Box 105		8,691			8,691			Nil
Nhp Electrical Engineering Products PI	185 Bourke Street		243			243			Nil
Nordon Hydraulics Pty Ltd	PO Box 561		875			875			Nil
Normet Asia Pacific Pty Ltd			3,484			3,484			Nil
Northpoint Toyota	PO Box 421		5,470			5,470			Nil
O'Brien Glass Industries Pty Ltd	PO Box 96		391			391			Nil
Occuhealth Pty Ltd	PO Box 772		789			789			Nil

ASIC Form 507 30 January 2012 Page 7 of 11

Appendix 6

SCHEDULE H—UNSECURED CREDITORS

(Trade payables)

		Amount		Amount
		claimed		admitted as		Reason for difference between
		by creditor		owing		amount claimed and admitted (if
Name	Address *	USD**		USD**		any)
Oem Dynamics Pty Ltd	PO Box 191		1,801		1,801		Nil
Office National Kalgoorlie			314		314		Nil
Offroad Trucks Australia Pty Ltd			18,974		18,974		Nil
Oilpath Hydraulics Pty Ltd	55 Main Street		526		526		Nil
Omnilogix Pty Ltd T/A Omnilogix Automation	PO Box 421		561		561		Nil
On Road Auto Electrics	45 Catalano Circuit		2,814		2,814		Nil
Orient Capital	Unit#5, 275 Treasure Road		2,285		2,285		Nil
Ox Engineering Pty			2,822		2,822		Nil
Palletco Sa Pty Ltd			145		145		Nil
Panalpina World Transport Pty Ltd (Australia)			115,286		115,286		Nil
Parchem Construction Supplies Pty Ltd			3,576		3,576		Nil
Parker Hannifin (Australia) Pty Ltd	Unit 2, 5 Mulgul Road		671		671		Nil
Parkes Bearings N Parts Pty Ltd			283		283		Nil
Partout Pty Ltd T/A Statewide Bearings			3,921		3,921		Nil
Penns Cartage Contractors			790		790		Nil
Penske Power Systems Pty Ltd			10,751		10,751		Nil
Perryco Marketing Pty Ltd			849		849		Nil
Perth Testing And Tagging			638		638		Nil
Peter James Motors	Shop 9		788		788		Nil
Peter'S Handyman Service			99		99		Nil
Phoenix Metalform	PO Box 605		218		218		Nil
Pictograph Pty Ltd	33 Tova Drive		606		606		Nil
Pirtek (Welshpool) Pty Ltd	8 Rose Street		82		82		Nil
Pme Plastic & Metal Engraving			104		104		Nil
Powerpak Packaging			176		176		Nil
Precision Alignment Equipment Pty Ltd			7,947		7,947		Nil
Precision Tool Engineering			1,795		1,795		Nil
Project Human Resources Pty Ltd			817		817		Nil
Protec Pty Ltd	62 Woodstock St		1,169		1,169		Nil
Pure Mechanical Pty Ltd			1,094		1,094		Nil
Qualtarp Pty Ltd			122		122		Nil
Quarry & Mining Manufacture Pty Ltd	236 Welshpool Road		55,931		55,931		Nil
Quarry Mining & Construction Equipment	5 Sevenoaks Street		10,328		10,328		Nil
R E Tooling Pty Ltd	Unit 9		91		91		Nil
R Hood Trust T/A Commercial Stationery Office National			1,517		1,517		Nil
Razorback Construction Pty Ltd			20,924		20,924		Nil
Rc Williams Pty Ltd			6,145		6,145		Nil
Res Telecommunications Pty Ltd			1,619		1,619		Nil

ASIC Form 507 30 January 2012 Page 8 of 11

Appendix 6

SCHEDULE H—UNSECURED CREDITORS

(Trade payables)

		Amount		Amount
		claimed		admitted as		Reason for difference between
		by creditor		owing		amount claimed and admitted (if
Name	Address *	USD**		USD**		any)
Recall Total Information			1,168		1,168		Nil
Redimed Pty Ltd	218 Welshpool Road		4,002		4,002		Nil
Reflex Instruments Asia Pacific Pty Ltd	21 Callanna Road		95,691		95,691		Nil
Rehnmark Pty Ltd	22 Church Road		330		330		Nil
Rentokil Initial Pty Ltd	18 Gumbowie Avenue		1,631		1,631		Nil
Rgm Maintenance Pty Ltd			5,014		5,014		Nil
Ricoh Finance	PO Box 240		5,407		5,407		Nil
Ridge Tool Australia Pty Ltd			760		760		Nil
Rmp (Nsw) Pty Ltd T/A Regos Plus Tyre And Mechanical			5,164		5,164		Nil
Rocktech			3,863		3,863		Nil
Rototech Pty Ltd	27 Saleyards Road		23,954		23,954		Nil
Roxby Hydraulics Pty Ltd	145 Roberts Road		94		94		Nil
Rs Components Pty Ltd	279 Princes Highway		1,307		1,307		Nil
Rto Solutions Pty Ltd T/A Illuminate Group	No 17, 85-91 Keilor Park Dr		1,838		1,838		Nil
Ryco Hydraulics Pty Ltd			49,758		49,758		Nil
S A Hetherington Pty Ltd	Unit 14, 5 Kelletts Road		9,434		9,434		Nil
Sa Tractors Pty Ltd			4,149		4,149		Nil
Safeman Pty Ltd	124 Norrie Avenue		4,939		4,939		Nil
Saferight Pty Ltd			874		874		Nil
Safety Sales & Hire			136		136		Nil
Safety Signs Service	16 Alacrity Place, Henderson		4,794		4,794		Nil
Safety Supplies On Site	2/4 Adelaide Terrace		714		714		Nil
Sage Automation Pty Ltd			32,069		32,069		Nil
Sage Software Australia Pty Ltd	42 Kremzow Road		20,262		20,262		Nil
Saint Gobain Abrasives Pty Ltd			1,626		1,626		Nil
Sandvik Mining & Construction Australia	14-16 Wedgewood Road		14,137		14,137		Nil
Santek Pty Ltd	98 Byfield Street		17,728		17,728		Nil
Sas Locksmith	14B Krawarri Street		2,026		2,026		Nil
Sauer Danfoss			1,076		1,076		Nil
Scootz Cafe West Beach			533		533		Nil
Sign Style	62 Clarinda Street		2,871		2,871		Nil
Silkcity Holdings Pty Ltd T/A Australian Boxes & Cases	11 Transport Avenue		27,096		27,096		Nil
Silverise Pty Ltd	PO Box 5660		8,792		8,792		Nil
Site Skills Group Pty Ltd T/A Site Skills Training	44 Pilbara Street		188		188		Nil
Skillpro Services Pty Ltd			520		520		Nil
Smc Pneumatics Australia Pty Ltd	PO Box 516		1,419		1,419		Nil
Snap Printing	32 Cottonview Road		67		67		Nil
Solo Waste Aust Pty Ltd			925		925		Nil

