Update on Merger with Polymetals - Notice of Meeting

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We note that SXG’s EV/resource multiple of $28.39 per ounce falls within the range of multiples of the comparable companies which implies that our value derived under the sum-of-parts methodology is reasonable. A brief description of the comparable companies is set out below: Company name Regis Resources Limited Tanami Gold NL Evolution Mining Limited Silver Lake Resources Limited Rand Mining Limited BCD Resources NL Kalnorth Gold Mines Limited Octagonal Resources Limited Ramelius Resources Limited Excelsior Gold Limited Description Regis Resources Limited is a mineral exploration and gold production company. Regis mines for gold, nickel and copper and currently has two producing gold mines being the Moolart Well Project and the Garden Well Project. Both these project are located in Western Australia. Tanami Gold NL acquires, explores for and produces gold in central Western Australia and the Northern Territory. The Tanami's prospects include Highland Rocks, the West Australian Joint Venture and Harts Range. Evolution Mining Ltd is a gold exploration and production company with operations in Western Australia and Queensland. Evolution owns the following gold mines - Cracow, Edna May, Mt Rawdon and Pajingo - and the Mt Carlton development project. Silver Lake Resources is a mineral exploration and production company currently in the ASX 200. Silver Lake is focused on gold exploration in Western Australia focussing on Mount Monger, and Murchison Goldfields and the Great Southern District of Western Australia. Rand Mining Limited is involved in mineral exploration, development and production activities at its gold interests in Kalgoorlie. Its main focus is the East Kundana joint venture in Western Australia. BCD Resources NL is a mining company focusing on gold and copper. It holds interests in copper and gold projects in Victoria and gold projects in Tasmania. Kalnorth Gold Mines Limited (formerly Carrick Gold Limited) is a gold exploration and development company with a portfolio of projects located in Western Australia. It focuses on four main projects: Lindsay’s, Kalpini, Mt Jewell and Kurnalpi (collectively the LKK Project). Octagonal Resources is a gold explorer focusing in the Eastern Goldfields Province of the Yilgarn Craton in Western Australia and the Bendigo Zone of the Lachlan Fold Belt in Victoria. Ramelius Resources Limited is a gold mining and production which operates two main projects, Wattle Dam Gold Mine and Mt Magnet Gold Mine, in Western Australia. It also holds a portfolio of exploration and development projects located in Australia and USA. Excelsior Gold Limited (formerly Atom Energy Limited) is engaged in the gold exploration and development. Its main project is the Kalgoorlie North Gold Project, located 45kms north of Kalgoorlie. 10.4. Assessment of SXG’s value The results of the valuations performed are summarised in the table below: Low $ Preferred $ High $ Sum-of-parts (Section 10.1) $0.031 $0.038 0.044 Quoted market prices (Section 10.2) $0.033 $0.042 $0.051 We consider that the sum-of-parts methodology to be the most reliable due to the core value of SXG being in the mineral assets that it holds in its balance sheet, being the Marda and Sandstone Projects. We do not 52
consider the QMP method to be as reliable due to the low level of liquidity over the past 12 months. We note however that the value per share derived under the QMP method supports the value derived using the sum-of-parts method. We have therefore based our valuation of an SXG share primarily on the sum-of-parts methodology and consider the value of an SXG share prior to the Transaction and including a premium for control to be between $0.031 and $0.044, with a preferred value of $0.038. 11. Valuation of the Merged Entity To determine if the Transaction is fair and reasonable it is necessary to conduct a valuation of the Merged Entity that will result from approval and implementation of the Scheme, including the requirement for approval of the Transaction by SXG Shareholders. In our assessment of the value of the Merged Entity, we have chosen to employ the sum of parts methodology. The Merged Entity is valued by combining the sum of parts value of each company and adjusted for any forecast synergies in the Merged Entity. SXG have advised us that if the Merger proceeds, the primary intention of the Merged Entity is to progress regulatory approvals and financing for the development of the Marda Project. On that basis, the valuation of the Merged Entity has been prepared with production at the Mt Boppy Project being delayed by 12 months to 2015 to enable the Merged Entity to focus on bringing the Marda Project into production in 2014. SXG have advised us that the Mt Boppy Project will be prioritised for development as sufficient cash reserves become available. 11.1. Sum of parts valuation of the Merged Entity 11.1.1. DCF valuation of the Mt Boppy Project We elected to use the DCF approach in valuing PLY’s Mt Boppy Project (“the Mt Boppy Project”). The DCF approach estimates the fair market value by discounting the future cash flows arising from the project to their net present value using the forecast discount rate of the Merged Entity. 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 Mt Boppy Project was prepared by PLY (“the Mt Boppy Model”). The Mt Boppy Model estimates the future cash flows expected from gold production at the Mt Boppy Project based on determined JORC compliant reserves. The Mt Boppy Model depicts forecasts of real, post-tax cash flows over the life of mine on a monthly basis. The Mt Boppy 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 Mt Boppy Model”). We have adjusted the Mt Boppy Model to reflect cash flows on an annual basis. 53
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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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- 39 - Peak Litigation The litigati
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- 41 - Annexure A Refer enclosed In
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Financial Services Guide 21 June 20
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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
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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
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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 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
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Page 156 and 157: APPENDIX 2 - VALUATION METHODOLOGIE
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Page 162 and 163: Merged Entity Determining the corre
Page 164 and 165: associated (relative to the compara
Page 166 and 167: APPENDIX 4 - TECHNICAL SPECIALIST V
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BDO CORPORATE FINANCE (WA) PTY LTD
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Update on Merger with Polymetals - Notice of Meeting

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