Update on Merger with Polymetals - Notice of Meeting

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Funding assumptions SXG has received two non-binding indicative debt funding offers to finance the Marda Project. We have valued the Marda Project on the basis that it will be funded by debt of $32 million and equity of between $9 million and $11 million. SXG will also refinance the Sandstone Project loan facility to $5 million. We have assessed this assertion in light of our industry knowledge and the debt funding offers received by SXG and consider this to be reasonable. Economic assumptions Inflation We have applied an inflation rate to convert the forecast nominal gold prices into real terms. In our assessment of the inflation rate, we have considered forecasts prepared by economic analysts and other publicly available information including broker consensus to arrive at our inflation rate assumptions. From our analysis, target inflation is in the range of 2% to 3% which is consistent with the Reserve Bank of Australia’s target inflation rate range. We have adopted an inflation rate of 3% to convert the cash flows expressed in nominal terms to real terms. Foreign exchange rate All commodity prices are stated in United States Dollars (“USD”) and the forecasts in the Adjusted Marda Model are in Australian Dollars (“AUD”). USD to AUD conversions were undertaken using the following foreign exchange rate assumptions: 2013 2014 2015 2016 2017 2018 2019 2020 2021 Exchange rate (USD:AUD) 1.00 1.01 0.93 0.90 0.87 0.85 0.84 0.82 0.82 Source: Bloomberg Royalties and tax Royalties The Western Australian State Government royalty is included in the Adjusted Marda Model. This is calculated as 2.5% of revenue. Corporate tax The Adjusted Marda Model assumes a corporate tax rate of 30% over the period of the forecasts, after taking into account any tax losses carried forward. DCF Valuation – Discount rate We have selected a real after tax discount rate of 6.5% to discount the forecasts to their present value. In selecting this range of discount rates we considered the following: • The rates of return for comparable listed Australian gold companies; • The risk profile of SXG as compared to other listed Australian gold companies; • The current and forecast debt to equity ratio of SXG; • SXG’s forecast cost of debt as advised by SXG; 32
• AMC’s assessment of the relative risk of the Marda Project compared with the Mt Boppy Project. Details on our discount rate determination are provided in Appendix 3. Commodity prices In obtaining projected gold prices we have considered: • Historical spot and forward prices from Bloomberg; and • Most recent Consensus Economics price forecasts. Based on our analysis, we adopted the following projected gold prices (in real terms): 2013 2014 2015 2016 2017 2018 2019 2020 2021 Gold price (real) 1,600 1,525 1,420 1,300 1,180 1,185 1,185 1,185 1,185 Source: Consensus Economics & Bloomberg The Adjusted Marda Model We undertook the following analysis on the Adjusted Marda Model: • A review of the mathematical structure and internal consistency; • Appointed AMC as the technical expert to assess the reasonableness of the resources, capital and operating cost and other mining inputs used in the preparation of the life of mine; • Conducted independent research on certain economic and other inputs such as commodity prices, foreign exchange rates, inflation and discount rate applicable to the future cash flows of the Marda Project; • Held discussions with SXG’s management regarding the preparation of the cash flow forecasts in the Marda Model and its views; • Adjusted the Marda Model to reflect any changes to the technical assumptions as a result of AMC’s review and any changes to the economic and other input assumptions from our research; and • Performed a sensitivity analysis on the value of the Marda Project as a result of flexing selected assumptions and inputs. Appointment of a technical expert AMC, a mining technical specialist was engaged to prepare a report providing an assessment on the following inputs used in the preparation of the Marda Model; • The reasonableness of the resources used in the preparation of the Marda Model; • Mining physicals (life of mine, production schedule, recovery and grade); • Operating costs (mining operation, surface haulage, processing, accommodation and messing, royalties and general and administration); • Capital costs (mining capital costs, processing capital costs, resource definition, general and administration); and • Restoration and rehabilitation provisions. 33
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ASX ANNOUNCEMENT / MEDIA RELEASE Fr
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ABN 71 124 374 321 U16,162 Colin St
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3. Access to the cash reserves of P
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Disclaimer and Important Notice •
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SXG - Well Placed • • •
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SXG and PLY - Key Merger Metrics
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Indicative Merger Timetable •