ASIC Form 507 30 January 2012 Page 9 of 11

Appendix 6

SCHEDULE H—UNSECURED CREDITORS

(Trade payables)

		Amount			Amount
		claimed			admitted as			Reason for difference between
		by creditor			owing			amount claimed and admitted (if
Name	Address *	USD**			USD**			any)
Somerled Services	10A Ranger Road		218			218			Nil
Sonnex Pty Ltd	24/9 Inspiration Drive		854			854			Nil
Sos Safety Signs Pty Ltd	PO Box 2462		53			53			Nil
Southcott Pty Ltd	PO Box 1600		2,023			2,023			Nil
Southern Cross Industrial Supplies Pty Limited			224			224			Nil
Southern Springs			4,731			4,731			Nil
St John Ambulance Australia (Western Australia) Inc	PO Box 31234		360			360			Nil
Staples Australia Pty Limited	7 Hugh Quinn Crescent		7,518			7,518			Nil
Stauff Corp Pty Ltd			1,559			1,559			Nil
Stefan'S Mechanical Services			(271	)		(271	)		Nil
Stockholm Precision Tools Ab			26,266			26,266			Nil
Stratex Pty	52 Aland Street		1,184			1,184			Nil
Sunsource (Usa)	33 Triumph Ave		405			405			Nil
Super Motor Spares	PO Box 5037		8,193			8,193			Nil
Superior Pump Technologies	PO Box 2545		187			187			Nil
Swagelok			4,361			4,361			Nil
Synergy Energy	PO Box 775		2,658			2,658			Nil
T & C Hedges Consulting Pty Ltd			16,322			16,322			Nil
Tafe Sa	129 Kerry Rd		903			903			Nil
Taris Engineering	5/83-85 Montague St		2,784			2,784			Nil
Telescope Tyres And Batteries			(120	)		(120	)		Nil
Telstra Corporation Limited	130 Mulgul Rd		50,397			50,397			Nil
The Cool Clear Water Company			734			734			Nil
The Maintenance Shed Pty Ltd	5A Grenfell St		3,939			3,939			Nil
Thomson Geer			1,650			1,650			Nil
Tnt Australia Pty Ltd			15,501			15,501			Nil
Toll Ipec Pty Ltd			8,125			8,125			Nil
Toll North Pty Ltd			470			470			Nil
Toll Transport Pty Limited	PO Box 1868		84,036			84,036			Nil
Torque Industries Pty Ltd	38 Thornbury St		232			232			Nil
Total C A M Solutions			96,109			96,109			Nil
Total Eden Pty Limited			522			522			Nil
Tox Free Australia Pty Ltd			586			586			Nil
Toyota Material Handling Australia Pty Limited			1,023			1,023			Nil
Track One Srl			310			310			Nil
Tregeseal Pty Ltd T/A Acorn Human Resources			6,980			6,980			Nil
Truckline			541			541			Nil
Tsubaki Australia Pty Ltd			438			438			Nil

ASIC Form 507 30 January 2012 Page 10 of 11

Appendix 6

SCHEDULE H—UNSECURED CREDITORS

(Trade payables)

		Amount		Amount
		claimed		admitted as		Reason for difference between
		by creditor		owing		amount claimed and admitted (if
Name	Address *	USD**		USD**		any)
Turck Australia Pty Ltd			1,605		1,605		Nil
Tyco Australia Pty Ltd			2,347		2,347		Nil
Ues International Pty Ltd			29		29		Nil
Underground Rock Drill			5,726		5,726		Nil
Unilift Equipment & Sales			12,569		12,569		Nil
United Fasteners Sa Pty Ltd			56		56		Nil
United Parcel Service			811		811		Nil
Van Ruth Prod			15,170		15,170		Nil
Veolia Environmental Services (Australia) Pty Ltd			1,005		1,005		Nil
Vilayphone Vilayvanh			357		357		Nil
Village National Holdings Limited			627		627		Nil
Vmw Engineering Pty Ltd			7,875		7,875		Nil
W A Grouting Systems			2,063		2,063		Nil
Wa Mine World Pty Ltd			10,402		10,402		Nil
Wa Truck & Machinery Repairs			155		155		Nil
Wakefield Trucks Pty Ltd			10,965		10,965		Nil
West Wyalong Tyre & Exhaust Centre			1,271		1,271		Nil
Western Freight Management Pty Limited			1,117		1,117		Nil
Westernex Supply			3,789		3,789		Nil
Westrac Equip			1,033		1,033		Nil
Whyalla Motel			949		949		Nil
Wilson Security Pty Ltd			1,228		1,228		Nil
Workpac Group			2,135		2,135		Nil
Wt Hydraulics			118		118		Nil
Yellow			378		378		Nil

