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
PAF material is proposed for encapsulation within NAF waste within waste stockpiles, to form a
“store-and-release” cover to provide long-term isolation of PAF material from the oxygen and water
necessary to allow sulphide oxidation and acid drainage. In this relatively dry environment, such a strategy
poses no significant challenge.
While no kinetic (column-leach) test work has apparently been performed on PAF material, the fact that no
acid drainage has been reported in the past indicates a low risk, especially as the proposed mine
development is primarily a cutback and thus unlikely to expose higher-sulphur primary rock.
No near-neutral or mild-acid leaching test work has been conducted on mine waste, but analyses have
demonstrated that there is little enrichment with metals known to pose environmental risk. Circum-neutral
metal enrichment in drainage from final waste stockpiles can therefore be considered to be a small risk,
especially in this dry environment.
3.1.6.5 Water Management
Project water supply will be, as in past operations, from pit dewatering, groundwater and from decant return
from the TSF. The requisite abstraction permits have reportedly been obtained.
Water balance modelling has shown that environmentally undesirable discharge of excess water will not be
required. Should pit dewatering for any significant period provide water volumes in excess of project
demand, temporary storage on the active TSF has been shown to be a viable management strategy.
Groundwater modelling has also shown a very low risk of impact on other users, the nearest of whom is
some 20 km away. Additionally, there are no groundwater-dependent ecosystems that will be impacted by
draw-down resulting from pit dewatering and groundwater abstraction activities.
In the event of lower than expected water supply from the above sources, water rights to up to 250 ML/year
are held by Mt Boppy; the modelled water balance identifies an additional 200 ML/year demand.
3.1.6.6 Closure
Some disturbed areas, especially disused TSFs, have already been capped with inter material, so that only
less expensive surface preparation and revegetation are required in the future.
Closure strategies have been developed for various project areas. These represent current technology and
environmental protection concepts, and can reasonably be expected to meet statutory requirements.
Importantly, the strategies identify the desirability of progressive rehabilitation.
In particular, encapsulation of PAF mine waste is well designed, with this material progressively being placed
within and covered by inert waste to form a “store-and-release” cover.
Post decommissioning, it is proposed that a groundwater-fed lake be allowed to develop in the pit void. While
groundwater salinity is not high (2,000 mg/L to 2,500 mg/L total dissolved solids), there does exist a low risk
that the net evaporative climate of the project area could result in the long term in increasing salinity of the pit
lake.
No estimate of closure costs was provided for this review, but an environmental performance bond
calculation of $0.99M was reviewed. Throughout Australia, bonds are known to cover only a fraction of
actual closure costs – sometimes as little as 30%. AMC has developed an empirical estimate, based on
areas of disturbance and current rehabilitation status, and considers a closure cost of $1.4M to $1.7M to be
realistic. This sum does not include demolition costs, which are frequently offset by salvage revenue. Nor
does it include retrenchment and related costs that are commonly included in accounting-based closure
estimates. AMC made an adjustment to the closure cost in its modelling for Mt Boppy.
3.1.7 Project Implementation
AMC notes that although the majority of the design and analytical work is complete for the assessment of
redeveloping Mt Boppy, a formal feasibility document does not exist. Such a document is likely to be
required for financing. Therefore three to four months should be allowed to complete the documentation and
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