Update on Merger with Polymetals - Notice of Meeting

We calculated the corporate costs over the Marda case 1 and 2 life of mines based on $2.52 million per
annum over the period when both Mt Boppy and Marda are in production and reduced the corporate costs
to $2.25 million per annum following the cessation of the Mt Boppy Project. $2.25 million per annum
represents SXG’s current corporate costs. The net present value is between $13.03 million and $15.72
million.
Note c: Transaction costs
The estimated transaction costs for the Merged Entity in relation to the Scheme and Transaction are
approximately $1 million.
Note d: Equity funding
The projects will be funded with $32 million of new debt funding and up to $3 million in equity funding.
We have considered the discount at which shares and options have been issued by ASX listed mining
companies, with market capitalisation between $5 million and $25 million, when compared with the
companies’ share prices the day prior to the announcement of the placements.
The average discount at which shares were issued by ASX listed metals and mining companies in 2012 with
market capitalisation between $5 million and $25 million was 13.6%. This indicates that any fund raising
on the ASX is likely to be at this level of discount to the prevailing listed market price.
We have based our calculation on the assumption that the Merged Entity issues between nil and 111
million shares at $0.027 to raise up to $3 million. The capital raising price is at a 15% discount to our
preferred value per SXG share of $0.032 under the quoted market price method as set out in section 10.2.
As the Scheme has been structured as a ‘merger of equals’, theoretically, the quoted market price of a
share in the Merged Entity should be similar to the quoted market price of an SXG share prior to the
Scheme. We therefore consider the assessed value per share of an SXG share prior to the Merger using the
QMP method to be a reasonable basis for the equity raising price per share for the Merged Entity.
We consider a discount of 15% to be appropriate given the equity funding required compared to the
estimated market capitalisation of the Merged Entity.
Proposed equity funding Low Mid High
Equity funding required $0 $1,500,000 $3,000,000
Share price - $0.032 $0.032
Discount 15% 15% 15%
Capital raising price per share - $0.027 $0.027
Total merged entity shares issued nil 55,555,556 111,111,111
Note e: Shares on issue
In determining a valuation per share for the Merged Entity, we applied the number of Merged Entity shares
of 867,450,815 as determined in section four of this report together with the 20 million shares that SXG
will issue to Barranco on the exercise of the Red Legs and Die Hardy option and then diluted the number
of shares for the forecast capital raisings required to fund the projects of the Merged Entity as set out in
note d above.
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