Note*: Address

First address line only

Note **: Amount claimed by creditor and admitted as owing

AUD amounts owing converted to USD at AUD:USD 0.75

Annexure E

Scheme Administrators’ Scale of Charges

Annex E

KordaMentha rates

National

Applicable from 1 July 2016

FY 2017

Classification	$ per hour*
Principal Appointee/Partner/Executive Director	675
Director	625
Associate Director 1	575
Associate Director 2	525
Manager	475
Senior Executive Analyst	425
Executive Analyst	400
Senior Business Analyst	350
Business Analyst	295
Administration	150

*Exclusive of GST

KordaMentha disbursement policy

Disbursements incurred from third party suppliers are charged at the cost invoiced. KordaMentha does not add any margin to disbursements incurred through third parties.

There are no charges for internal KordaMentha disbursements, such as internal photocopy use, telephone calls or facsimiles, except for bulk printing and postage that is performed internally, which are calculated on a variable cost recovery basis.

In relation to any employee allowances, being kilometre allowance and reasonable travel allowance, the rate of the allowance set by KordaMentha is at or below the rate set by the Australian Taxation Office.

If a KordaMentha data room is utilised, the fee will comprise an initial setup fee and then a fee based on the duration and size of the data room.

Certain services provided by Forensic Technology may require the processing of electronically stored information into specialist review platforms. Where these specific Forensic Technology resources are utilised, the fee will be based on units (e.g. number of laptops), size (e.g. per gigabyte) and/or period of time (e.g. period of hosting).

GST is applied to disbursements as required by law.

Liability limited by a scheme approved under Professional Standards Legislation.  
Page 1

KordaMentha disbursement internal rates and allowances

Description	Charge*
Photocopying, printing (general)	$0.06 per page
Envelopes and postage (varies due to size and weight)	$1.45 to $2.40 per envelope
Travel Reimbursement	$0.60 per kilometre
Meal per diem, etc.	Up to $92.70 per day per staff member (unless other arrangements made)
Dataroom fee (varies based on MB size)	See detail below

*Exclusive of GST, reviewed annually on 1 July

Dataroom fee – Size (MB)	Charge per month*
0–300	$1,000
300–1000	$1,000 + $2.50/MB
1000–5000	$2,750 + $1.25/MB
5000+	$7,750 + $0.60/MB

*Exclusive of GST, reviewed annually on 1 July

KordaMentha classifications

Classification	Guide to level of experience
Principal Appointee/Partner/ Executive Director	Registered/Official Liquidator/Trustee, his or her Partners. Specialist skills brought to the administration. Generally in excess of 10 years’ experience.
Director	More than eight years’ experience and more than three years as a Manager. Answerable to the appointee, but otherwise responsible for all aspects of an administration. Controls staffing and their training.
Associate Director 1	Six to eight years’ experience with well developed technical and commercial skills. Will have conduct of minor administrations and experience in control of a small to medium team of staff. Assists with the planning and control of medium to large administrations.
Associate Director 2	Five to seven years’ experience with well developed technical and commercial skills. Will have conduct of minor administrations and experience in control of a small to medium team of staff. Assists with the planning and control of medium to large administrations.
Manager	Four to six years’ experience. Will have had conduct of minor administrations and experience in control of one to three staff. Assists with the planning control of medium to large administrations.
Senior Executive Analyst	Three to four years’ experience. Assists planning and control of small to medium administrations as well as performing some of the more difficult tasks on larger administrations.
Executive Analyst	Two to three years’ experience. Required to control the tasks on small administrations and is responsible for assisting tasks on medium to large administrations.
Senior Business Analyst	Graduate with one to two years’ experience. Required to assist in day-to-day tasks under supervision of more senior staff.
Business Analyst	Undergraduate or graduate with up to one year experience. Required to assist in day-to-day tasks under supervision of more senior staff.
Administration	Appropriate skills, including books and records management and accounts processing particular to the administration.

KordaMentha rates - National  
Page 2

Annexure F

Please note: to be eligible to vote at the Scheme Meeting, Noteholders must ensure that they lodge the Proxy Form below with their Registered Participant in sufficient time to allow the Registered Participant (a) to complete a Voting Proof of Debt Form on the Noteholder's behalf and (b) lodge the Proxy Form and the Voting Proof of Debt Form with the Information Agent by no later than 4.00 pm on 25 May 2017 (New York City Time).

Proxy Form

Form 532

(regulation 5.6.29)

(as modified and adopted for the Scheme)

A.C.N or A.R.B.N:             _____________________________

Corporations Act 2001 (Cth)

Capitalised terms in this Proxy Form that are not otherwise defined have the same meaning as is given to those terms in the Explanatory Statement.

