Update on Merger with Polymetals - Notice of Meeting

Equity Beta
Beta is a measure of the expected correlation of an investment’s return over and above the risk free rate,
relative to the return over and above the risk free rate of the market as a whole. A beta greater than one
implies that an investment’s return will outperform the market’s average return in a rising market and
underperform the market’s average return in a falling market. On the other hand, a beta less than one
implies that the business’ performance compared to that of a business whose beta is greater than one will
provide an inverse relationship in terms of the market’s average return.
Equity betas are normally either an historical beta or an adjusted beta. The historical beta is obtained
from the linear regression of a stock’s historical data and is based on the observed relationship between
the security’s return and the returns on an index. An adjusted beta is calculated based on the assumption
that the relative risk of the past will continue into the future, and hence derived from the historical data.
It is then modified by the assumption that a stock will move towards the market over time, taking into
consideration the industry risk factors which make the operating risk of the investment project greater or
less risky than comparable listed companies when assessing the equity beta for an investment project.
It is important to note that it is not possible to compare the equity betas of different companies without
having regard to their gearing levels. Thus, a more valid analysis of betas can be achieved by “ungearing”
the equity beta (β a ) by applying the following formula:
β a = β / (1+(D/E x (1-t))
In order to assess the appropriate equity beta for the Marda Project we have had regard to the equity
betas of listed companies involved in similar activities in similar industry sectors. The geared betas below
have been calculated against the All Ordinaries Index.
Company Market Capitalisation ($) Geared beta Gross debt/equity Ungeared beta
Rand Mining Ltd 21,294,422 1.28 9% 1.20
BCD Resources NL 4,557,416 0.78 1% 0.77
Kalnorth Gold Mines Limited 23,787,399 0.86 0% 0.86
Octagonal Resources Limited 11,665,280 0.93 0% 0.93
Ramelius Resources Limited 70,927,429 1.06 2% 1.04
Excelsior Gold Limited 55,900,589 1.01 0% 1.01
Tanami Gold NL 48,766,525 1.04 71% 0.69
Mean 0.93
Median 0.93
Source: Bloomberg
Selected Beta (β)
In selecting an appropriate Beta for the Projects, we have considered the similarities between the
Projects and the comparable companies selected above. The comparable similarities and differences
noted are:
• the comparable companies’ mining and exploration assets have varying risk profiles depending on
the maturity of the assets and the stages and location of production; and
• several companies having been producing for a considerable time period.
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