Update on Merger with Polymetals - Notice of Meeting

10. Valuation of SXG
10.1. Sum-of-parts valuation of SXG
10.1.1. DCF Valuation of the Marda Project
We elected to use the DCF approach in valuing SXG’s Marda Gold Project (“the Marda Project”). The DCF
approach estimates the fair market value by discounting the future cash flows arising from the project to
their net present value. Performing a DCF valuation requires the determination of the following:
• The expected future cash flows that the project is expected to generate; and
• An appropriate discount rate to apply to the cash flows of the project to convert them to present
value equivalent.
A cash flow model for the Marda Project was prepared by SXG (“the Marda Model”). The Marda Model
estimates the future cash flows expected from gold production at the Marda Project based on determined
JORC compliant reserves. The Marda Model depicts forecasts of real, post-tax cash flows over the life of
mine on a monthly basis.
The Marda Model has been adjusted by us to reflect any changes to technical assumptions as a result of
AMC’s review and any changes to the economic and other input assumptions from our research (“the
Adjusted Marda Model”). We have adjusted the Marda Model to reflect cash flows on an annual basis.
The main assumptions underlying the Adjusted Marda Model include:
• Mining and production volumes;
• Commodity prices;
• Operating costs;
• Sustaining capital expenditure;
• Foreign exchange rates;
• Royalties;
• Funding; and
• Discount rate.
Limitations
Since forecasts relate to the future, they may be affected by unforeseen events and they depend, in part,
on the effectiveness of management’s actions in implementing the plans on which the forecasts are based.
Accordingly, actual results may vary materially from the forecasts, as it is often the case that some events
and circumstances frequently do not occur as expected, or are not anticipated, and those differences may
be material.
Revenue assumptions
Revenue has been estimated as the product of annual saleable gold and the forecast gold prices. The
Adjusted Marda Model has been based on forecast real gold prices and exchange rates.
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