1. APPOINTMENT OF PROXY

I/We _______________________________________________________________ of ________________________________________, a creditor of Boart Longyear Limited ACN 123 052 728, Boart Longyear Management Pty Limited ACN 123 283 545, Boart Longyear Australia Pty Ltd ACN 000 401 025 or Votraint No. 1609 Pty Limited ACN 119 244 272 appoint:

¨ Chairman of Boart Longyear

- Or -

¨ ____________________ or in his or her absence ____________________ as my/our general/special proxy;

to vote at the Scheme Meeting:

¨ for the Resolution

¨ against the Resolution

2. THE RESOLUTION

RESOLVE THAT pursuant to and in accordance with section 411 of the Corporations Act 2001 (Cth), the Scheme between the Companies, the 7% Scheme Creditors and the Subordinate Claim Holders, as contained and described in the Explanatory Statement, is agreed to.

Dated

Signature

OR if executing as a company:

executed by
Signature of director	Signature of director/secretary
Name	Name

CERTIFICATE OF WITNESS

(This certificate is to be completed only if the person giving the proxy is blind or incapable of writing. The signature of the creditor, contributory, debenture holder or member must not be witnessed by the person nominated as proxy)

I ____________________, of ____________________, certify that the above instrument appointing a proxy was completed by me in the presence of and at the request of the person appointing the proxy and read to him or her before she signed or marked at the instrument.

Dated

Signature of witness

Description

Place of residence

This form must be lodged with the Information Agent at the following address by 4.00 pm New York City Time on 25 May 2017:

Boart Longyear Ballot Processing

c/o Prime Clerk LLC

830 Third Avenue

3^rd Floor

New York

NY 10022

UNITED STATES

OR

Email: boartballotprocessing@primeclerk.com

Annexure G

Voting Proof of Debt Form

Section 1

Form 535

(subregulation 5.6.49 (2))

(as modified and adopted for the Scheme)

A.C.N or A.R.B.N:                  ____________________________

Corporations Act 2001 (Cth)

FORMAL PROOF OF DEBT OR CLAIM (GENERAL FORM)

Capitalised terms in this Proof of Debt that are not otherwise defined have the same meaning as is given to those terms in the Explanatory Statement.

To the Scheme Administrators of Boart Longyear Limited ACN 123 052 728, Boart Longyear Management Pty Limited ACN 123 283 545, Boart Longyear Australia Pty Ltd ACN 000 401 025 and Votraint No. 1609 Pty Limited ACN 119 244 272

1. This is to state that ______________________ was on the Voting Entitlement Record Date justly and truly indebted to ____________________________ for________ dollars and ________ cents.

Particulars of the debt are:

1a) Loan or other debt that is other than that of Noteholders

Date Consideration Amount Remarks

1b) Noteholder information

The above name creditor holds the following Notes to which this Voting Proof of Debt Form relates.

ISIN Amount⁸ DTC Account Number

2. I am employed by the creditor and authorised in writing by the creditor to make this statement. I know that the debt was incurred for the consideration stated and that the debt, to the best of my knowledge and belief, remains unpaid and unsatisfied.⁹

3. I am the creditor’s agent authorised in writing to make this statement in writing. I know the debt was incurred for the consideration stated and that the debt, to the best of my knowledge and belief, remains unpaid and unsatisfied.¹⁰

⁸ The amount entered should be the entire principal amount of Notes in respect of which the Registered Participant is giving instructions on behalf of the relevant Noteholder pursuant to this Voting Proof of Debt Form. If the Registered Participant in respect of which it is not giving instructions pursuant to this Voting Proof of Debt Form, this amount should not be stated and is not required to be notified.

⁹ Do not complete if this proof is made by the creditor personally.

¹⁰ Do not complete if this proof is made by the creditor personally.

Dated:

If executing as an individual:

executed by
Signature of creditor	Signature of witness
Name	Name

If executing as a company:

executed by
Signature of director	Signature of director/secretary
Name	Name

If executing under power of attorney:

signed for
under power of attorney in the presence of:
	Signature of attorney
Signature of witness	Name
Name	Date of power of attorney

This form (including Sections 2 and 3) must be lodged with the Information Agent at the following address by 4.00 pm New York City time on 25 May 2017:

Boart Longyear Ballot Processing

c/o Prime Clerk LLC

830 Third Avenue

3^rd Floor

New York

NY 10022

UNITED STATES

OR

Email:Boartballotprocessing@primeclerk.com

Section 2

Noteholder, Registered Participant and Holding Details

This Section 2 must be validly completed by the Registered Participant, on behalf of Noteholders, and submitted to the Information Agent.

Part A Details of the Noteholder

Please identify the Noteholder (that is, the person that is the beneficial owner of and/or the holder of the ultimate economic interest in the Notes, held in global form through DTC) on whose behalf you are submitting this Voting Proof of Debt Form.

To be completed for all Noteholders:

Full Name of Noteholder:

Address of Noteholder:

Email Address:

Telephone Number (with country code):

To be completed if the Noteholder is an institution:

Jurisdiction of incorporation of Noteholder:

Contact Name:

Email Address:

PART B Details of Registered Participant

This Part must be validly completed by the Registered Participant and submitted to the Information Agent.

Full Name of Registered Participant:

DTC Account Number:

Authorised employee of Registered Participant:

Email of authorised employee:

Authorised employee signature:

Date:

Medallion Guarantee:

Before returning this Voting Proof of Debt Form to the Information Agent, please make certain that you have provided all the information requested.

PART C Details of Holdings

The Registered Participant holds the following Notes to which this Voting Proof of Debt Form relates.

ISIN Amount¹¹ DTC Account Number

¹¹ The amount entered should be the entire principal amount of Notes in respect of which the Registered Participant is giving instructions on behalf of the relevant Noteholder pursuant to this Voting Proof of Debt Form. If the Registered Participant in respect of which it is not giving instructions pursuant to this Voting Proof of Debt Form, this amount should not be stated and is not required to be notified.