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A Diversified Portfolio of Australi
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Marda Project • Rare greenfields
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Northern Gold Corridor Targets - Dr
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WA Gold Assets - Turner River • P
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Mt Boppy - A Near-Term Production O
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ASX Code: Investor Presentation J
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Pro Forma Gold Reserve Statement Pr
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ABN 71 124 374 321 U16,162 Colin St
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- 3 - Notice of General Meeting Not
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- 5 - Proxy appointment, voting and
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- 7 - 1.2 Rationale for the Merger
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- 9 - 1.5 Implementation of the Mer
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- 11 - in terms of assets and marke
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- 13 - (a) You may not agree with t
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- 15 - (b) the Technical Specialist
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- 17 - (a) Identity of the person r
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- 19 - (i) Other matters The Direct
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- 21 - The purpose of Resolution 2
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- 23 - Schedule 1 - Information abo
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- 25 - Woodside Energy Ltd and Dire
Page 56 and 57: - 27 - Stephen Jones (Chief Financi
Page 58 and 59: - 29 - In accordance with ASIC Clas
Page 60 and 61: - 31 - million SXG Options which ha
Page 62 and 63: - 33 - Schedule 2 - Terms & Conditi
Page 64 and 65: - 35 - the Company out of profits o
Page 66 and 67: - 37 - Glossary In this Explanatory
Page 68 and 69: - 39 - Peak Litigation The litigati
Page 70 and 71: - 41 - Annexure A Refer enclosed In
Page 72 and 73: Financial Services Guide 21 June 20
Page 74 and 75: TABLE OF CONTENTS 1. Introduction 1
Page 76 and 77: 2. Summary and Opinion 2.1 Purpose
Page 78 and 79: The respective advantages and disad
Page 80 and 81: elieves that there are sufficient r
Page 82 and 83: Existing SXG PLY Capital structure
Page 84 and 85: Sandstone Exploration Potential In
Page 86 and 87: 5.3 Historical Balance Sheet Southe
Page 88 and 89: in tenement acquisition costs also
Page 90 and 91: The current SXG unlisted options on
Page 92 and 93: Drew Hill - White Dam Gold Project
Page 94 and 95: 6.4 Historical Statement of Compreh
Page 96 and 97: At 31 March 2013, PLY have recorded
Page 98 and 99: Gold Demand/Supply Mined Metric ton
Page 100 and 101: • On 9 August 2012, Regis Resourc
Page 102 and 103: eport to be used in our report. At
Page 104 and 105: eport to be used in our report. At
Page 108 and 109: AMC modelled two cases for the Mard
Page 110 and 111: Marda Project Case 2 Units 31-Dec-1
Page 112 and 113: uildings and water supply. The $38.
Page 114 and 115: Considering the valuation outcomes
Page 116 and 117: Southern Cross Goldfields Limited V
Page 118 and 119: We calculated the corporate costs o
Page 120 and 121: SXG share price and trading volume
Page 122 and 123: On 28 February 2013 SXG announced t
Page 124 and 125: Control Premium The concept of a pr
Page 126 and 127: We note that SXG’s EV/resource mu
Page 128 and 129: The Adjusted Mt Boppy Model was pre
Page 130 and 131: 2013 2014 2015 2016 2017 2018 Gold
Page 132 and 133: AMC and management of PLY advise th
Page 134 and 135: Mt Boppy Case 2 Mt Boppy Project Ca
Page 136 and 137: Mt Boppy Case 2 Sensitivity analysi
Page 138 and 139: Polymetals Mining Limited Value of
Page 140 and 141: projects. PLY has discounted the to
Page 142 and 143: The Merged Entity - SXG Low Preferr
Page 144 and 145: Note f: Minority discount Following
Page 146 and 147: 12. Is the Transaction fair In asse
Page 148 and 149: As set out in section 12, the Trans
Page 150 and 151: 15. Sources of information This rep
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Page 154 and 155: Meadowhead Meadowhead Indemnity The
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APPENDIX 2 - VALUATION METHODOLOGIE
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APPENDIX 3 - DISCOUNT RATES SXG We
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Having regard to the above we consi
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Merged Entity Determining the corre
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associated (relative to the compara
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APPENDIX 4 - TECHNICAL SPECIALIST V
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AMC Consultants Pty Ltd ABN 58 008
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BDO CORPORATE FINANCE (WA) PTY LTD
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