Synergy Plus Limited ACN 091 126 082 Level 5, 151 Castlereagh Street, Sydney NSW 2000 Australia T 02 8263 0515 30 August 2013 Manager of Company Announcements ASX Limited Exchange Centre 20 Bridge Street SYDNEY NSW 2000 By E-Lodgement AGREEMENT TO ACQUIRE INTEREST IN MINERAL RIGHTS 1. Background Synergy Plus Limited (Synergy or Company) wishes to announce that it has entered into a conditional term sheet (Term Sheet) with Australian Tailings Group Pty Ltd (ATG). ATG is a New South Wales based exploration company. ATG is in the process of entering into an acquisition agreement with Wentworth Metal Group Pty Ltd (WMG) whereby ATG will acquire a beneficial interest in all mineral rights from a specified portion, namely Area C, of an asset (Interest) owned by WMG located in South Australia (Asset) (Sale Agreement). Refer to Schedule A for details of the Asset. Mr John Hillam, a director and the controller of ATG, is also a director and the controller of WMG. Synergy and ATG have agreed a proposal, which is subject to a number of conditions precedent, for the acquisition by Synergy of all the ordinary fully paid shares of ATG. The acquisition of ATG, and the down-stream acquisition of the Interest, will allow a newly recapitalised Synergy to apply for a relisting on ASX. As announced on 12 April 2013, Synergy has effectuated the DOCA and the Administrators have retired. The Company remains in suspension. Subject to receiving shareholder approval, the Company is proposing to dispose of its subsidiary AirData Pty Ltd (AirData) prior to the finalisation of the transaction with ATG which will result in Synergy being a listed shell company with the full capacity to exploit the Interest through what will then be its wholly owned subsidiary, ATG. 2. The Interest Area C EL 4566 Area C (Area C) is located in the Olary Region in South Australia and is a large iron sands exploration licence covering approximately 6,100ha. Magnetite sand has been noted throughout the entire Olary creek system and has been identified in other locations within the Olary Region which stretches approximately 250kms long and 50km wide. From Area C, the Olary creek flows initially easterly and then southward towards the Murray Darling Basin where it disappears into the Murray Darling Basin flood plain. The Murray Darling Basin area is the subject of heavy mineral sand exploration by companies such as Iluka Resources Limited who
operates two heavy mineral mines on the eastern ridge of the basin. The main attraction of this project is the extensive area it comprises and the quality of the magnetite sands product derived from weathered primary sources of outcropping magnetite rich hosts rocks including the nearby outcropping Braemar Iron Formation and the Curnamona Province rocks. Preliminary mineral sampling has been undertaken at Area C which has been analysed by ALS Lab Perth using Davis Test-tube Recovery (DTR) to produce an indicative iron ore specification for Area C product. Sample Fe% SiO 2 % AI 2 O 3 % P% S% Average 65.49 7.16 0.53 0.015 <0.015 DSO Spec 58-65 3-6 1.3-2.0 0.03-0.08 <0.05 * Please refer to Schedule C for the complete table of preliminary test results The potential grade is an estimate only, is conceptual in nature and is based purely on preliminary testing results. There has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource. The DTR test results reveal that Area C has the potential to house a high grade iron product with a relatively low level of impurities. This enhances the potential economics and marketability of the project. Synergy is encouraged by these initial results and, in conjunction with ATG, is in the process of commissioning a technical team to undertake an extensive scoping study to analyse and assess the various commercialisation options. The focus is centred on assessing the commerciality of Area C by implementing a three phase strategy over the course of the next 12-18 months (Strategy): 1. Phase I Phase I involves collecting up to 400 x 25kg samples and utilising a pilot DF High Speed Magnetic Separator Plant (Plant) to process the material in order to produce up to 20 x 2-5kg bulk product samples. The samples will be provided to select steel mills and other potential customers. Phase I will involve commencing commercial negotiations with potential off-takers, calibrating the separation plant, evaluating various infrastructure solutions and defining an intended mining area if proven to be commercial. 2. Phase II Subject to a successful Phase I, Phase II will involve transitioning to and commissioning a fullscale Plant. This phase is also designed to execute off-take agreements (if not achieved in Phase I) and test the commerciality of one Plant operating in isolation based on the findings in Phase I. 3. Phase III On the basis that the first two phases are successful, Phase III involves commissioning a further 3 Plants in order to commence full-scale mining operations.