Section 3

Noteholder confirmations

Each Noteholder who submits, delivers or procures the delivery of a Voting Proof of Debt Form and Proxy Form represents, warrants and undertakes to the Companies and the Information Agent that:

1. it is the Beneficial Owner (as defined below) of, or a duly authorized representative of one or more Beneficial Owners of, the Notes, and it has full power and authority to vote with respect to such Notes;

2. the Notes were owned as of the date of voting, free and clear of any liens, charges, claims, encumbrances, interests and restrictions of any kind;

3. the holder of the Notes will execute any further documents and give any further assurances that may be required in connection with any of the foregoing, in each case on and subject to the terms and conditions;

4. it has received the Scheme and the Explanatory Statement and has had sufficient opportunity to review all documents contained therein;

5. to the best of its knowledge, it is lawful to seek voting instructions from it in respect of the Scheme;

6. it is assuming all of the risks inherent in it participating in the Scheme and has undertaken all the appropriate analysis of the implications of participating in the Scheme for it;

7. the Notes which are the subject of the Voting Proof of Debt Form and Proxy Form are, at the time of delivery of such Voting Proof of Debt Form and Proxy Form, held by it (directly or indirectly) or on its behalf at DTC;

8. it has not given voting instructions or submitted the Voting Proof of Debt Form or Proxy Form with respect to the Notes other than those that are the subject of this Voting Proof of Debt Form and Proxy Form;

9. it authorises the Registered Participant to provide details concerning its identity, the Notes which are the subject of the Voting Proof of Debt Form and Proxy Form and delivered on its behalf and its applicable account details to the Companies and the Information Agent and their respective legal and financial advisers at the time the Voting Proof of Debt Form and Proxy Form is submitted;

10. neither the Information Agent nor any of its affiliates, directors, officers or employees has made any recommendation to it as to whether, or how, to vote in relation to the Scheme, and that it has made its own decision with regard to voting based on any legal, tax or financial advice that it has deemed necessary to seek;

11. all authority conferred or agreed to be conferred pursuant to these representations, warranties and undertakings shall, to the best of its knowledge and to the extent permitted by law, be binding on the successors and assigns of it (in the case of a corporation or institution) or the successors, assigns, heirs, executors, trustees in bankruptcy and legal representatives of it (in the case of a natural person) and shall not be affected by, and shall survive, the insolvency, bankruptcy, dissolution, death or incapacity (as the case may be) of it; and

12. it is solely liable for any taxes or similar payments imposed on it under the laws of any applicable jurisdiction as a result of voting in favour of the Scheme, and that it will not and does not have any right of recourse (whether by way of reimbursement, indemnity or otherwise) against the Companies, the Information Agent or any of their affiliates, directors, officers, advisers or employees in respect of such taxes or similar payments.

“Beneficial Owner” of any of the Notes means any holder that exercises investment discretion with respect to such Notes.

Annexure H

Annex H

ANNEXURE H

Known 7% Scheme Creditors, known Guaranteed Creditors and known Internal Creditors

Item 1 Summary

Name		Finance Document	Claim amount (principal and interest) as at 1 April 2017		BLY Shares owned as at 1 April 2017
1.	Ares *	Indenture	$	126,200,655		-
2.	Ascribe *	Indenture	$	133,843,095		10,671,038
3.	Other †	Indenture	$	33,896,250		-

* As manager of one or more individual investment accounts.

† Reflects unknown creditor claim amounts.

Item 2 Registered Holder

DTC was recorded in the register of the Trustee, U.S. Bank National Association, as at 29 March 2017 as the holder of the notes issued under the Indenture as follows:

(a) the Rule 144A Note (CUSIP No: 09664PAA0) with a principal outstanding in the amount of US$275,200,000 and accrued but unpaid interest as at 1 April 2017 in the amount of US$9,632,000 (Rule 144A Note); and

(b) the Regulation S Note (CUSIP No: Q16465AA6) with a principal outstanding in the amount of US$8,800,000 and accrued but unpaid interest as at 1 April 2017 in the amount of $US308,000 (Regulation S Note).

Item 3 Registered Participants

The Registered Participants through which Noteholders held the Rule 144A Note as of 29 March 2017 (as listed in the registered participants maintained by DTC) (CUSIP No: 09664PAA0) are listed in the table below.

Participant No.	Holder Name	Quantity (US$)
2787	BNPNY/C/CA		689,000
0902	JPMCBNA		132,967,000
2803	US BANK NA		12,889,000
0010	BROWN BROS		1,620,000
2778	NTHRN/FFA		10,995,000
0250	WELLS FARG		2,500,000
0355	CS SEC USA		15,521,000
0997	SSB&T CO		98,019,000

The Registered Participants through which Noteholders held the Regulation S Note as of 29 March 2017 (as listed in the registered participants maintained by DTC) (CUSIP No: Q16465AA6) are listed in the table below.

Participant No.	Holder Name	Quantity (US$)
0908	CITIBANK		7,000,000
0534	INT BROKER		100,000
0902	JPMCBNA		1,700,000

Item 4 Noteholders

Details of the Noteholders are confidential.

Annexure I

Form of Representation Letter

LETTER OF REPRESENTATION

Ladies and Gentlemen:

This certificate is delivered to you in connection with our proposed acquisition of Scheme Warrants of Boart Longyear Limited (the “Issuer”) and new shares of the Issuer to be received upon exercise thereof. In connection with such acquisition, the undersigned represents and warrants to you that:

1.           We are, and at the time of any exercise of the Scheme Warrants will be, both a “qualified institutional buyer” (Qualified Institutional Buyer) as defined in Rule 144A under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3), (7) or (8) under the Securities Act in reliance on Rule 506(c) of Regulation D).

