DDH1 : ATO Class Ruling on Swick Inspecie Distribution of Orexplore

ASX Announcement

30 March 2022

ATO Class Ruling - In-specie Distribution of Orexplore Technologies Limited Shares

DDH1 Limited (ASX: DDH) (DDH or the Company) is pleased to advise that Class Ruling 2022/31 (Class Ruling) has been published by the Australian Taxation Office (ATO), clarifying the income tax consequences of the return of capital amount, which formed part of the In-Specie Distribution of Orexplore Technologies Limited shares (Orexplore) to former shareholders of Swick Mining Services Limited (Swick) (Former Swick Shareholders).

The ATO Class Ruling only applies to Former Swick Shareholders that were registered on the Swick share register at the record date of 30 December 2021 and who received Orexplore shares on 7 January 2022, by way of the In-Specie Distribution by Swick and who held Swick shares on capital account (but are not subject to the taxation of financial arrangement rules).

Subsequent to the In-Specie Distribution of Orexplore shares by Swick, Swick was acquired by DDH1 on 7 February 2021. Accordingly, DDH1 provides this update to Former Swick Shareholders.

Section 3.16 of Swick's Notice of General Meeting (as filed with ASX by Swick on 23 November 2021) set out the income tax consequences of the In-Specie Distribution for Former Swick Shareholders (which will depend upon the relevant Former Swick Shareholders' individual circumstances). The comments below set out the position for resident Former Swick Shareholders who held their Swick shares on a capital account (i.e. have not been held for the purpose of resale or as trading stock). The views expressed in the summary below are not intended as specific advice to Former Swick Shareholders. The application of tax legislation may vary according to the individual circumstances of Former Swick Shareholders, and they should obtain their own tax advice in relation to the In-Specie Distribution of Orexplore shares.

The In-Specie Distribution of Orexplore shares received by Former Swick Shareholders comprised two elements:

• • a return of capital of 3.72381718 cents per Swick share; and

• • a fully franked dividend of 0.80363108 cents per Swick share.

In summary, the ATO's Class Ruling confirms that for Australian tax resident Former Swick Shareholders who received Orexplore shares that:

• • The return of capital of 3.72381718 cents per Swick share received by Former Swick Shareholders as part of the In-Specie Distribution of Orexplore shares is not a dividend;

• • The return of capital received by Former Swick Shareholders as part of the In-Specie Distribution of Orexlore shares is not assessable as ordinary income;

• • Demerger roll-over relief in respect of any capital gain made as a result of the In-Specie distribution is not available;

• • A capital gains tax event occurred when Swick made the return of capital in respect of Swick shares, and capital gain arose if the return of capital was more than the cost base of the Swick shares. The capital gain is equal to the difference between the return of capital and the cost base of Swick shares, and the cost base of Swick shares is reduced to nil. If the return of capital is not more than the cost base of the Swick shares, the cost base is reduced by the amount of return of capital;

• • The fully franked dividend of 0.80363108 per Swick share received by Former Swick Shareholders as part of the In-Specie Distribution of Orexplore shares is assessable to Former Swick Shareholders;

• • For the purposes of the subsequent disposal of Orexplore shares, Former Swick Shareholders are taken to have acquired the Orexplore shares on 7 January 2022; and

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• • The first element of the cost base and reduced cost base of each Orexplore share received by the Former Swick Shareholders is 13.58 cents per Orexplore share, which the Commissioner accepts as being the market value of each Orexplore share.

The above is summarised in the table below:

Return of Capital	Fully Franked Dividend	Cost base of Orexplore share
3.72381718 cents per Swick share	0.80363108 cents per Swick share	13.58 cents per Orexplore share

Former Swick Shareholders will receive a Distribution Statement outlining the amounts received as part of the In-Specie Distribution of Orexplore shares (including any franking credits attached) to assist them in completing their income tax returns at the appropriate time.

The ATO Class Ruling is available on the ATO website at:

https://www.ato.gov.au/law/view/document?docid=CLR/CR202231/NAT/ATO/00001

A copy is also attached to this announcement.

Former Swick Shareholders should consult the ATO Class Ruling when considering the tax implications of the In-Specie Distribution of Orexplore shares. Former Swick Shareholders are encouraged to seek independent taxation advice relevant to their particular circumstances.

This announcement is a summary only and does not constitute tax advice or take into account the individual circumstances of each Former Swick Shareholder.

This ASX announcement has been authorised for release by Sy van Dyk, Managing Director and CEO of DDH1 Limited.

For further information, please contact:

Sy Van Dyk

Managing Director & CEO DDH1 Limited

[phone]

About DDH1 Limited

DDH1 Limited (ASX: DDH) is Australia's largest mineral drilling contractor providing high quality surface and underground drilling services to a diverse group of exploration and mining houses across a balanced spread of mineral commodities. Established in 2006, DDH1 is an industry leader in enabling its clients to secure quality mineral samples with exceptional spatial accuracy.

DDH1 employs around 1,600 people and operates a fleet of 176 highly specified mineral drilling rigs across its four brands, namely DDH1 Drilling, Ranger Drilling, Strike Drilling, and Swick Mining Services. Offering clients, the full suite of mineral drilling services including air core, reverse circulation, and both surface and underground core drilling.

DDH1's drill rig fleet is a strategically important asset within the Australian mining industry. Surface drilling is performed across Australia by DDH1 Drilling, Ranger Drilling, and Strike Drilling while Swick Mining Services has a global presence performing underground drilling services across Australia, North America, and Western Europe. DDH1 has a strong reputation for innovation in rig design and drilling practices that deliver improvements in productivity, safety, and value.