Subject to completion of the transaction with ATG, Synergy will continue to update shareholders on a regular basis on the progress of the Strategy and any further developments or exploration results achieved. 3. The Transaction The key terms of the transaction are: a) Synergy will conduct a 1:100 consolidation of its existing issued capital. This will reduce the issued capital of Synergy to a maximum of 7,764,078 fully paid ordinary shares (Shares). b) ATG will provide an unsecured, interest free convertible loan to Synergy of $200,000 (Loan) payable in tranches by 27 September 2013. On payment of the final tranche, the Term Sheet will remain conditional but will then be binding on the parties. The Loan will be used to pay the various costs associated with implementing the transaction and will be convertible into Shares (post-consolidation) at the sole discretion of Synergy at a deemed issue price of $0.20 each per Share (Loan Shares). c) Subject to receiving the consent of the third party lender, Synergy will issue 1,250,000 Shares (post-consolidation) to the third party lender in consideration for the conversion of a previously advanced $200,000 loan (Conversion Shares). d) Synergy will acquire ATG for $30,404,043 via the issue of 152,020,215 Shares (postconsolidation) to ATG at a deemed issue price of $0.20 each per Share (Acquisition Shares). Subject to any necessary approvals that may be required, it is anticipated that the Acquisition Shares will be distributed in-specie to the existing ATG shareholders. Pursuant to the ASX Listing Rules, the Acquisition Shares may attract escrow restriction. e) The acquisition of ATG will result in Synergy inheriting a 2.5% revenue royalty in favour of WMG up to a total of $2,000,000 payable once revenue from production from the Interest exceeds $10,000,000 but is payable on the first $10,000,000. f) Synergy will seek to issue 15,000,000 Shares (post-consolidation) at an issue price of $0.20 each per Share to raise not less than $3,000,000 under a prospectus (IPO Shares). g) The issue of 2,200,000 Shares and 2,200,000 options exercisable at $0.20 each on or before the date which is 3 years from the date of issue (post-consolidation) to Minimum Risk Pty Ltd in consideration for the set-off of outstanding loans made by Minimum Risk Pty Ltd to various subsidiaries of Synergy. Minimum Risk Pty Ltd is a company associated with and controlled by Mr Christopher Martino, a director of Synergy. h) At the general meeting of Synergy to approve the transaction, Synergy shareholder approval will also be sought: 1) for the purposes of Chapter 11 of the Listing Rules and Chapter 6 of the Corporations Act;
2) for the purposes of Chapter 10 of the Listing Rules and Chapter 2E of the Corporations Act; 3) to appoint a new board of directors; 4) to change the company's name; and 5) to issue (pre-consolidation): (1) 21,000,000 Shares for nil consideration to current officers of Synergy in lieu of outstanding fees owed; and (2) 15,000,000 Shares for total consideration of $0.001 to the liquidators of Synergy Plus (Operations) Pty Ltd. Completion of the transaction is subject to satisfactory due diligence by Synergy and all necessary shareholder and regulatory approvals and third party consents being obtained. Subject to ASX's confirmation, the Company expects that completion of the transaction will require recompliance with Chapters 1 and 2 of the ASX Listing Rules. Please refer to Schedule B for further details regarding the effect of the transaction on the capital structure of the Company. The primary goal of relisting Synergy will be to recapitalise the Company, recommence trading on ASX and then exploit the Interest. Following this, it is an aim of the proposed new board of Synergy to seek to acquire other projects in the resource sector to complement its operations. 4. Conditions precedent to completion Completion of the acquisition of ATG is subject to and conditional upon satisfaction of the following conditions by no later than 31 December 2013: a) ATG completing a placement on terms acceptable to, and approved by, Synergy to raise not less than $2,000,000 through the issue of ordinary fully paid shares in the capital of ATG at an issue price of $0.16 each per share with such funds to be applied towards part payment of the completion consideration under the Sale Agreement; b) completion occurring under the Sale Agreement; c) completion of due diligence investigations (DD) by Synergy to its sole satisfaction, including but not limited to the Sale Agreement specifically, and all applicable legal, financial and technical DD generally; d) receipt from ASX of conditional relisting approval on ASX of Synergy in compliance with Chapters 1 and 2 of the ASX Listing Rules; and e) Synergy obtaining all relevant approvals and third party consents necessary to implement the transaction.