2.           We are not acquiring the Scheme Warrants with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Scheme Warrants, and we invest in or purchase securities similar to the Scheme Warrants in the normal course of our business. We, and any accounts for which we are acting, each understand and are each able to bear the economic risk of our or its investment (including the necessity of holding such shares for an indefinite period of time).

3.           We understand and acknowledge that neither the Scheme Warrants nor the shares issuable upon the exercise of such warrants have been registered under the Securities Act and, unless so registered, may not be sold or exercised, directly or indirectly, in the United States, except as permitted in accordance with paragraph 4 below.

4.           We agree on our own behalf and on behalf of any investor account for which we are purchasing Scheme Warrants to offer, sell or otherwise transfer such Scheme Warrants prior to the date that is one year after the later of the date of original issue and the last date on which either the Issuer or any affiliate of the Issuer was the owner of such Scheme Warrants (or any predecessor thereto) (the “Resale Restriction Termination Date”) only (a) in the United States to a person whom we reasonably believe is a qualified institutional buyer (as defined in rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, (b) outside the United States in an “offshore transaction” in accordance with Rule 904 of Regulation S under the Securities Act, (c) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if applicable) or (d) pursuant to an effective registration statement under the Securities Act, in each of cases (a) through (d) in accordance with any applicable securities laws of any state of the United States.

5.           We will, and each subsequent holder is required to, notify any purchaser of the Scheme Warrants evidenced hereby of the resale restrictions set forth above. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If

any resale or other transfer of the Scheme Warrants is proposed to be made to an institutional “accredited investor” prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Issuer and the Trustee, which shall provide, among other things, that the transferee is an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3), (7) or (8) under the Securities Act and that it is acquiring such Scheme Warrants for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Issuer and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Scheme Warrants pursuant to Section 4 above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Issuer and the Trustee.

We acknowledge that you, the Issuer, the Trustee and others (including, for the avoidance of doubt, Milbank, Tweed, Hadley & McCloy LLP) will rely upon our acknowledgments, representations and agreements set forth herein, and we agree to notify you promptly in writing if any of our acknowledgements, representations and agreements herein cease to be accurate and complete.

THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Dated: [X], 2017

[Insert name of Purchaser]

By:
	Name:
	Title:
[Insert name of Purchaser]
By:
	Name:
	Title:

Annexure J

Extract from ASX Announcement dated 3 April 2017

Term	Summary
Conditions precedent	Consummation of the transactions contemplated by the RSA (Recapitalisation) is subject to the satisfaction or waiver (if applicable) of certain conditions precedent, including: (a)        The independent expert failing to conclude that the Recapitalisation is "not fair" and "not reasonable" to non-associated shareholders of the Company; (b)        Shareholders of the Company approving the required resolutions at the general meeting by the requisite majorities; (c)        Creditors of the Company approving the creditors' schemes of arrangement by the requisite majorities; (d)        Court approval of the creditors' schemes of arrangement; (e)        The Company entering into director appointment agreements with lenders affiliated with each of CBP, Ares and Ascribe (Supporting Creditors); (f)         The new ABL Revolver being duly executed by all the parties to it and all conditions precedent to the ABL Revolver being satisfied (other than those conditions relating to the creditors' schemes of arrangement becoming effective); (g)        The warranties given by the Company and the Supporting Creditors being true and correct in all material respects; (h)        All relevant Supporting Creditors obtaining approval under the Foreign Acquisitions and Takeovers Act 1975 (Cth); (i)         The issue of shares, notes and warrants notes under the Recapitalisation, where relevant, being exempt from registration under the United States Securities Act of 1933; and (j)         The Company obtaining all other relevant regulatory approvals, confirmations, consents or waivers, including ASX confirmation that it approves the terms of the warrants. Each party must use its respective reasonable endeavours to procure that each of the conditions precedent is satisfied as soon as reasonably practicable. The RSA may be terminated by either the Company or the Supporting Creditors (acting unanimously) in the event that a condition precedent becomes incapable of being satisfied by 31 December 2017, or as extended by agreement.
Implementation and milestones	The Company agrees to implement the Recapitalisation in accordance with the RSA. The Supporting Creditors have agreed to support the creditors' schemes and have agreed to implement the transactions subject to the terms of the RSA. Following execution of the RSA, the Company and the Supporting Creditors will use reasonable endeavours to agree in good faith the documents to give effect to the Recapitalisation in accordance with agreed milestones. Some of the key milestones are set out in the Schedule at the end of this Appendix.
Exclusivity	The Company is required to comply with certain exclusivity obligations under the RSA, which include: (a)        (No shop restriction) the Company must not solicit, invite, encourage or initiate any enquiries, proposals, negotiations or discussions (or communicate any intention to do any of these things) with a view to obtaining any expression of interest, offer or proposal from any other person in relation to a competing proposal or potential competing proposal. (b)        (No talk restriction) subject to a fiduciary carve-out (summarised below), the Company must not: (i)          enter into, continue or participate in any negotiations or discussions with any person regarding a competing proposal or which may reasonably be expected to lead to a competing proposal;

Term Summary

(ii)        provide any non-public information regarding the Company's businesses or operations to a person for the purposes of enabling or assisting that person to make a competing proposal; or

(iii)       accept, enter into or offer to accept or enter into any agreement, arrangement or understanding in relation to an offer or proposal from any other person in relation to a competing proposal.