Central to DDH1's strategic approach is the pursuit of long-term relationships with clients, built on quality drilling services and a deep understanding of their business needs.

For more information, please visitwww.ddh1.com.au

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Status: legally binding

Class Ruling

Swick Mining Services Ltd - in specie distribution of Orexplore Technologies Limited shares

Relying on this Ruling

This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953.

If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling.

Table of Contents	Paragraph
What this Ruling is about	1
Who this Ruling applies to	5
When this Ruling applies	7
Ruling	8
Scheme	24
Appendix 1 - Explanation	57
Appendix 2 - Legislative provisions	71
What this Ruling is about

1. This Ruling is about the in specie distribution of shares in Orexplore Technologies Limited (Orexplore) issued to shareholders of Swick Mining Services Ltd (Swick)

on 7 January 2022 (Implementation Date).

2. This Ruling sets out the income tax consequences of the return of capital amount which formed part of the in specie distribution. This Ruling does not address the income tax consequences of the dividend amount which also formed part of the in specie distribution.

• 3. Full details of this scheme are set out in paragraphs 24 to 56 of this Ruling.

• 4. All legislative references in this Ruling are to provisions of the Income Tax

Assessment Act 1936 or the Income Tax Assessment Act 1997 (as detailed in the table in Appendix 2 of this Ruling), unless otherwise indicated.

Who this Ruling applies to

5. This Ruling applies to you if you:

• • held shares in Swick on 30 December 2021 (Record Date), and

Status: legally binding

• • held your shares on capital account; that is, you did not hold your Swick Shares as revenue assets (as defined in section 977-50) or as trading stock (as defined in subsection 995-1(1)).

6. This Ruling does not apply to anyone who is subject to the taxation of financial arrangements rules in Division 230 in relation to the scheme outlined in paragraphs 24 to 56 of this Ruling.

Note: Division 230 will not apply to individuals, unless they have made an election for it to apply.

When this Ruling applies

7. This Ruling applies from 1 July 2021 to 30 June 2022.

Ruling

Demerger relief not available

8. Demerger relief (being demerger roll-over pursuant to Division 125 and demerger dividend treatment under subsections 44(3) and (4)) is not available as the scheme does not satisfy the requirements of a demerger under section 125-70.

Return of capital not a dividend

9. The return of capital amount of 3.72381718 cents per Swick share you received as part of the in specie distribution of shares in Orexplore is not a dividend as defined in subsection 6(1).

Return of capital not assessable as ordinary income

10. The return of capital amount you received as part of the in specie distribution of shares in Orexplore is not assessable as ordinary income under section 6-5.

Sections 45B and 45C do not apply

11. The Commissioner will not make a determination under paragraph 45B(3)(b) that section 45C applies to the whole, or any part, of the return of capital you received as part of the in specie distribution of shares in Orexplore.

Capital gains tax consequences

CGT event G1

12. CGT event G1 happened to you when Swick made the return of capital in respect of each Swick share you owned on the Record Date and continued to own on the Implementation Date (section 104-135).

13. You made a capital gain when CGT event G1 happened if the return of capital amount of 3.72381718 cents per Swick share you received was more than the cost base of your Swick share. The capital gain is equal to the difference, and the cost base and reduced cost base of your Swick shares are reduced to nil (subsection 104-135(3)).

Status: legally binding

14. You cannot make a capital loss from CGT event G1 happening (Note 1 to subsection 104-135(3)).

15. If the return of capital amount of 3.72381718 cents per Swick share you received was not more than the cost base of your Swick share, each of the cost base and reduced cost base of your Swick shares is reduced by the amount of the return of capital (but not below nil) (subsection 104-135(4)).

CGT event C2

16. CGT event C2 happened to you if you held Swick shares at the Record Date but disposed of them prior to the Implementation Date (section 104-25). This event happened when Swick made the in specie distribution of an Orexplore share to you in satisfaction of your right to receive the Orexplore share.

17. You received capital proceeds of 13.58 cents in satisfaction of the right to receive an Orexplore share (paragraph 116-20(1)(a)).

18. You made a capital gain when CGT event C2 happened equal to the amount of the capital proceeds as you did not pay, or were not required to pay, for the right to receive an Orexplore share (subsection 104-25(3)).

19. Your capital gain is reduced by the dividend amount of 2.41 cents

(0.80363108 cents per Swick share), which formed part of the proceeds you received in satisfaction of your right to receive the Orexplore share (section 118-20).

Discount capital gain

20. You can treat a capital gain made when CGT event G1 or CGT event C2 happened in respect of the return of capital as a discount capital gain if you acquired your Swick share at least 12 months before the Implementation Date (subsection 115-25(1)), provided the other conditions in Subdivision 115-A are satisfied.

Cost base and reduced cost base of Orexplore Technologies Limited share

21. The first element of the cost base and reduced cost base of each Orexplore share you received is 13.58 cents, which the Commissioner accepts as being the market value of each Orexplore share1 (subsections 110-25(2) and 110-55(2)).

22. You are taken to have acquired the Orexplore share on the Implementation Date (Table Event number A1 (case 1) in subsection 109-5(2)).

Foreign-resident shareholders

23. If you were a foreign resident or the trustee of a foreign trust for CGT purposes as defined in subsection 995-1(1), you disregard any capital gain made from CGT event G1 or any capital gain made from CGT event C2 under subsection 855-10(1) as a Swick share

1 Calculated based on a five-day volume-weighted average price of an Orexplore share on the first five days of trading.