Sedgman Managing Director Discusses Intermet Acquisition

Brisbane, July 12, 2007 (ABN Newswire) - Brisbane, Australia, July 12, 2007 - (Starlink Media) Australian resource services company Sedgman Limited (ASX: SDM) has further broadened its reach from coal into the metals sector with the acquisition of Perth-based Intermet Engineering Pty Ltd. The A$32.75 million deal is Sedgman's second acquisition in the sector since going public in June 2006 as it seeks to boost its growth prospects in complementary business areas.

Sedgman's Managing Director, Peter Hay, said the acquisition would further boost the Brisbane-based company's engineering expertise following the $65 million acquisition in November 2006 of ore crushing and screening services company Pac-Rim.

"We're very pleased with the acquisitions we have made in terms of the Pac-Rim and now the Intermet acquisitions," he said.

"Both of those are going to provide us with a platform for growth and diversification into the metalliferous sector; I think it's really quite exciting going forward."

Mr Hay said Intermet was similar to Sedgman in its structure, but operated in the metals sector rather than Sedgman's traditional business area of coal.

"The acquisition rationale for the company was it was a complementary business; it provided a platform for growth; it provided us with diversification and it provided us with some positive financial impact in terms of the existing business," he said.

"But the most important aspect of Intermet was their sound technical skills.

"We think that's the core to both our coal business and the metals business to have that sound process engineering technical capability. That's the differentiator for the businesses in the marketplace and that was the real prime asset that we saw in the Intermet business."

Established in 1979 and specialising in the design, construction and operation of coal handling and preparation plants, Sedgman has become the market leader in its sector with two core business units of Engineering Services and Operations.

The acquisitions of Pac-Rim and now Intermet have led to a reorganisation of Sedgman's corporate structure into two key resource sectors of coal and metals, with the former two businesses both operating in the latter sector.

"If you look at the two business units we now have, we have Sedgman Coal and Sedgman Metals. Coal in Australia for Sedgman is a fairly mature market, so to grow that market or business will require us to look at offshore opportunities, which is exactly what we are doing," Mr Hay said.

"Within the metalliferous area, there are still significant opportunities for us domestically so while Intermet has quite a degree of international exposure, ironically probably quite a lot of the growth opportunities for our Intermet operation are domestic."

Mr Hay said Intermet had a strong pipeline of potential projects with an installed capital value of around $600 million, in addition to a current order book worth $290 million.

Current contracts cover the commodities of copper, zinc, gold and silver and range from plant commissioning at the Canatuan project in the Philippines to the Palmarejo project in Mexico for Bolnisi, with other projects in Papua New Guinea, Africa and Western Australia.

"Historically Intermet has operated in Australia, the Pacific, Asia, South America and significantly in Africa, so it has very substantial international experience," Mr Hay said.

Yet despite operating in a range of countries, Intermet is a low-risk acquisition for Sedgman, he added.

"The majority of the work is actually done onshore in Australia, including most of the detailed engineering and process engineering," Mr Hay said.

"Most of the projects are paid in Australian dollars so both the country risk and the exchange risks are fairly minimal."

Having grown market capitalisation to $570 million from less than half that when it listed, Sedgman has indicated that further acquisitions may be made in complementary business areas.

"There are a number of other small engineering service providers who may well be complementary to the Intermet acquisition and it would be fair to say that we are continuing to look at opportunities in the marketplace," Mr Hay said.

Summing up the year since going public, the managing director said, "I think it's been a very positive year in terms of the establishment of the platform for growth going forward and our outlook is excellent."