(c)        (Notification) the Company must notify the Supporting Creditors if it is approached about a potential competing proposal, or provides or proposes to provide any material non-public information to a third party to enable that party to make a competing proposal.

A fiduciary carve-out allows the Company's Board to consider certain competing proposals received after entering into the RSA and before shareholders approve the required resolutions for the Recapitalisation at the general meeting of shareholders, if:

(a)        such action is in response to a bona fide competing proposal that was not solicited or encouraged in contravention of the "no shop" or "no talk" restriction;

(b)        the Board, acting in good faith, determines that the competing proposal is a superior proposal or that such action which the Board proposes to take may reasonably be expected to lead to a competing proposal that is a superior proposal; and

(c)        the Board, acting in good faith, determines after receiving written legal advice from the Company's external legal advisors (and, if appropriate, the Company's financial advisors) that failing to take such action in response to such competing proposal would reasonably be expected to constitute a breach of the Board's fiduciary or statutory duties under applicable law.

A competing proposal under the RSA means any dissolution, winding up, liquidation, reorganisation, assignment for the benefit of creditors, merger, transaction, consolidation, business combination, joint venture, partnership sale of assets, financing (debt or equity), refinancing, or restructuring of the Company, other than the restructuring contemplated in the RSA, including, but not limited to, any proposal, agreement, arrangement or transaction, received in writing within the period from the commencement date to the completion date, which the Company's Board determines, in good faith and in consultation with the Company's counsel, if completed, would mean a third party (either alone or with any associate of that third party) may:

(a)        directly or indirectly acquire a relevant interest in 20% or more of the Company's shares or 50% or more of the share capital of any material subsidiary of the Company;

(b)        acquire control of the Company;

(c)        directly or indirectly acquire a legal, beneficial or economic interest in, or control of, all or a material part of the Company's business or assets or the business or assets of the Company taken as a whole, or

(d)        otherwise directly or indirectly acquire or merge with the Company or acquire a material subsidiary of the Company.

A superior proposal under the RSA means a bona fide written competing proposal of the kind referred to in (b) or (c) of the definition of competing proposal (above) that the Board, acting in good faith, and after receiving written legal advice from the Company's counsel and advice from its financial advisor, determines:

(e)        is reasonably capable of being valued and completed, taking into account all aspects of the competing proposal including any timing considerations, any conditions precedent, the identity, reputation and financial standing of the proponent, the current contractual rights of the Supporting Creditors under the relevant finance documents, and any requirements set forth by the Supporting Creditors in their response to a competing proposal;

(f)        would, if completed substantially in accordance with its terms, be more favourable to the Company's shareholders (as a whole) and the creditors of the

Term Summary

	Company that the transaction (having regard to the fact that trade creditors will be paid in full under the transaction) taking into account all terms and conditions of the competing proposal; and (g)        would reasonably be expected to require it by virtue of its directors' fiduciary or statutory duties under applicable law to respond to such competing proposal or to change, withdraw or modify its recommendation.
	The RSA requires that, if the Company determines that a competing proposal is a superior proposal, the Company will provide the Supporting Creditors with details of the competing proposal that is a superior proposal. The Supporting Creditors will have the right until the expiration of five business days of receiving the information to make one or more offers to the Company in writing to amend the terms of the RSA or propose any other transaction (a Counterproposal). If the Supporting Creditors make a Counterproposal, then the Board must review the Counterproposal in good faith to determine whether it is more favourable to the Company than the superior proposal. If the Board determines that the Counterproposal is more favourable to the Company, its shareholders and its creditors than the superior proposal, and is capable of being implemented in a reasonable time, then: (a)        if the Supporting Creditors contemplate an amendment to the RSA, the parties will enter into an amending deed reflecting the Counterproposal; (b)        if the Counterproposal contemplates any other transaction, the Company will make an announcement recommending the Counterproposal, in the absence of a superior proposal and, if required, subject to the conclusions of an independent expert, and the parties will pursue implementation of the Counterproposal in good faith with their best endeavours; and (c)        the Company will effect a change of recommendation of the Board in relation to the transaction and will not authorise or enter into any letter of intention, memorandum of understanding, recapitalisation agreement or other agreement, arrangement or understanding relating to (or consummate) such former superior proposal. The requirements of paragraph (b), above, will not preclude the Board from receiving and considering any further competing proposal (including from the same person which provided the former superior proposal). Any further competing proposal will require the board of the Company to comply with the requirements in paragraph (c), above. Any modification of any superior proposal will constitute a new superior proposal and require the Company's board to again comply with paragraph (b), above.
Break fee	A break fee of totalling AUD$1,000,000 (exclusive of GST) is payable by the Company to the Supporting Creditors (Break Fee) if: (a)        during the exclusivity period, a Superior Proposal is publicly announced by a third party and that third party or an associate acquires a relevant interest in 20% or more of the Company's shares within 6 months of such an announcement; (b)        prior to the completion date, any director of the Company (other than Conor Tochilin or Jeffrey Long, who will recuse themselves with respect to any vote regarding the Recapitalisation): (i)         withdraws or adversely modifies his/her recommendation in favour of the transaction or recommends a Superior Proposal; (ii)        does not recommend that the shareholders approve the transaction resolutions in the notice of meeting; or (iii)        makes a public statement with the effect that the transaction resolutions are no longer recommended, other than as a result of the independent expert determining that the transaction resolutions are 'not fair' and 'not reasonable' for the Company's non-associated shareholders; or (c)        the Supporting Creditors terminate the Restructuring Support Agreement if

Term Summary

(amongst other reasons) the Company materially breaches the Restructuring Support Agreement. The Break Fee is in addition to the expense reimbursement provisions summarised below.

