Update on Merger with Polymetals - Notice of Meeting

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million SXG Options which had a calculated value of $0.372 million giving
total acquisition cost for accounting purposes of $3.653 million. This
acquisition price is recorded as $2.013 million to property, plant and
equipment and $1.640 million to tenements;
• a deposit of $2.719 million to cash back environmental bonds relating to
previous activities on the Sandstone Gold Project;
• recording a liability of $1 million for the existing environmental liabilities
assumed;
• recording a liability of $7 million for the loan from RMB; and
• recording additional reserves of $0.493 million being the calculated value
of options issued as follows: options issued to Troy Resources $0.372
million, options issued to RMB $0.11 million, options issued to PCF
Capital Group Pty Limited $0.011 million.
(ii)
Sale of White Dam and Drew Hill by Polymetals
On 27 May 2013 Polymetals announced the sale of its interests in the Drew
Hill and White Dam operations. The sale included the following elements:
• receipt of cash of $1.437 million from Exco Resources Limited (Exco) as
consideration;
• addition of $0.275 million to property, plant and equipment to reflect
additional consideration being the receipt of Exco’s 50% share of the
White Dam mine camp; and
• disposal of current and non-current assets and liabilities as shown
above.
(iii)
Transaction costs and other adjustments
(a)
(b)
(c)
transaction costs of $1.5 million, payment to Meadowhead
Investments of $0.3 million and combined SXG and Polymetals cash
outflows of $3.5 million during the quarter from 31 December 2012 to
31 March 2013 have been deducted from the 31 December 2012
cash balance;
Polymetals accounting policy is to capitalise the costs of exploration
evaluation and development (EE&D) expenditure as well as tenement
acquisition costs. The accounting policy of SXG is to capitalise
tenement acquisition costs but expense EE&D costs as they are
incurred. This adjustment reflects the expensing of the previously
capitalised EE&D costs of Polymetals to align with the SXG
accounting policy;
as an operating and cash producing company Polymetals has
previously recorded deferred liabilities (DTLs) and deferred tax assets
(DTAs) (including carried forward tax losses). With the sale of White
Dam (Polymetals only operating asset) and no future operations that
are virtually certain of realising taxable income the merged entity will
not record DTLs and DTAs. This adjustment removes all DTLs and
DTAs from the merged entity balance sheets;