Southern Cross Goldfields Ltd ASX Announcement: 29 July 2013 QUARTERLY REPORT FOR PERIOD ENDED 30 JUNE 2013 Merger with Polymetals on track: completion expected August 2013 BUSINESS DEVELOPMENT Merger with Polymetals Mining Previously announced merger with Polymetals Mining (ASX: PLY) proceeding on track, with key milestones achieved during the Quarter including: o o Completion of Scheme Implementation Agreement and Scheme Booklet; and Dispatch of Notices of Meeting to SXG and PLY shareholders to vote on aspects of the merger SXG meeting convened for 30 July and PLY meeting for 31 July. The Merger is expected to be completed in August 2013 subject to shareholder approval. The Merged Entity will have increased scale and liquidity as an Australian junior resources company, a strengthened capital base and improved ability to access capital markets. It will also have greater visibility and investor relevance combined with a strong balance sheet. GOLD The Marda gold project continued to be advanced with engineering studies continuing into the refurbishment and relocation of the Sandstone plant to Marda. SXG continued its systematic regional auger drilling soil sampling programme during the quarter. Infill sampling confirmed previous results and has enhanced the prospectivity of several areas along the north eastern section of the Evanston Shear. An auger sampling program was completed on an interpreted gold target west of the Transvaal Mine approximately 15km south of Southern Cross. The target is 7km long and has variable sand and soil cover. The wide spaced auger program has identified low level gold anomalism over 2km of strike which requires infill auger testing. CORPORATE Financing options for the development of the Marda Gold Project continued to proceed positively following completion of independent due diligence by AMC mining consultants. Cash at the end of the June Quarter was $1.8M and the Company is taking a conservative approach to activities and cash management until the merger is completed. The Company commenced investigations into opting into the new DMP Mine Rehabilitation Fund (MRF). The Company currently has $2.8M in cash backed environmental bonds across its Marda and Sandstone tenements. ASX: SXG Shares on Issue: 408.9M Market Cap: $9.0M (at 2.2c) T: +61 8 9215 7600 F: +61 8 9485 1283 E: admin@scross.com.au W: www.scross.com.au PO Box 708, West Perth 6872 Unit 16, 162 Colin St, West Perth 6005.
BUSINESS DEVELOPMENT Polymetals and Southern Cross Goldfields to merge to create a diversified Australian gold company Overview On 8 April 2013 Polymetals Mining Limited ( Polymetals ; ASX: PLY) and Southern Cross Goldfields announced (refer ASX Announcement 8 April 2013) that they had entered into a Scheme Implementation Agreement (SIA) to combine the two companies to create a significant diversified Australian gold company. Subsequently, the Company issued an amended and restated SIA (refer ASX Announcement 31 May), merger update (refer ASX Announcement 21 June) and Notice of Meeting (refer ASX Announcement 28 June). The merger is being implemented as a merger of equals by way of a scheme of arrangement under which Southern Cross will offer 11 SXG shares for every 1 PLY share on issue. Southern Cross shareholders will collectively hold approximately 47% of the shares in the merged company, while Polymetals shareholders will collectively hold approximately 53%. Subject to standard fiduciary carve-outs, the merger is unanimously recommended by the Polymetals Board of Directors, who have also agreed to vote in favour of the merger in respect of all shares they control. The merged entity will have: a diversified gold and base metal portfolio in Western Australia and New South Wales spanning projects at development, scoping study and exploration stage; ownership of a fully permitted, 600ktpa CIL gold treatment facility and associated infrastructure currently located at Sandstone in Western Australia; combined JORC compliant Mineral Resources totalling 1.63 million ounces and JORC compliant Ore Reserves totalling 254,000oz gold (see Tables 1 and 3); exploration upside within an extensive portfolio covering 4,500km 2 in Western Australia within the Southern Cross and Sandstone greenstone belts and the Pilbara region and 200km 2 in the highly prospective Lachlan Fold Belt of NSW; and a strong balance sheet with cash as at 30 June of approximately A$11 million, liquid assets of approximately $3M and debt of approximately A$7 million. The merged entity will have increased scale and liquidity as an Australian junior resources company, a strengthened capital base and improved ability to access capital markets. It will also have greater visibility and investor relevance combined with a strong balance sheet. The combined group will have a diversified asset base and risk profile spread across assets in two States, as well as a strengthened Board and management team with proven track records in taking development assets into production and operations. The merged entity will have equal board representation from each company, with Samantha Tough as Chairman. Polymetals Chairman David Sproule, and Directors Jon Parker and Frank Terranova will join the Board of the merged entity. From Southern Cross, Samantha Tough, who will be Chairman of the merged entity, and existing Directors John Rowe and Graham Brock, will join the Board. Glenn Jardine from Southern Cross will be Chief Executive Officer. The Company headquarters will remain in Perth, Western Australia. Important dates regarding the merger are set out below.