Termination

The RSA includes customary termination rights, including: (a)        Termination for no approval of the Recapitalisation - any party may terminate if, among others: (i)        the completion date has not occurred by 31 December 2017; (ii)        the shareholders of the Company do not approve the required resolutions at the general meeting; (iii)       the creditors of the Company do not approve the respective creditors' schemes of arrangement by the requisite majorities; (iv)      any government agency or court of competent jurisdiction issues a final, non-appealable judgment, order, injunction, decree, ruling or similar action restraining, enjoining or otherwise prohibiting the consummation of Recapitalisation or declaring unlawful the Recapitalisation; (v)       an Australian court does not approve the creditors' schemes of arrangement; or (vi)      a U.S. bankruptcy court or Canadian court enters a final, non-appealable order denying final approval of the Australian court's approval of the Company's creditors' schemes. (b)        (Termination by the Company for material breach) the Company may terminate at any time before the completion date by written notice to the other parties if a Supporting Creditor has materially breached the RSA; (c)        (Termination by any of CBP, Ares or Ascribe) Any one of CBP, Ares or Ascribe may terminate by written notice to all the parties if: (i)         any one of them has materially breached the RSA (provided that the party terminating cannot be the party in breach); (ii)        the Company enters into an agreement to implement a competing proposal; or (iii)       a warranty given by a Supporting Creditor becomes untrue or misleading (provided that the party terminating cannot be the party who has given the warranty which has become untrue or misleading). (d)        (Termination by CBP, Ares and Ascribe acting unanimously) the Supporting Creditors (acting unanimously) may terminate by written notice to the Company if either: (i)        the Board fails to recommend the Recapitalisation resolutions or withdraws or modifies its recommendation that the Company's shareholders vote in favour of those resolutions or approves a competing

Term Summary

	proposal; (ii)        the Company materially breaches the RSA; (iii)       any capacity warranty given by the Company or other Company warranty becomes untrue or misleading; (iv)       a milestone has not been achieved (other than as a result of any action or omission by a Supporting Creditor, a regulator or court) on or before the date that is 10 business days following the applicable milestone date (as set out in the Schedule); (v)        the Company seeks, and the Australian Court does not approve, an order under the Corporations Act and an insolvency event occurs; (vi)      the Company seeks, and the U.S. Bankruptcy Court denies, pursuant to a final, non-appealable order, interim or provisional relief and an insolvency event occurs; or (vii)      a material adverse event has occurred. (e)        (Other Circumstances for termination by the Company) the Company may terminate the RSA at any time before the date shareholders approve the Recapitalisation resolutions if, following full compliance with the RSA: (i)          the Company's board adversely changes or withdraws its recommendation in accordance with the RSA; or (ii)        the Company enters into an agreement or arrangement with a third party with respect to a Competing Proposal that is a Superior Proposal, as permitted by the RSA.
Commitments regarding the Recapitalisation	Subject to certain exceptions, the Supporting Creditors agree not to sell, assign, transfer or otherwise dispose of any right, title or interest in respect of ownership in any of the supporting debt, or grant any proxies, or enter into a voting agreement with respect to the supporting debt, unless the transferee either: (a)        is a Supporting Creditor; or (b)        agrees in writing to be bound by all the terms of the RSA.
Debt standstill	From the date of the RSA until the earlier of 30 September 2017 (as may be extended by agreement), the consummation of the Recapitalisation or the termination of the RSA, the Supporting Creditors agree (among other things): (a)        to forbear from the exercise of any right or remedies they have under or in connection with the documents governing their respective claims against the Company (including any right to seek interest payments); and (b)        not to declare any "event of default", including in respect of any circumstances subsisting as at or prior to the date of the RSA (unless the "event of default" occurs as a result of an insolvency event that would not otherwise arise by virtue of the transaction).
Failure of the creditors' schemes	If: (a)        the shareholders of the Company do not approve the required resolutions at the general meeting; (b)        the creditors of the Company do not approve the respective creditors' schemes of arrangement by the requisite majorities; (c)        any government agency or court of competent jurisdiction issues a final, non-appealable judgment, order, injunction, decree, ruling or similar action restraining, enjoining or otherwise prohibiting the consummation of the Recapitalisation or declaring unlawful the Recapitalisation; (d)        the Company seeks, and the Australian Court does not approve, an order under the Corporations Act, and the RSA is terminated by the Supporting Creditors; (e)        an Australian court does not approve the creditors' schemes of arrangement,

Term Summary

(f)        the Company seeks, and the U.S. Bankruptcy Court denies, pursuant to a final, non-appealable order, interim or provisional relief, and the RSA is terminated by the Supporting Creditors; (g)        the U.S. Bankruptcy Court enters a final, non-appealable order denying final approval of the Australian Court's approval of the Company's creditors' schemes; or (h)        the Company enters into an arrangement to implement a superior proposal (other than superior proposal in which the unsecured notes claims are paid in full in cash), then the Supporting Creditors agree during the three-month period following any of these events to: (a)        work together in good faith to cause the Company to implement an alternative restructuring; (b)        engage in good faith consultations regarding alternative restructuring; and (c)        not solicit, encourage or take other action in support of a restructuring or other transaction other than the agreed alternative restructuring.

Reimbursement of advisory fees

The Company agrees to pay in cash and in full, in accordance with their respective engagement letters, all invoiced fees and out of pocket expenses incurred by the Supporting Creditors (and their respective counsel and financial advisors).