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
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
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