Important Dates Event Date SXG General Meeting 10.00am (Perth time) on Tuesday, 30 July 2013 Polymetals General Meeting 10.00am (Brisbane time) on Wednesday, 31 July 2013 Polymetals Scheme Meeting 10.30am (Brisbane time) on Wednesday, 31 July 2013 Second Court Hearing to approve the Scheme Monday, 5 August 2013 Effective Date Tuesday, 6 August 2013 Record Date Tuesday, 13 August 2013 Implementation Date Tuesday, 20 August 2013 The above timetable is indicative only and the actual timetable will depend on many factors. These factors include the Court approval process and the time at which the conditions precedent to the Scheme are satisfied or waived (as applicable). These times and dates may vary without directly notifying shareholders, subject to the approval of such variation by ASX, the Court and Polymetals. Any variation to the timetable will be announced to the ASX and will be published on the SXG website. GOLD SXG completed a Feasibility Study on the development of a new greenfields gold operation at its Marda Gold Project, located 200km north of Southern Cross in Western Australia, in May 2012. This study generated positive results, targeting an initial gold production rate of 35,000oz per annum over five years from SXG s internal resource base, treated through a centrally located 480,000 tonne per annum (tpa) gold processing facility at Marda Central. In August 2012, SXG announced a landmark agreement to acquire the Sandstone Gold Project assets from Troy Resources. The relocation of Sandstone plant to Marda would significantly enhance the projected economics by reducing capital costs, minimizing development schedule risk and providing increased plant throughput and gold production flexibility. Marda Gold Project The Company has placed the Sandstone gold plant and infrastructure on care and maintenance. Engineering studies into the capital cost of refurbishing and relocating the Sandstone plant to Marda have continued. SXG continues to progress the process of obtaining environmental and statutory approvals for the Marda Project, and expects all approvals to be in place to coincide with the completion of project funding. All proposed mining deposits are located within granted mining leases, and significant environmental baseline studies were completed in 2011. The Company has appointed respected environmental firm Bioscope Environmental Pty Ltd to manage the environmental and statutory approvals process.
Gold Exploration Marda SXG continued systematic regional auger drilling soil sampling programme within its extensive Marda tenement package. This programme infill sampled several areas along the north eastern section of the Evanston Shear which had previously returned anomalous gold values. The infill sampling confirmed the previous results and has enhanced the prospectivity of these areas. Sampling commenced on the central section of the Evanston Shear and has returned anomalous gold values for follow up. Southern Cross South An auger sampling program was completed on an interpreted gold target west of the Transvaal Mine approximately 15km south of Southern Cross. The target is 7km long and has variable sand and soil cover. The wide spaced auger program has identified low level gold anomalism over 2km of strike which requires infill auger testing.
BASE METALS The Company has significant base metals prospectivity across its 3,000km 2 tenement package, and in 2012 announced the discovery of a volcanogenic massive sulphide (VMS) base metal system at its Copper Bore Project. Copper Bore is located 400km north-east of Perth at the northern end of the Marda region within the richly endowed Central Yilgarn Mineral Province. Copper Bore Base Metal Project Exploration and development work at Copper Bore has been scaled back while the Company focuses on Marda gold project development and exploration and corporate activities. Western Areas NL Nickel Joint Venture (SXG 30% nickel interest, 100% non-nickel interest*) *SXG retains 100% of non-nickel rights (other than iron ore) under its nickel rights agreement with Western Areas. WSA advises that planned activities for the coming quarter include focus area selection and target generation work that will include stratigraphic air-core drilling and auger geochemical sampling. The work will aim to identify prospective ultramafics and screen for the presence of nickel sulphides. WSA believes the Marda area to prospective for nickel sulphides given the large volume of interpreted cumulate ultramafics and felsic volcanics, and the presence of local tectonic indicators such as SXGs copper bore VMS project. CORPORATE PLY Facility Agreement Subsequent to the end of the quarter, the Company entered into a facility agreement for an amount of $0.5M with Polymetals (refer ASX announcement 8 July 2013). Cash on Hand Cash at the end of the March Quarter was $1.8 million and the Company is taking a conservative approach to its activities and cash management until the merger is completed. Mine Rehabilitation Fund The Company commenced investigations into opting into the new DMP Mine Rehabilitation Fund (MRF). The Company currently has $2.8M in cash backed environmental bonds across its Marda and Sandstone tenements. Glenn Jardine Managing Director ENDS For further details, please contact Glenn Jardine, Managing Director Southern Cross Goldfields Ltd Telephone: +61 8 9215 7600, email glennj@scross.com.au Refer to www.scross.com.au For media inquiries, please contact: Nicholas Read Read Corporate Telephone: +61 9388 1474, email nicholas@readcorporate.com.au
