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 Case 1, ore production, is primarily based on the feasibility study scenario using Ore Reserves, and that part of Mineral Resources included in the mine plan provided. AMC added additional ore to the production case in years 5 and 6 of the schedule based on the likelihood of conversion of near mine Mineral Resources to Ore Reserves and exploration success also contributing to additional ore Reserves. Case 2, ore production, includes that scheduled in Case 1, with the addition of two years production simulated to reflect the likely conversion of additional Mineral Resources to Ore Reserves and likely success with exploration in the Marda region. AMC has included additional production to extend the mine life for two years to reflect further exploration success. The two production cases are designed to provide a lower and upper range of likely outcomes for the Marda Project. AMC believes that the two production cases described appropriately provide a value on the Mineral Resources and exploration potential for the greater Marda Gold project. Marda Case 1 (Feasibility Case) Key aspects of AMC's case 1 model are: • The mine schedule and processing schedule are essentially based on the 5 year LOM plan provided in the feasibility study with a limited amount of ore added to end of the mine life. • Project development commences in May 2014. • Operating and capital costs are based on those provided in the feasibility study. • Average unit mining costs of $3.24/t of material moved are used. • Average processing costs of $30.21/t ore processed are assumed. • Total ore processed is 2.7 Mt at a head grade of 2.3 g/t. • AMC adjusted the head grade to reflect a lower grade of diluting material than that assumed in the feasibility study based on the AMC review of the Resource model, this had the effect of lowering the head grade from 2.36 g/t to 2.31 g/t over the life of the project. • AMC adjusted the metallurgical recovery for the project in the first three years from 95% to 94% compared to the feasibility study based on our review of the test work.. • Total gold production of 190 koz of gold. • Initial capital expenditure of $38.2M based on the feasibility study. This capital is principally associated with site establishment and relocation and refurbishment of the processing facilities and camp from Sandstone to Marda. • Closure costs increased by $1.2M compared to the feasibility study to offset the assumed residual value of the mining equipment. Marda Case 2 (Feasibility Case Plus Additional Inventory) Key aspects of AMC's case 2 model are: • Assumptions as in case 1 for the first 4 years of production. • An additional 1 million tonnes of ore at a grade 2.31 g/t is added to the end of the mine life. AMC has assumed that operating costs are the same as those incurred in year 2014 for the extension period. The head grade is based on the project average. The 1 Mt represents 50% of the Marda Inferred Resource converting to Ore Reserves. The average project head grade has been applied. • Processing recoveries are assumed to be 92% in the extension years to reflect a lower confidence in the recovery characteristics for this material. • Total gold production of 246 koz of gold. • A higher capital expenditure over the extension period is assumed compared to case 1 due to costs that would be associated with starting or extending open pits. 40
BDO CORPORATE FINANCE (WA) PTY LTD Polymetals Mining Limited and Southern Cross Goldfields Limited Technical Specialist's Report Exploration Valuation AMC considers that the production cases indicate an appropriate value for groups of tenements hosting Mineral Resources. In the Marda area, tenements hosting Mineral Resources occupy about half of the overall tenement area. The northern part of the Marda tenement area (about 650 km 2 ) does not host any Mineral Resources but remains prospective for gold and base metals as previously described. AMC considers it appropriate to assign a value of $1,000/km 2 to $2,000/km 2 indicating a range of values for this area of $0.65M to $1.3M. Opportunities and Risks AMC considers that additional opportunities that might be available for Marda include: • Southern Cross has undertaken a review of the mine schedules in the feasibility study. The results of this work demonstrate a mine plan targeting early development of higher grade ore. AMC has reviewed this work and although it is preliminary in nature, believes the revised mine schedules would generate higher earlier cash flows and an increase in the projects DCF compared to case 1. • A significant resource remains outside and below the open pits at Marda. Reductions in cost structures and/or an increase in gold price would allow more of this material to be mined economically. • AMC has not considered underground mining of additional resources in its evaluation as no work has been undertaken in this regard. However, a number of the Mineral Resources at Marda have a grade that might support underground mining. • Potential to achieve plant throughputs greater than design once the project is commissioned. • Potential to install higher grinding capacity and hence increase plant throughput and gold production. This could be achieved by specifying a larger SAG mill or utilising the spare ball mill at Sandstone. The rest of the process plant either has the capacity to handle the additional tonnage or modifications required are relatively simple and inexpensive. AMC considers that the following risks apply to Marda: • Marda is a green-fields open pit operation. There is no historical mining or ore processing in the area, therefore there is a level of risk associated with the key assumptions for the project such as mine dewatering, geotechnical and productivity assumptions. • The advance rate assumed for the open pits is high, however this is offset to an extent by the number of ore sources available and the ore stockpiles built up during the operation. • AMC's production cases include Inferred Mineral Resources and assumed further exploration success. Based on AMC's assessment of the large Mineral Resource inventory and exploration prospectivity in the area, AMC considers that there is a reasonable basis for including these in its production cases. However, it is not certain if further exploration will result in the determination of additional Mineral Resources and Ore Reserves. • Slightly lower metallurgical recoveries are possible in later years of the project because of limit specific test work on the ore scheduled to be treated in those years. 4.2 Sandstone Project The Sandstone project was acquired by Southern Cross from Troy Resources NL (Troy) in a transaction completed in March 2013 involving $2.3M cash, replacement of $2.7M of existing environmental bonds, a 2% net smelter royalty and 44M SXG options. The transaction included the Sandstone treatment plant and camp. Troy acquired the project in 1998, purchased the Sandstone treatment plant in 1999 and commenced mining at Bulchina. The Bulchina pit produced 230,000 oz of gold. Production commenced from the Lord Nelson and Lord Henry pits in 2005. Mining at Lord Nelson was discontinued in August 2007 having produced 180,000 oz of gold but was restarted in a pit cutback to produce a further 27,440 oz of gold. The Lord Henry pit was completed in 2007 having produced 48,000 oz of gold. 41
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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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Having regard to the above we consi
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Merged Entity Determining the corre
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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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Update on Merger with Polymetals - Notice of Meeting

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