Update on Merger with Polymetals - Notice of Meeting

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As set out in section 12, the Transaction is fair. RG 111 states that an offer is reasonable if it is fair. The Proposed Merged Entity will be of a significantly larger scale than the existing SXG It is anticipated that the combined production from the Marda and Mt Boppy Projects could reach 69,000 ounces per annum. The Proposed Merged Entity will create a company with a bigger, more diversified portfolio of gold and base metals assets. The larger scale of the Merged Entity may make it easier to raise funds in the future through debt or equity funding. The Scheme is a merger of two similar sized entities with equal Board representation in the Merged Entity Following the implementation of the Scheme, SXG will hold approximately 47% of the Merged Entity shares, with PLY shareholders holding the remaining 53% of the shares. This weighting of shares is similar to size of the companies based on market capitalisation prior to the announcement of the Scheme. Share price as at The Board of the proposed Merged Entity will consist of six directors, of whom three will be current directors of SXG and three will be current directors of PLY. The Chairperson will be Samantha Tough (current Chairperson of SXG) and Glenn Jardine (current Managing Director of SXG) will be the Chief Executive Officer. The Merged Group Board will consist of the following current members of the SXG Board: • Samantha Tough, as non-executive Chairman; • John Rowe, as non-executive director; and • Graham Brock, as non-executive director, with the addition of the following current members of the PLY Board: • Frank Terranova, as non-executive director; • David Sproule, as non-executive director; and • Jon Parker, as non-executive director. Access to the cash reserves of PLY The significant cash reserves of PLY will be available to the combined entity to provide funding certainty for the Marda Project and to allow immediate pursuit of those development projects prioritised by the directors (which may be from the existing SXG and PLY portfolios). Potential for synergies 3 April 2013 Shares on issue Market capitalisation % of combined market capitalisation SXG $0.031 408,912,834 $12,676,298 47.9% PLY $0.360 38,285,620 $13,782,823 52.1% Total combined market capitalisation $26,459,121 Combining the companies should allow efficiencies to be realised in terms of consolidating the Western Australia based activities and corporate and administrative costs. SXG has advised us that the forecast 74
corporate cost savings of the Merged Entity will be approximately $1.95 million per annum before any tax shields. Stronger more diversified development pipeline In addition to the operating mines at Marda and Mt Boppy, both SXG and PLY have a portfolio of potential projects giving the directors significant choice in the projects to be prioritised. Shareholders will benefit from increased market relevance and liquidity of shares The combined entity will have a more significant market presence and there is likely to be greater liquidity making it easier for shareholders to realise the value of their shares should they choose to sell. Technical expertise of the Sproule Interest David Sproule, PLY’s current non-executive Chairman will bring technical expertise to the Merged Entity including expertise in refurbishing and reconstructing small gold plants and operating small gold plants. The Sproule Interests also bring with them a committed vision for growing small companies as well as cash reserves. Diversified and larger group of assets The Merged Entity will hold a larger pool of assets providing the company with greater flexibility and more options to divest or develop a number of projects. 13.5 Disadvantages of Approving the Transaction If the Transaction is approved, in our opinion, the potential disadvantages to Shareholders include those listed below: There will be a new substantial SXG shareholder Following the Transaction, the Sproule Interests and its members will have a voting power in the Company of approximately 26%. A single shareholding block of this size may also deter any potential bidders from making a takeover offer for the Merged Entity, thereby depriving Shareholders from receiving a takeover premium for their shares. Dilution of existing shareholders’ interests The Transaction (and successful implementation of the Scheme) will see 458,537,981 shares issued to PLY shareholders which will reduce the combined holding of existing shareholders from 100% to 47.1% SXG Shareholders will be exposed to the risk of PLY’s assets Through holding shares in the Merged Entity, SXG shareholders will be exposed to the risks of the Mt Boppy Project, the Turner River Gold Project and Turner River Base Metals Project. 14. Conclusion We have considered the terms of the Transaction as outlined in the body of this report and have concluded that the Transaction is fair and reasonable to the Shareholders of SXG. 75
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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
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2. Summary and Opinion 2.1 Purpose
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The respective advantages and disad
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elieves that there are sufficient r
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Existing SXG PLY Capital structure
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Sandstone Exploration Potential In
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5.3 Historical Balance Sheet Southe
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in tenement acquisition costs also
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The current SXG unlisted options on
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Drew Hill - White Dam Gold Project
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6.4 Historical Statement of Compreh
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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
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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
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Page 122 and 123: On 28 February 2013 SXG announced t
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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
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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
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Page 166 and 167: APPENDIX 4 - TECHNICAL SPECIALIST V
Page 168 and 169: AMC Consultants Pty Ltd ABN 58 008
Page 170 and 171: BDO CORPORATE FINANCE (WA) PTY LTD
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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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