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 Table 4.4 Southern Cross Capital Estimate Summary Marda Infrastructure Cost Centre Capital Cost (Single SAG Mill) ($M) 1 Accommodation camp, roads, airstrip, buildings/workshops 8.26 Plant and Equipment Sandstone equipment refurbishment and relocation 4.59 Additional equipment and installation costs 13.17 Provisional cost items 0.33 Upgrade requirements 1.44 Plant and Infrastructure Contingencies (overruns) 5.26 Tailings Dam 1.98 Owners Costs Project Supervision 0.30 First Fills 0.45 Total Processing and Infrastructure 35.74 1 Costs exclude GST AMC notes that the allowance for the single SAG mill is based on sourcing a suitable used mill. There is a risk that actual costs in the milling area may increase depending on the cost and refurbishment of the mill that is sourced for the plant. AMC notes in ASX announcement of 14 August 2012 that Southern Cross quoted an estimated capital cost for the project at $25M (plus or minus $5M) to refurbish and relocate the plant from Sandstone to Marda. AMC understands this was a preliminary estimate prior to the decision to upgrade the plant and the receipt of a more detailed cost estimate. In AMC’s opinion the capital estimate shown in Table 4.4 is reasonable. 4.1.8.7 Operating Cost Estimate Southern Cross has prepared an operating cost estimate based on an assessment by independent technical specialists in the July FS. This estimate was prepared to an accuracy level of ±20% on the basis of an annual ore throughput of 480 ktpa of blended ore. The Southern Cross cost estimate is presented in Table 4.5. Table 4.5 Marda Operating Cost Estimate Cost Centre LOM ($M) Operating Cost Mean LOM ($/t ore treated) Salaries and labour 20.41 8.23 Reagents and operating consumables 25.55 10.30 Power 24.43 9.85 Maintenance 3.09 1.24 G/A, flights and accommodation 1.46 0.59 Total Process Operating Costs 74.93 30.21 AMC considers the mean LOM unit operating cost of $30/t ore to be in general agreement with treatment costs for other Australian gold projects of a similar throughput and plant complexity. 36
BDO CORPORATE FINANCE (WA) PTY LTD Polymetals Mining Limited and Southern Cross Goldfields Limited Technical Specialist's Report 4.1.9 Environment 4.1.9.1 Overview Marda appears to involve no environmental risks that cannot be managed with well established strategies and techniques, although hydrogeology and some geochemistry reports were not available for this review. Statutory environmental approval is likely to be uncontroversial, as potential environmental impacts have been well characterised and their manageability demonstrated. Extensive consultation with regulators has been important in managing approvals-related risks. While there are fauna conservation issues (rare/endangered species), these fauna are likely to be only marginally impacted by project activities. Moreover, studies conducted for the project are likely to enhance scientific knowledge of the occurrence and auto-ecology of these species, thereby supporting conservation efforts by the relevant agencies. Importantly, conservation risks to approval have been mitigated by close and regular liaison with the agencies. Acid mine drainage is an inconsequential risk at the four Central Marda deposits. Results of geochemical test work for the King Brown and Golden Orb deposits were not available for this review. At Marda Central, much of the sulphide present in mine waste occurs as sulphates, rather than sulphides and, even where sulphides are present, relatively large volumes of carbonate also occur. Similarly, risks of circum-neutral metal enrichment of leachates from waste stockpiles have been shown to be low: potential metal pollutants in labile forms are not present at elevated concentrations, and significant acid-neutralising capacity is likely to be available in stored waste. Water supply from existing and proposed bores at Marda is reported to be adequate for project needs, although hydrogeological reports were not available for this review. While excess water is unlikely (pits are reported to be dry to full mining depth), the disposal to land or water-course of significant volumes of excess water would attract close scrutiny from regulators. Closure poses no technical challenges at Marda, based on current information. The closure provision of $2.2M is considered by AMC to be reasonable, reflecting the relatively small disturbance footprint of the project. This situation could change, however, if mined pits partially refilled with groundwater – rehandling of mine waste to backfill pits above the re-established water table would result in additional, yet-to-be-determined, closure costs. 4.1.9.2 Statutory Environmental Approval Portions of the project area are included in a proposed Dual Purpose Mining and Conservation Reserve. AMC considers this not to pose a significant risk, as mining is legally an acceptable land use, subject to agreement and consultation with the regulator. Other companies in the region are in comparable situations, and the dual-use model is now well established. The lengthy and detailed consultation conducted with government agencies by Southern Cross is considered to have ensured adequate security of tenure and purpose for the project. State environmental approval is most unlikely to involve the lengthy and complex processes of Part IV of the EP Act, administered by the EPA. Potential impacts are easily manageable by other agencies, and in recent years the EPA has increasingly and pointedly not assessed such projects, and relied on these other agencies. Southern Cross has maintained close contact with the Office of the EPA (OEPA), which has clearly flagged that EPA assessment is unlikely to be necessary. A Works Approval (to construct) and a Licence (to operate) will be required under Part V of the EP Act, administered by the DEC. These are relatively routine processes, compared with those of Part IV of the EP Act, and are unlikely to delay project implementation. The Mining Proposal processes of the Mining Act, administered by the DMP will also be required. A Mining Proposal is currently being prepared, with submission planned for June 2013. The DMP undertakes to complete its assessment of proposals within 30 days, although this timeframe can be significantly changed if additional information is requested after submission of a proposal. Southern Cross and its environmental consultants are aware of this risk, and have committed to submitting a sufficiently detailed document. For 37
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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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projects. PLY has discounted the to
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The Merged Entity - SXG Low Preferr
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Note f: Minority discount Following
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12. Is the Transaction fair In asse
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As set out in section 12, the Trans
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15. Sources of information This rep
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esponsible for conducting appropria
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Meadowhead Meadowhead Indemnity The
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APPENDIX 2 - VALUATION METHODOLOGIE
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APPENDIX 3 - DISCOUNT RATES SXG We
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Page 166 and 167: APPENDIX 4 - TECHNICAL SPECIALIST V
Page 168 and 169: AMC Consultants Pty Ltd ABN 58 008
Page 170 and 171: BDO CORPORATE FINANCE (WA) PTY LTD
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