5. Public offering and re-admission Synergy will prepare a prospectus to issue the IPO Shares which will enable existing shareholders and third party investors to participate in the public offering. Synergy will then seek to apply for readmission to the official list of ASX (Official List). Whilst the board is confident that Synergy will satisfy the ASX Listing Rule requirements for readmission by completing the transaction, there is no guarantee that ASX will permit Synergy to be readmitted to the Official List. 6. New Board Following completion of the transaction, the current board of Synergy will be replaced with nominees of ATG. It is anticipated that Mr John Hillam, Mr Roman Fong and one other ATG nominee will comprise the new board which will ensure continuity of knowledge and experience in relation to the Interest for the short to medium term. 7. Indicative timetable The milestone dates for the acquisition of the Asset and completion of the transaction are set out in the table below. They are indicative only and are subject to change. Event Date ASX Announcement of the acquisition 29 August 2013 Due diligence completes late-september 2013 Notice of General Meeting for shareholder approval of the transaction lodged with ASIC and ASX mid-october 2013 General Meeting of shareholders mid-november 2013 Lodgement of prospectus with ASIC mid-november 2013 Prospectus offer opens late-november 2013 Prospectus offer closes mid-december 2013 Allotment of new shares and despatch of holding statements mid-december 2013 Completion of the transaction late-december 2013 Anticipated date for requotation on ASX late-december 2013
8. Pro-forma statement of financial position On the basis that the transaction is completed, the indicative pro-forma statement of financial position of the Company is as follows: Unaudited 30 June 2013 $ Pro-Forma 30 June 2013 $ Assets Current Assets Cash and cash equivalents 12,413 5,712,413 Monies owed by AirData 357,781 - Other receivables 21,390 21,390 Total Current Assets 391,584 5,733,803 Non-Current Assets Deferred tax asset 280,837 280,837 Intangible assets - 30,404,043 Investment in AirData 1,500,000 - Total Non-Current Assets 1,780,837 30,684,880 Total Assets 2,172,421 36,418,683 Current Liabilities Trade and other payables 302,956 Amounts due to administrators 1,598,685 Total Current Liabilities 1,901,641 25,000-25,000 Non-Current Liabilities Total Non-Current Liabilities - - Total Liabilities 1,901,641 25,000 Net (Liabilities)/ Assets 270,780 36,393,683 Equity Issued capital 31,401,031 67,810,074 Reserves 40,646 40,646 Accumulated losses (31,170,897) (31,457,037) Total (Deficit)/ Equity 270,780 36,393,683 NB: The above pro-forma statement of financial position does not account for the potential liability relating to the claims made by Synergy s previous chairman, Mr Frank Stranges, as disclosed to the market on 21 June 2013. Synergy refutes the claims made by Mr Stranges and will defend any action against the Company made by Mr Stranges.
9. Shareholder benefits Completion of the recapitalisation transaction will restructure the Company's issued capital and net asset base, provide working capital and provide a new board and business direction. Whilst the current board of Synergy is aware that the proposed transaction will result in a significant dilution of existing shareholdings, the board is of the view that this proposal is the best outcome for shareholders in the current circumstances. 10. Shareholder Meeting To implement the transaction, Synergy will prepare a notice of meeting seeking shareholder approval for, among other things, the acquisition of ATG. The board of Synergy will continue to provide shareholders with updates regarding the recapitalisation transaction. For and on behalf of the Board Leanne Ralph Company Secretary References to geological information in this ASX announcement by Synergy Plus Limited that relate to exploration results, mineral resources or ore reserves are based on and accurately reflect information compiled by Mr Pyper, who is an independent consultant for Minnelex Pty Ltd. Mr Pyper is a qualified member of The Australasian Institute of Mining and Metallurgy and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Pyper consents to the inclusion of the matters based on his information in this document in the form and context in which it appears.
