Update on Merger with Polymetals - Notice of Meeting

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1.5 Implementation of the Merger
Implementation of the Merger is dependent on a number of approvals and conditions being
satisfied, including:
(a)
(b)
SXG Shareholders approving Resolution 1 contained in the Notice;
Polymetals obtaining Polymetals Shareholder approval for:
(i)
(ii)
the cancellation of Polymetals Shares issued under the Loan Funded Share
Plan, whereby eligible employees of Polymetals were invited to apply to
acquire Polymetals Shares and for a loan to finance the acquisition of the
Polymetals Shares; and
the issue of 1,939,508 Polymetals Shares and the payment of $300,000 to
Meadowhead Investments as the Indemnity Consideration in return for the
indemnity provided to Polymetals by Meadowhead Investments in respect of
the Peak Litigation (Meadowhead Indemnity) – see Section 1.13 of this
Explanatory Memorandum for further details;
(c)
(d)
(e)
Polymetals Shareholders approving the Scheme;
Court approval of the Scheme; and
the satisfaction or waiver of a number of conditions precedent comprising the
Scheme Conditions.
1.6 Regulatory purpose for Resolution 1
If the Merger is implemented, interests associated with Polymetals’ Chairman,
Mr David Sproule (the Sproule Interests) will collectively be issued New SXG Shares on
the same basis and terms as all other Polymetals Shareholders comprising an interest of
approximately 26.17% of the expanded issued capital of SXG as a result of the Sproule
Interests holding of 49.5% in Polymetals prior to the Merger.
Several relatives of David Sproule also own Polymetals Shares. As at the date of this
Notice, David Sproule’s relatives together held 4,504,470 Polymetals Shares, equating to
11.77% of Polymetals’ issued capital. In accordance with the Corporations Act, these
relatives are not Associates of David Sproule, and their interests in SXG post-Merger are
not included in the Sproule Interests’ holdings in the expanded issued capital of SXG
referred to above.
Following consultation with ASIC, it has been determined that it is appropriate for SXG
Shareholders to vote on the proposed issue to the Sproule Interests of New SXG Shares
under the Merger which will comprise more than 20% of the total SXG Shares on issue
after completion of the Merger.
SXG Shareholders are not required by law or the Listing Rules of ASX to approve the
Merger or the issue of all New SXG Shares proposed to be issued under the Merger.
Instead, the specific regulatory purpose of Resolution 1 is to obtain SXG Shareholder
approval for the issue of New SXG Shares to the Sproule Interests on implementation of
the Merger.
However it is important to note that if SXG Shareholder approval of Resolution 1 is not
obtained, then the Merger will not proceed. Effectively therefore SXG Shareholders have
an opportunity to determine an important step in the development of the Company.