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 project scheduling, it is practical to assume a DMP approval within 8 to 12 weeks of submission of the Mining Proposal. The federal EPBC Act could theoretically be triggered by the occurrence at Marda of “threatened fauna species and communities” (species include the Malleefowl and Major Mitchell’s Cockatoo). However, targeted surveys for Malleefowl and assessment of risks to the cockatoo have identified low and manageable risk of impacts. On this basis, it is possible that no referral will be made under the EPBC Act. The Act requires referral only of proposals likely to cause significant impacts and, while there is a risk that the proposal could be referred by another party, AMC considers referral to be unnecessary. It is common practice for a professional consultant to complete the referral pro forma document and, if appropriate, endorse it as “referral not necessary”. This document is then available if the proposal is referred by others, to quickly have the referral discontinued. 4.1.10 Flora and Fauna Flora and vegetation conservation issues are of minor significance at Marda. No Declared Rare Flora (DRF) or Threatened Ecological Communities (TECs) will be impacted. Priority Flora Species (PFS) which do occur on the project area have been reviewed by the relevant agencies on a regional basis and, while some modification of project facility locations may be required, no significant impediment to implementation is considered likely. A proposed Priority Ecological Community (PEC) in the region is considered unlikely to constrain project development, because the location of facilities has been discussed at length with DMP and DEC. Conservation-sensitive fauna species (two wishbone spiders, a pseudoscorpion, the Malleefowl and Major Mitchell’s Cockatoo) have been recorded in the environs of the project, but impacts on all species are considered by AMC to be easily manageable. The spiders and pseudoscorpion do not occur on areas proposed for disturbance, and are thus most unlikely to be impacted, given the implementation of environmental management plans which prevent disturbance of land outside approved envelopes. A targeted survey for Malleefowl revealed no active (current use) or recently active (1 to 5 years) nesting mounds on the Southern Cross tenements. Three inactive mounds were found, but none in areas proposed for disturbance. Some 400 ha of potential Malleefowl habitat was identified in the environs of the project, but only a small amount (some 6%) occurs on areas of proposed disturbance. Management of potential Malleefowl impacts is a regional issue, with the greatest risk at Marda being from traffic deaths. Workforce education and monitoring will form part of the operating environmental management plan for Marda, and can reasonably be expected to manage impacts. Impacts on the Major Mitchell’s Cockatoo are considered likely to be small, as this volant species can avoid disturbance and seek alternative habitat, of which there are large undisturbed tracts in the region. Assessment of potential impacts on conservation-sensitive fauna at Marda have been characterised by close and regular consultation with the DEC. Minuted meetings have been held, and the DEC appears to be aware of both the low risks of significant impacts and the contribution to a broader understanding of the auto-ecology of some of these species, particularly the Malleefowl. AMC therefore considers it unlikely that consideration of fauna impacts will significantly affect environmental approval and ongoing operation. 4.1.11 Acid and Metalliferous Drainage Based on rigorous geochemical test work conducted on representative samples using recognised techniques, risks of acid and metalliferous drainage (AMD) in waste rock at Marda Central (four pits) have been shown to be extremely low. Sulphide sulphur concentrations in waste rock are mostly below the rule-of-thumb threshold of 0.3%S, and occurrences of carbonate and other acid-neutralising compounds are significant. By far the greater proportion of samples were shown to be NAF, and the few samples judged by acid-base accounting to be PAF were shown to be NAF after more detailed testing. 38
BDO CORPORATE FINANCE (WA) PTY LTD Polymetals Mining Limited and Southern Cross Goldfields Limited Technical Specialist's Report Leaching test work has also shown the risks of circum-neutral metal enrichment of drainage from stockpiled waste rock to be low. While AMD risks at Marda Central are considered by AMC to be low, no rigorous test work results were available for this review. The risk of AMD challenges at the King Brown and Golden Orb deposits therefore cannot be dismissed absolutely. 4.1.12 Water Management Southern Cross advises that project water demand will be met from existing and proposed bores at Marda, but no hydrogeology reports were available for this review. Based on limited drill-hole sampling, no dewatering of mine pits has been judged likely to be necessary, but AMC has not been able to rigorously assess this view. Should dewatering in excess of project demand prove necessary, disposal to land or nearby water-courses could attract the scrutiny of regulators (DEC and the Department of Water (DoW)). While such a situation is unlikely in the low-rainfall area of the project, and with relatively shallow pits planned, there are regional precedents for the development of unforeseen excess-water issues. Groundwater in the project area is saline and, while adequate for processing and (after reverse osmosis) potable supply, unlikely to be required by other users. The project area is remote and sparsely inhabited, and other mining operations in the area are unlikely to place demands on groundwater exploited by Southern Cross. 4.1.13 Rehabilitation and closure Technical closure and rehabilitation issues at Marda are undemanding. The creation of safe, stable and nonpolluting landforms after mining will require no novel strategies or techniques. The lack of potential AMD issues at Marda means that complex and expensive encapsulation of PAF waste will not be needed, and simple landscaping of waste stockpiles, with appropriate erosion-control and water-capture structures, can easily meet DMP guidelines. It is noted again here that rigorous geochemistry test work results for the King Brown and Golden Orb deposits were not available for this review, so AMD risks, and implications for closure, have not been assessed for those deposits. Given the small disturbance footprint of the project and the improbability of needing to manage acid-generating waste rock, the existing closure cost estimate of $2.2M is considered by AMC to be adequate and reasonable, subject to the AMD question noted immediately above, and to the following qualification. It is noted that the DEC has a general stance across the mining industry of opposition to the formation of pitlakes after mining. While it has been assumed that all proposed pits at Marda are above the water table, AMC has not sighted hydrogeological reports confirming this view. If the water table is such that pit lakes could form after mining, backfilling to several metres above natural water table could be demanded by DEC and DMP. Without detailed hydrogeological information, it is not possible to quantify the volume of backfill involved, and thus the amount and cost or rehandling mine waste. 4.1.14 Project Implementation A formal feasibility document exists for Marda thus making the process of financing and approvals straightforward. However this is a green fields development project. Therefore three months should be allowed to complete environmental approvals and financing. A further 6 to 9 months should be allowed for procurement, construction and commissioning.. 4.1.15 AMC Production Cases AMC has modelled two cases for Marda. The cases are projections of mining and processing tonnages, gold grades and costs. The cases are provided to BDO for consideration of value. Southern Cross provided AMC with a range of technical information: Mineral Resource models, Ore Reserves, mine designs and schedules and a feasibility study. AMC has prepared its cases based on this information. 39
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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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- 37 - Glossary In this Explanatory
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- 39 - Peak Litigation The litigati
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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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Having regard to the above we consi
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Update on Merger with Polymetals - Notice of Meeting

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