Update on Merger with Polymetals - Notice of Meeting

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The respective advantages and disadvantages in relation to the Transaction and Merger are summarised below: ADVANTAGES AND DISADVANTAGES Section Advantages Section Disadvantages 13.4 The Transaction is fair. 13.5 There will be a new substantial SXG shareholder 13.4 The Proposed Merged Entity will be of a significantly larger scale than the existing SXG 13.4 The Scheme is a merger of two similar sized entities with equal Board representation in the Merged Entity 13.5 Dilution of existing shareholders’ interests 13.5 SXG Shareholders will be exposed to the risk of PLY’s assets 13.4 Access to the cash reserves of PLY 13.4 Potential for synergies 13.4 Stronger more diversified development pipeline 13.4 Shareholders may benefit from increased market relevance and liquidity of shares 13.4 The Merged Entity may benefit from the expertise of the Sproule Interest 13.4 The Merged Entity will hold a larger pool of assets giving the Merged Entity greater flexibility to divest or develop a number of projects Other key matters we have considered include: Section Description 13.1 Alternate proposals 13.2 Practical level of control 13.3 Consequences of not approving the Transaction 4
3. Scope of the Report 3.1 Purpose of the Report Section 606 of the Corporations Act Regulations prohibits the acquisition of shares by a party if that acquisition will result in that person (or someone else) holding an interest in 20% or more of the issued shares of a public company, unless a full takeover offer is made to all shareholders. However, item 7 of Section 611 permits such an acquisition if the shareholders of that entity have agreed to the issue of such shares. This agreement must be by resolution passed at a general meeting at which no votes are cast in favour of the resolution by any party who is associated with the party acquiring the shares, or by the party acquiring the shares. Section 611 states that shareholders of the company must be given all information that is material to the decision on how to vote at the meeting. Whilst the Scheme may be characterised as a merger of equals, we consider the Transaction to be a control transaction as it will result in the Sproule Interests holding approximately 26% of the issued capital in the Merged Entity. No other shareholder will have an interest in the Merged Entity greater than 5%. Regulatory Guide 74 issued by ASIC deals with "Acquisitions Agreed to by Shareholders". It states that the obligation to supply shareholders with all information that is material can be satisfied by the nonassociated directors of SXG, by either: • undertaking a detailed examination of the Transaction themselves, if they consider that they have sufficient expertise; or • by commissioning an Independent Expert's Report. The directors of SXG have commissioned this Independent Expert's Report to satisfy this obligation. 3.2 Regulatory guidance Neither the Listing Rules nor the Corporations Act defines the meaning of “fair and reasonable”. In determining whether the Transaction is fair and reasonable, we have had regard to the views expressed by ASIC in RG 111. This regulatory guide provides guidance as to what matters an independent expert should consider to assist security holders to make informed decisions about transactions. This regulatory guide suggests that where the transaction is a control transaction, the expert should focus on the substance of the control transaction rather than the legal mechanism to affect it. RG 111 suggests that where a transaction is a control transaction, it should be analysed on a basis consistent with a takeover bid. In our opinion, the Transaction is a control transaction as defined by RG 111 and we have therefore assessed the Transaction as a control transaction to consider whether, in our opinion, it is fair and reasonable to Shareholders. 3.3 Adopted basis of evaluation RG 111 states that a transaction is fair if the value of the offer price or consideration is greater than the value of the securities subject of the offer. This comparison should be made assuming a knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm’s length. When considering the value of the securities subject of the offer in a control transaction the expert should consider this value inclusive of a control premium. Further to this, RG 111 states that a transaction is reasonable if it is fair. It might also be reasonable if despite being ‘not fair’ the expert 5
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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
Page 27 and 28: Pro Forma Gold Reserve Statement Pr
Page 30 and 31: ABN 71 124 374 321 U16,162 Colin St
Page 32 and 33: - 3 - Notice of General Meeting Not
Page 34 and 35: - 5 - Proxy appointment, voting and
Page 36 and 37: - 7 - 1.2 Rationale for the Merger
Page 38 and 39: - 9 - 1.5 Implementation of the Mer
Page 40 and 41: - 11 - in terms of assets and marke
Page 42 and 43: - 13 - (a) You may not agree with t
Page 44 and 45: - 15 - (b) the Technical Specialist
Page 46 and 47: - 17 - (a) Identity of the person r
Page 48 and 49: - 19 - (i) Other matters The Direct
Page 50 and 51: - 21 - The purpose of Resolution 2
Page 52 and 53: - 23 - Schedule 1 - Information abo
Page 54 and 55: - 25 - Woodside Energy Ltd and Dire
Page 56 and 57: - 27 - Stephen Jones (Chief Financi
Page 58 and 59: - 29 - In accordance with ASIC Clas
Page 60 and 61: - 31 - million SXG Options which ha
Page 62 and 63: - 33 - Schedule 2 - Terms & Conditi
Page 64 and 65: - 35 - the Company out of profits o
Page 66 and 67: - 37 - Glossary In this Explanatory
Page 68 and 69: - 39 - Peak Litigation The litigati
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Page 72 and 73: Financial Services Guide 21 June 20
Page 74 and 75: TABLE OF CONTENTS 1. Introduction 1
Page 76 and 77: 2. Summary and Opinion 2.1 Purpose
Page 80 and 81: elieves that there are sufficient r
Page 82 and 83: Existing SXG PLY Capital structure
Page 84 and 85: Sandstone Exploration Potential In
Page 86 and 87: 5.3 Historical Balance Sheet Southe
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Page 90 and 91: The current SXG unlisted options on
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Page 94 and 95: 6.4 Historical Statement of Compreh
Page 96 and 97: At 31 March 2013, PLY have recorded
Page 98 and 99: Gold Demand/Supply Mined Metric ton
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Page 102 and 103: eport to be used in our report. At
Page 104 and 105: eport to be used in our report. At
Page 106 and 107: Funding assumptions SXG has receive
Page 108 and 109: AMC modelled two cases for the Mard
Page 110 and 111: Marda Project Case 2 Units 31-Dec-1
Page 112 and 113: uildings and water supply. The $38.
Page 114 and 115: Considering the valuation outcomes
Page 116 and 117: Southern Cross Goldfields Limited V
Page 118 and 119: We calculated the corporate costs o
Page 120 and 121: SXG share price and trading volume
Page 122 and 123: On 28 February 2013 SXG announced t
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Page 126 and 127: 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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associated (relative to the compara
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APPENDIX 4 - TECHNICAL SPECIALIST V
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AMC Consultants Pty Ltd ABN 58 008
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BDO CORPORATE FINANCE (WA) PTY LTD
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