Table 1: Combined SXG and PLY JORC Mineral Resource Estimate Measured Indicated Inferred Total Resources kt g/t Au koz kt g/t Au koz kt g/t Au koz kt g/t Au koz Canbelego (1) 39 6.4 8 646 4.0 84 82 3.9 10 766 4.1 102 Turner River Gold JV 2,669 1.8 157 1,145 1.3 47 2,936 1.5 141 6,750 1.6 345 (Earning In) 2) Combined Polymetals 2,707 1.9 165 1,791 2.28 131 3,018 1.6 151 7,516 1.9 448 Project Total (3) Marda (4) 2,796 2.3 204 2,640 1.8 155 3,052 1.9 188 8,487 2.0 546 Sandstone (4) 1,932 2.4 146 12,586 1.4 574 14,518 1.5 720 Combined Southern Cross Total 2,796 2.3 204 4,572 2.1 301 15,638 1.5 762 23,005 1.7 1,266 Polymetals / Southern Cross 5,503 2.1 368 6,362 2.1 433 18,655 1.5 914 30,521 1.8 1,714 Total (5) Polymetals Share / Southern Cross 4,836 2.1 329 6,076 2.2 421 17,921 1.5 878 28,833 1.8 1,627 Total (6) (1) Mt Boppy; 2.5g/t cut-off; Boppy Sth: 1.0g/t cut-off (2) Polymetals has a entered into an agreement with De Grey Mining to earn a 75% interest in the Turner River Gold Project (3) Total includes 100% of Turner River Resources (4) Marda and Sandstone; 1.0 g/t Au cut-off grade. (5) Figures may not add due to rounding. Includes 100% of Turner River JV Resources (6) Figures may not add due to rounding. Includes 75% of Turner River JV Resources Table 2: Turner River Base Metals Project JV JORC Resource Summary (1.0%Zn cut-off grade) PLY Earning 75% Resource Tonnes Zinc Silver Lead Gold Deposit Copper Cu% Category (Mt) Zn% Ag g/t Pb % Au g/t Discovery (1) Inferred 1.12 2.62 94 1.03 0.12 0.87 Orchard Tank (2) Inferred 1.49 2.71 84 1.10 0.08 0.57 Total (3) Inferred 2.61 2.67 89 1.07 0.10 0.70 (1) Resource estimation by Ravensgate Feb 2012. 18 RC, and 2 DD drill holes. Ordinary Kriging verified by Polymetals (2) Resource estimation by Ravensgate, Feb 2012. 10 RC, and 10 DD drill holes. Ordinary Kriging verified by Polymetals (3) Total includes 100% of Turner River Resources
Table 3 Combined SXG and PLY JORC Proved and Probable Ore Reserve Statement Proved Probable Total kt g/t Au oz kt g/t Au oz kt g/t Au oz Marda (1) 1,900 2.4 149,200 300 2.7 29,300 2,300 2.4 178,500 Mt Boppy (2) 0.042 5.64 7,636 0.507 4.19 68,312 0.549 4.3 75,945 Polymetals / Southern Cross Total (1) 1.94 2.51 156,836 0.81 3.76 97,612 2.85 2.78 254,449 (1) Note: Rounding conforming to JORC to appropriate levels of precision may cause minor computational errors. (2) The Ore Reserves exclude Inferred Resources of 30,000 tonnes @ 4.69 g/t Au (4,500 oz Au) which are contained within the planned open pit. These Inferred Resources have been included in the mining schedule and financial model. The Ore Reserves also exclude 10,000 tonnes @ 2 g/t Au (640 oz Au) of Unclassified material (remnant stockpiles) which have been included in the mining schedule and financial model JORC Code Compliance Statement Capitalised terms used in this statement are defined in the in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). JORC Code Compliance Statement SXG Mineral Resources, Marda Project Information in this Report relating to Mineral Resources and Exploration results in the Marda Project has been compiled by Richard Simmons, Exploration Manager, Southern Cross Goldfields Ltd who has sufficient experience which is relevant to the 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 Simmons is a Member of the Australasian Institute of Mining and Metallurgy and has consented to the inclusion in this report of the matters compiled by him in the form and context in which they appear. JORC Code Compliance Statement SXG Mineral Resources, Sandstone Project Information in this Report relating to Mineral Resources in the Sandstone Project has been compiled by David Otterman of D.W. Otterman Exploration Consultant who is an independent consultant and has sufficient experience which is relevant to the 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 Otterman is a Fellow of the Australasian Institute of Mining and Metallurgy, Chartered Professional (Geology), and has consented to the inclusion in this report of the matters compiled by him in the form and context in which they appear. JORC Code Compliance Statement SXG Ore Reserves, Marda Project The information in this Report that relates to Ore Reserves for the Marda Gold Project is based on information compiled by Mr Denis Grubic, who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Grubic is an independent consultant employed by Rock Team Pty Ltd. Mr Grubic 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 Grubic consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. JORC Code Compliance Statement Polymetals Mineral Resources and Ore Reserves The information in this announcement that relates to Polymetals Mineral Resources is based on information compiled (Canbelego, Turner River) or verified (Turner River) by Mr Troy Lowien, Polymetals Senior Resource Geologist, who is a Member of the Australian Institute of Mining and Metallurgy and is a fulltime employee of Polymetals Mining Limited.