Schedule A: Tenement Schedule Tenement EL/4566 Holder (interest in Tenement) WMG (100%) Status Live Start Date 20/09/2010 Expiry Date 19/09/2014 Location Approximately 10km North and West of Olary Expenditure commitment $90,000.00 between 20/09/2012 and 19/09/2014 Sale Agreement area Area C
Schedule B: Proposed Capital Structure (post-consolidation) Item Number of Shares % of Equity SNR (post-consolidation) 7,764,078 4.33 Conversion Shares* 1,250,000 0.70 Acquisition Shares** 152,020,215 84.82 Loan Shares 1,000,000 0.56 IPO Shares 15,000,000 8.36 Shares to Minimum Risk Pty Ltd 2,200,000 1.23 TOTAL 179,234,293 100% * Subject to receiving consent for the conversion. If consent is not received, the minimum subscription will need to be increased by $200,000 to account for repayment. ** It is proposed that the Acquisition Shares will be distributed in-specie to the existing shareholders of ATG.
Schedule C: ALS Davis Test-tube Recovery Results SAMPLE ID Fe% SiO2% Al2O3% P% S% Olary- o12-2497.98 CONC 69.91 2.21 0.17 0.008 0.061 Olary- o12-2499.00 CONC 69.11 2.93 0.16 0.015 0.064 Olary- o12-2503.04 CONC 69.78 2.12 0.2 0.015 0.022 Olary- o12-2505.06 CONC 69.67 2.57 0.18 0.004 0.042 Olary- o12-2510.11 CONC 65.45 8.12 0.43 0.004 0.033 Olary- o12-2522.23 CONC 62.27 11.85 0.92 0.012 0.014 Olary- o9-2543.44 CONC 67.66 5.22 0.38 0.012 0.003 Olary- o10-2549.50 CONC 65.88 7.32 0.56 0.015 0.017 Olary- o10-2551.52 CONC 65.41 7.93 0.59 0.025 <0.001 Olary- o11-2557.58 CONC 69.7 0.9 0.18 0.008 0.009 Olary- o11-2559.60 CONC 69.2 2.3 0.23 0.004 0.031 Olary- q2-2575.76 CONC 64.39 9.61 0.45 0.005 0.002 Olary- q2-2577.78 CONC 66.34 6.8 0.38 0.017 <0.001 Olary- q6-2616.17 CONC 60.69 13.65 1.08 0.036 0.042 Olary- q6-2618.19 CONC 63.12 11.05 0.71 0.014 0.014 Olary- q6-2620.21 CONC 65.31 7.74 0.67 0.029 <0.001 Olary- r5-2654.55 CONC 62.96 10.7 0.99 0.027 0.011 Olary- m7-2716.17 CONC 65.57 7.88 0.53 0.016 <0.001
Olary- m6-2728.29 CONC 65.14 8.65 0.54 0.01 <0.001 Olary- m5-2751.52 CONC 68.22 4.14 0.4 0.01 0.001 Olary- m5-2753.54 CONC 65.27 8.1 0.68 0.004 <0.001 Olary- m4-2757.58 CONC 67.72 5.24 0.37 0.014 <0.001 Olary- m4-2759.60 CONC 62.66 11.25 0.79 0.053 0.012 Olary2-1919.20 CONC 62.67 11.05 0.99 0.007 <0.001 Olary2-1969.70 CONC 68.84 3.97 0.2 0.009 <0.001 Olary- q6-2618.19 DUP CONC 61.59 12.85 0.88 0.017 0.004 Average 65.49 7.16 0.53 0.015 <0.015 The potential grade is an estimate only, is conceptual in nature and is based purely on preliminary testing results. There has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.