Update on Merger with Polymetals - Notice of Meeting

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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 16
BDO CORPORATE FINANCE (WA) PTY LTD Polymetals Mining Limited and Southern Cross Goldfields Limited Technical Specialist's Report financing. A further seven months should be allowed for procurement, construction and commissioning. The earliest likely start-up date is May 2014. 3.1.8 AMC Production Cases AMC has modelled two cases for Mt Boppy. The cases are projections of mining and processing tonnages, gold grades and costs. The cases are provided to BDO for consideration of value. Polymetals provided AMC with a range of technical information: Mineral Resource models, Ore Reserves, mine designs and schedules. AMC has prepared its cases based on this information. Case 1, ore production, is based primarily on the pit optimisation study scenario using mainly the Ore Reserves and a small volume of Inferred Mineral Resource also in the production case as presented by Polymetals. Case 2, ore production, includes that scheduled in Case 1, with the addition of 35 kt or ore added to the end of the mine life to simulate the likely conversion of Mineral Resources to Ore Reserves and likely success with exploration in the project area. The Mineral Resources defined at Mt Boppy outside the development case proposed by Polymetals are limited. AMC believes that the two production cases described appropriately provide a value range on the Mineral Resources and exploration potential for the greater Mt Boppy project by simulating the range of likely outcomes for the project. Mt Boppy Production Case 1 (Feasibility Case) Key aspects of AMC's Case 1 model are: • The mining and processing schedules are based on the LOM plan provided in the feasibility study and financial model. • 587 kt of ore at a head grade of 4.28 g/t is mined and processed over a 25 month period. This represents all of the Ore Reserves and approximately 40 kt of the Inferred Mineral Resource. • At total of 64 koz of gold are produced. • AMC increased the estimated mining period by six months to effectively lower the assumed mining productivities and fast development rates in the supplied model. • Project commences in May 2014. • Average unit mining costs of $3.90/t of material moved are used. • Average processing costs of $33.48/t ore processed. • AMC added an allowance of $0.7M for additional closure costs. • AMC added a contingency of $1M to the capital estimate relating to the assumed availability of secondhand equipment. Mt Boppy Production Case 2 (Feasibility Case Plus Additional Inventory) Key aspects of AMC's Case 2 model are: • Assumptions as in Case 1 initial production period. • An additional 35 kt of ore at a grade 3.98 g/t is added to the end of the mine life. The tonnage is based on the assumption that 50% of the remaining resource outside the pit or equivalent exploration success elsewhere converts to Ore Reserve at the head grade produced at the end of the mine life. AMC has assumed that operating costs are the same as those incurred in the last months of the financial model provided and have added these to the schedule. • AMC notes there is only limited additional Mineral Resource outside the current mine plan proposed by Polymetals. • A total of 68,200 oz of gold are produced. 17
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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
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Gold Demand/Supply Mined Metric ton
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• On 9 August 2012, Regis Resourc
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eport to be used in our report. At
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eport to be used in our report. At
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Funding assumptions SXG has receive
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AMC modelled two cases for the Mard
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Marda Project Case 2 Units 31-Dec-1
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uildings and water supply. The $38.
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Considering the valuation outcomes
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Southern Cross Goldfields Limited V
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We calculated the corporate costs o
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SXG share price and trading volume
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On 28 February 2013 SXG announced t
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Control Premium The concept of a pr
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We note that SXG’s EV/resource mu
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The Adjusted Mt Boppy Model was pre
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2013 2014 2015 2016 2017 2018 Gold
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AMC and management of PLY advise th
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Mt Boppy Case 2 Mt Boppy Project Ca
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Mt Boppy Case 2 Sensitivity analysi
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Polymetals Mining Limited Value of
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Update on Merger with Polymetals - Notice of Meeting

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