The information in this announcement that relates to Mt Boppy Ore Reserves is based on information compiled by Messrs Sean Buxton and Andrew Lawry, who are Members of The Australasian Institute of Mining and Metallurgy. Mr Buxton is a former employee and General Manager and Mr Lawry is a former employee and Polymetals COO. The information in this announcement that relates to Exploration Results is based on information compiled or verified by Mr Jess Oram, who is a Member of the Australian Institute of Geoscientists and is a former Polymetals Exploration Manager. Messrs Buxton, Lawry, Lowien and Oram have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activities which they undertook to qualify as a Competent Persons as defined in the 2004 Edition of the Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves. Messrs Lawry, Lowien and Oram consent to the inclusion of matters based on their information in the form and context in which it appears in this announcement. Disclaimer This document has been prepared by Southern Cross Goldfields Ltd (SXG) and Polymetals Mining Limited (PLY). The information and opinions contained in this document are derived from public and private sources which they believe to be reliable and accurate but which, without further investigation, cannot be warranted as to their accuracy, completeness or correctness. This information is supplied on the condition that SXG, and any director, agent or employee of SXG, are not liable for any error or inaccuracy contained herein, whether negligently caused or otherwise, or for loss or damage suffered by any person due to such error, omission or inaccuracy as a result of such supply. Forward-Looking Statements This document contains forward-looking statements concerning the projects owned by SXG and PLY. Statements concerning mining reserves and resources may also be deemed to be forward looking statements in that they involve estimates based on specific assumptions. Forward-looking statements are not statements of historical fact and actual events and results may differ materially from those described in the forward looking statements as a result of a variety of risks, uncertainties and other factors. Forward-looking statements are based on SXG s and PLY s beliefs, opinions and estimates as of the dates the forward looking statements are made, and no obligation is assumed to update forward looking statements if these beliefs, opinions and estimates should change or to reflect other future developments. Exploration potential is conceptual in nature and where there has been insufficient exploration to define a Mineral Resource it is uncertain if further exploration will result in the determination of a Mineral Resource. Readers are cautioned not to place undue reliance on forward-looking statements and SXG assumes no obligation to update such information.
