Update on Merger with Polymetals - Notice of Meeting

BDO CORPORATE FINANCE (WA) PTY LTD
Polymetals Mining Limited and Southern Cross Goldfields Limited
Technical Specialist's Report
2 VALUATION METHODS AND MACROECONOMIC FACTORS
2.1 Valuation Methods
The methods used by AMC for valuation of the mineral assets of Polymetals and Southern Cross can be
described as follows.
2.1.1 Operations and Development Projects
Where projections of production physicals and related costs can be reasonably determined for an operation
or development project, it is accepted industry practice to prepare discounted cash flow (DCF) models to
determine net present value (NPV) estimates. Accordingly, for each of the operations and development
projects reviewed for Polymetals and Southern Cross, AMC has prepared production and capital and
operating cost projections ("production cases"). BDO then prepared DCFs based on those projections of
physicals and costs, and macroeconomic inputs.
AMC believes the scenarios are based on reasonable grounds.
2.2 Exploration
The valuation of exploration projects, particularly those for which it is not possible to quantify Mineral
Resources, is very subjective. There are, however, several generally accepted procedures to value
exploration projects and AMC has used such methods as appropriate to arrive at balanced judgments of
value.
Where possible, AMC attempts to use more than one method before selecting the valuation appropriate to
that project. Values are rounded, and outliers in contributing estimates are sometimes excluded.
The Past Expenditure Method
A prospectivity enhancement multiplier (PEM) generally between 0.5 and 3.0 is applied to past expenditure
which AMC judges to be effective in regard to future prospectivity.
The Yardstick Value Method
Rules of thumb or yardstick values can be used for properties where a Mineral Resource has been
quantified. A value per contained metal unit (e.g. ounce of gold or gold equivalent) is assigned to an actual
Mineral Resource or to a preliminary mineralisation estimate.
In considering transactions, AMC has determined ranges that reflect the difference in classification between
Inferred and Indicated Resources and consideration of factors including the size of the deposit, proximity to
existing operations, and known metallurgical issues.
Actual or Comparable Transaction Method
A value is determined by reference to either actual transactions for the property in question (Actual
Transaction method) or to recent transactions for projects considered to be similar to those under review
(Comparable Transaction method). Comparable Transactions are converted to a value per unit area.
Joint Venture Terms Method
Many transactions on exploration tenements are of a farm-in nature and AMC assesses a "cash equivalent"
value for them from the terms of the "deemed expenditure" on the property at the time of the deal discounted
by a time and probability factor for the likelihood that the farm-in will complete its earning requirement. AMC
adjusts the resulting value for any other terms of the joint venture and/or for the results of work carried out
since the commencement of the farm-in.
3