Update on Merger with Polymetals - Notice of Meeting

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We calculated the corporate costs over the LOM in case 1 and case 2 of the Adjusted Marda Model based on $2.25 million per annum. The net present value of future corporate costs is between $12.01 million and $14.69 million. 10.1.6. Transaction costs Transaction costs in relation to the Scheme and Transaction of $500,000 have been deducted. These costs will be incurred regardless of whether or not the Transaction is approved. 10.1.7. Shares on Issue In determining a value per share for SXG, we applied the number of SXG shares on issue at the date of this report, being 408,912,834 plus the SXG shares that would be issued if the Company were to raise between $9 million $11 million via equity funding and the shares issued to Barranco on the exercise of the Red Legs and Die Hardy option. 10.1.8. Sum-of-parts valuation for SXG We have assessed the control value per share using the sum-of-parts method to be between $0.031 and $0.044, with a midpoint value of $0.038. Southern Cross Goldfields Limited Low Preferred High Summary of assessment Reference $ (millions) $ (millions) $ (millions) DCF value of the M arda Project 10.1.1 28.22 32.39 36.55 Value of the M arda Project's exploration potential 10.1.2 0.65 0.98 1.30 Value of the Sandstone Project 10.1.2 - - - Value of mineral assets 28.87 33.37 37.85 NAV multiple 10.1.3 1.00 1.00 1.00 Total value of SXG's mineral assets 28.87 33.37 37.85 Other assets 10.1.4 13.45 16.90 20.35 Other liabilities 10.1.4 (6.17) (6.17) (6.17) Corporate costs 10.1.5 (12.01) (13.35) (14.69) Transaction costs 10.1.6 (.50) (.50) (.50) Value of SXG 23.64 30.25 36.84 Current shares on issue 10.1.7 408,912,834 408,912,834 408,912,834 Shares issued to Barranco Resources 10.1.4 20,000,000 20,000,000 20,000,000 Shares issued through equity funding 10.1.4 333,333,334 370,370,371 407,407,408 Shares on issue following the capital raising 762,246,168 799,283,205 836,320,242 Value of an SXG share on a control basis 0.031 0.038 0.044 We note that we have not diluted for the exercise of any SXG options on issue as they are considered to be ‘out of the money’ based on our assessed value per share above. 44
10.2. Quoted Market Prices for SXG securities To provide a comparison to the valuation of SXG in Section 11.1, we have also assessed the quoted market price for an SXG share. The quoted market value of a company’s shares is reflective of a minority interest. A minority interest is an interest in a company that is not significant enough for the holder to have an individual influence in the operations and value of that company. RG 111.11 suggests that when considering the value of a company’s shares for the purposes of approval under Item 7 of s611 the expert should consider a premium for control. An acquirer could be expected to pay a premium for control due to the advantages they will receive should they obtain 100% control of another company. These advantages include the following: • control over decision making and strategic direction; • access to underlying cash flows; • control over dividend policies; and • access to potential tax losses. Whilst the Sproule Interest will not be obtaining 100% of SXG, RG 111 states that the expert should calculate the value of a target’s shares as if 100% control were being obtained. RG 111.13 states that the expert can then consider an acquirer’s practical level of control when considering reasonableness. Reasonableness has been considered in Section 13. Therefore, our calculation of the quoted market price of an SXG share including a premium for control has been prepared in two parts. The first part is to calculate the quoted market price on a minority interest basis. The second part is to add a premium for control to the minority interest value to arrive at a quoted market price value that includes a premium for control. Minority interest value Our analysis of the quoted market price of an SXG share is based on the pricing prior to the announcement of the Transaction. This is because the value of a share after the announcement may include the effects of any change in value as a result of the Transaction. However, we have considered the value of an SXG share following the announcement when we have considered reasonableness in Section 13. Information on the Scheme and Transaction was announced to the market on 8 April 2013. Therefore, the following chart provides a summary of the share price movement over the 12 months to 5 April 2013 which was the last trading day prior to the announcement. 45
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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
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- 27 - Stephen Jones (Chief Financi
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- 29 - In accordance with ASIC Clas
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- 31 - million SXG Options which ha
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- 33 - Schedule 2 - Terms & Conditi
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- 35 - the Company out of profits o
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- 37 - Glossary In this Explanatory
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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 106 and 107: Funding assumptions SXG has receive
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 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
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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
Page 156 and 157: APPENDIX 2 - VALUATION METHODOLOGIE
Page 158 and 159: APPENDIX 3 - DISCOUNT RATES SXG We
Page 160 and 161: Having regard to the above we consi
Page 162 and 163: Merged Entity Determining the corre
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Page 166 and 167: 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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