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
ppm Cu along a 1.3 km strike about 2 km north-west of Southern Gossan. Anomalous gold grades include
250 ppb Au 1.3 km south-east of Southern Gossan and 54 ppb Au west of Southern Gossan.
A downhole electro-magnetic survey was also completed over a 10 km trend between Copper Bore and
Southern Gossan during 2012. Ten drillholes were surveyed. Of 17 anomalies identified. Six of the identified
anomalies are related to base metal sulphide occurrences that have already been drill-tested.
A reconnaissance survey west of the Copper Bore trend identified a wide quartz veined shear zone
characterised by micaceous schist with up to 10% box-work texture after pyrite. The shear zone appears to
strike over 10 km and is up to 50 m wide. Rock chip samples from the shear zone returned a peak result of
3.38 g/t Au from a quartz vein in gabbro. Other exploration targets associated with this shear are thrust-fold
structures, which returned 0.5 g/t Au at two separate outcrops 800 m apart.
4.1.6 Mining
The Marda mining study utilises Mineral Resource estimates undertaken in 2011 and 2012 following the
completion of additional drilling during 2011. Open pit optimisations, designs, and mining schedules have
been developed by Southern Cross and its consultants using these resource model estimates.
Southern Cross proposes mining ten small open pits using a company owned and managed mining fleet and
conventional open pit mining techniques. Mining is planned to commence in the Marda Central, Golden Orb
and King Brown areas before commencing at Red Legs in Year 4, and at the two furthest projects (British Hill
and Battler) in Year 5. The mining sequence is logically based on the higher value and higher confidence pits
early in the schedule with lower value/confidence pits mined at the end of the mine life.
A gold processing plant is planned at Marda with a capacity of 500 ktpa.
Marda comprises shallow open pits ranging in depths of between 45 m and 100 m. The material to be mined
is predominantly oxide mineralisation. The proposed mining fleet comprises a 120 tonne excavator and a
truck fleet of three 40 tonne trucks. Blasting is planned across all materials to assist productivity and to
provide blasthole grade control samples. Southern Cross plans to lease the mining fleet and associated
equipment. Ore haulage from satellite pits will be undertaken using conventional road trains capable of
hauling on public and private roads. Southern Cross plans to lease and operate the road train fleet.
All maintenance facilities and associated services are to be provided by Southern Cross.
The open pit designs incorporate narrow 10 m wide ramps to reduce stripping costs associated with small
pits. The geotechnical studies are preliminary, however they did identify the risk of ramp crest failure. Ramp
crest failure on narrow ramps would interrupt production although the existence of multiple pits and ore
stockpiles offsets this risk to some extent.
The overall mining schedule shows a high rate of vertical development. In AMC’s opinion the mining
schedule will be difficult to achieve. This risk is offset by the availability of multiple pits and ore stockpiles.
Southern Cross added ore dilution and an ore recovery factor to the pit inventory prior to developing the
mine schedule. This is standard industry practice. However, in AMC’s opinion, the 0.7 g/t Au grade assigned
to the diluting material is too high and has adjusted head grades in the cash flow model.
In AMC’s opinion the overall mining costs appear reasonable for Marda.
4.1.7 Ore Reserves
The Ore Reserves for Marda were developed as part of the recent feasibility study. The Ore Reserves are
based on the development of the ten open pit designs using the current Mineral Resource model. Ore
Reserves were calculated at a gold price of $1,475/oz and are shown in Table 4.2. AMC notes that
approximately 4% of the inventory supporting the feasibility study is in the Inferred Mineral Resource
category. This is not a material concern for the project.
32