Boart Longyear : 2018 Full Year Results

BOART LONGYEAR LIMITED

A.B.N. 49 123 052 728

ANNUAL FINANCIAL REPORT YEAR ENDED 31 DECEMBER 2018

CONTENTS

DIRECTORS' REPORT ....................................................................................................................................... 3

REVIEW OF OPERATIONS ............................................................................................................................... 5

REMUNERATION REPORT ............................................................................................................................ 19

BOARD OF DIRECTORS ................................................................................................................................. 33

EXECUTIVE MANAGEMENT TEAM ............................................................................................................... 37

AUDITOR'S INDEPENDENCE DECLARATION ............................................................................................... 38

INDEPENDENT AUDITOR'S REPORT ............................................................................................................ 41

DIRECTORS' DECLARATION .......................................................................................................................... 46

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ........... 47

CONSOLIDATED STATEMENT OF FINANCIAL POSITION ........................................................................... 48

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ........................................................................... 49

CONSOLIDATED STATEMENT OF CASH FLOWS ........................................................................................ 50

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ..................................................................... 52

Boart Longyear Limited Annual Report 2018

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 2018 (the "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
Kyle Cruz	Non-executive Director
Jason Ireland	Non-executive Director
James Kern1	Non-executive Director (appointed effective 20 February 2018)
Gretchen McClain	Non-executive Director
Jeffrey Olsen	Executive Director
Robert Smith	Non-executive Director
Richard Wallman	Non-executive Director
Eric Waxman	Non-executive Director

For a summary of experience and qualifications for each Director, see the Board of Directors section on page 33 of this Report.

COMPANY SECRETARIES Robert Closner

Philip Mackey

PRINCIPAL ACTIVITIES

Boart Longyear is the global leading integrated provider of drilling services, drilling equipment and performance tooling for mining and mineral drilling companies. 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, combined 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 127 years of drilling expertise, the Company believes itsinsignia and brand represent the gold standard in the global mineral drilling industry.

(1)James Kern served as an alternate, non-executive director on behalf of Lawrence First from 29 September 2017 to 20 February 2018 at which time Mr. First resigned from the Board and Mr. Kern was appointed to fill the vacated Board position.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

During the second half of 2018 the Company completed a transaction to increase its position to a majority stake (51.7%) in Globaltech Corporation Pty Ltd. Boart Longyear and acted on its rights to convert debt to equity to increase the total ownership position.

The continued investment in Globaltech builds upon the in-house knowledge tied to electronic instrumentation and data collection in the mineral exploration and mining industry. This is an intentional decision to further support the Company's Geological Data Services strategy that is fully focused on developing digital technologies and services and delivering resource-defining information for mining clients.

EVENTS SUBSEQUENT TO REPORTING DATE

No subsequent events.

DIVIDENDS

No dividends have been paid during the financial year.

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. Our successes include the LF160 surface coring drill paired with our Freedom Loader which has set a new benchmark in productivity and hands-free rod handling. Launched in the second half of 2017, our patented Longyear™ coloured diamond bits continue to show improved productivity by lasting longer and cutting faster. Commercial launch of the new XQ™ coring rod continues globally, featuring a greater depth capacity than the RQ™ rod, and faster, easier joint make/breaks for higher productivity. TruCore™ core orientation tools continue to expand geographically and are available globally. The TruShot™ magnetic survey instrument, the second in a future suite of tools, was launched in the first half of 2018 and we are now using our TruScanTM geological sample field screening technology at mine sites with several mining customers. These instruments are part of our strategy to be the global technology leader in providing subsurface resource information to mining companies through our Geological Data Services business.

Our capital structure exposes us to a variety of market, operational and liquidity risks. As at 31 December 2018 cash flows from operating activities was $3.7 million. This represents an improvement of $57.7 million over 2017 cash flows from operating activities of negative $54.0 million. This significant improvement was achieved through continued discipline on cost control and capital management, focused cost reductions, productivity enhancements and working capital management.

1.2 Safety Performance

Boart Longyear strives to continuously improve safety performance each year. The Company is driving culture and consistency across the globe though new systems and programs designed to focus on the Company's critical risks, the simplification of field standards, and through system based critical control verification audits.

For the year ending 31 December 2018, the Company performance on key indicators includes a Total Case Incident Rate (TCIR) of 1.90 and Lost Time Injury Rate (LTIR) of 0.10, compared to corresponding rates of 1.62 and 0.22 in 2017. Both TCIR and LTIR are rates calculated based on 200,000 hours worked. During this period, our employees experienced 5 injuries resulting in lost work time, the lowest number of lost time injuries in the past 12 years. The Company's TCIR increase from 2018 reflects, in part, the increase in exposure in drilling services activity and the deployment of increasing numbers of new employees into the operations. The majority of recordable injuries are low severity, including muscle pulls, muscle strains, and abrasions.

The continued improvements made this year are primarily due to the focus shift from lagging indicators to proactive leading indicator programs. Boart Longyear's key leading indicator programs focused on management interactions and hazard identification, new and existing employee training, non-conformance corrective action monitoring, and vehicle driver performance - monitored with a fleet of In-Vehicle Monitoring Systems (IVMS). The 2019 KPI programs now includes Critical Risk Management. These programs are measured and reviewed monthly by Boart Longyear's Executive Committee who drive overall performance. These systems reflect our ongoing priority to identify and mitigate significant and critical risks.

(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.