Appendix 5B MINING EXPLORATION ENTITY QUARTERLY REPORT Name of entity SOUTHERN CROSS GOLDFIELDS LIMITED ABN Quarter ended (current quarter) 71 124 374 321 30 June 2013 Consolidated Statement of Cash Flows Cash flows related to operating activities Current Qtr Year to Date (12 months) 1.1 Receipts from product sales and related debtors 1.2 Payments for: (a) exploration and evaluation (609) (3,288) (b) development (242) (2,377) (c) production (d) administration (520) (1,667) 1.3 Dividends received 1.4 Interest and other items of similar nature received 32 116 1.5 Interest and other costs of finance paid (186) (186) 1.6 Income taxes paid 1.7 Other (provide details if material) 20 Net operating cash flows (1,525) (7,382) Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (20) (b) equity investment (c) other fixed assets (2,284) 1.9 Proceeds from sale of: (a) prospects 40 (b) equity investment 150 (c) other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities Other (provide details if material) Cash backed bonds (2,724) Net investing cash flows 0 (4,838) 1.12 Total operating and investing cash flows (carried forward) (1,525) (12,220)
Current Qtr Year to Date (12 months) 1.12 Total operating and investing cash flows (brought forward) (1,525) (12,220) Cash flows related to financing activities 1.13 Proceeds from the issue of shares, options, etc. 5,300 1.14 Proceeds from the sale of forfeited shares 1.15 Proceeds from borrowings 7,000 1.16 Repayment of borrowings 1.17 Dividends paid 1.18 Other (provide details if material) Equity raising costs (459) Net financing cash flows 0 11,841 Net increase (decrease) in cash held (1,525) (379) 1.19 Cash at beginning of quarter/year to date 3,361 2,215 1.20 Exchange rate adjustments 1.21 Cash at end of quarter 1,836 1,836 Payments to Directors of the entity and associates of the Directors, payments to related entities of the entity and associates of the related entities Current Qtr 1.22 Aggregate amount of payments to the parties included in item 1.2 (133) 1.23 Aggregate amount of loans to the parties included in item 1.10 1.24 Explanation necessary for an understanding of the transactions Directors fees, salaries and superannuation (A$132,969). Non cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows None 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest
Financing facilities available Add notes as necessary for an understanding of the position Amount available Amount used 3.1 Loan facilities 7,000 7,000 3.2 Credit standby arrangements The Company has fully drawn on the RMB Sandstone Acquisition Facility $7,000,000 drawn down in March 2013. Interest of $186,096 has been paid in the current quarter. Estimated cash outflows for next quarter 4.1 Exploration and evaluation 225 4.2 Development 175 4.3 Administration 350 Total 750 Reconciliation of cash Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to related items in the accounts as follows. Current Quarter Previous Quarter 5.1 Cash on hand and at bank 836 1,956 5.2 Deposits at call 1,000 1,405 5.3 Bank Overdraft 5.4 Other (provide details) Total: cash at end of quarter 1,836 3,361
Changes in interests in mining tenements 6.1 Interests in mining tenements relinquished, reduced or lapsed Tenement Nature of interest Interest at Interest at reference (note (2)) Begin of Quarter P77/3425 P77/3900 E77/1320 E77/1372 P77/3902 E57/666 E77/1368 E57/576 E77/1566 E77/1353 P77/3868 E77/2089 P77/3808 P77/3809 P77/3759 P77/3760 P77/3761 E77/1424 End of Quarter 100% 6.2 Interests in mining tenements acquired or increased P77/4221 P77/4222 100% 100% Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rights together with prices and dates. 7.1 Preference securities (description) Total number Number quoted Issue price per security (see note 3) ($) Amount paid up per security (see note 3) ($) 7.2 Changes during Quarter (a) Increases through share issues (b) Decreases through returns of capital, buybacks, redemptions Ordinary securities 408,912,834 408,912,834 Fully Paid 7.3 Changes during Quarter (a) Increases through share issues (b) Decreases through returns of capital, buybacks 7.4 Convertible debt securities (description)
7.5 Changes during Quarter (a) Increases through issues (b) Decreases through securities matured, converted 7.6 Options Total number 6,500,000 6,500,000 25,000 25,000 100,000 100,000 2,000,000 1,000,000 1,000,000 1,000,000 2,200,000 500,000 500,000 10,000,000 43,665,000 2,500,000 5,000,000 34,255,319 Number quoted Issue price per security (see note 3) ($) Exercise Price $0.25 $0.30 $0.25 $0.30 $0.25 $0.30 $0.20 $0.25 $0.30 $0.40 $0.10 $0.20 $0.25 $0.10 $0.10 $0.10 $0.10 $0.047 Amount paid up per security (see note 3) ($) Expiry Date 12/03/2014 12/03/2014 02/07/2014 02/07/2014 21/07/2014 21/07/2014 01/10/2014 01/10/2014 01/10/2014 01/10/2014 31/07/2014 31/07/2014 31/07/2014 24/02/2015 10/10/2017 10/10/2015 23/11/2017 21/03/2015 7.7 Issued during Quarter Exercise Price Expiry Date 7.8 Exercised during Quarter N/A N/A 7.9 Expired during Quarter N/A N/A 7.9 (a) Cancelled during Quarter 7.10 Debentures (totals only) 7.11 Unsecured notes (totals only) N/A N/A
Compliance 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows.. Compliance Statement 1. This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4). 2. This statement does give a true and fair view of the matters disclosed. Sign here: Date: 29 July 2013 Chief Financial Officer Print name: Stephen Jones Notes 1. The Quarterly Report is to provide a basis for informing the market how the entity s activities have been financed for the past Quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report. 2. The Nature of Interest (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2. 3. Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities. 4. The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report. 5. Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.