1. business and industrial

MGT Resources Limited
ACN 131 715 645
Notice of General Meeting
to be held on 16th February 2015
and
Explanatory Memorandum
for the Notice of General Meeting
and
Independent Expert’s Report
THE INDEPENDENT EXPERT REPORT PREPARED BY NEXIA COURT FINANCIAL SOLUTIONS
PTY LTD CONCLUDES THAT THE PROPOSED INVESTMENTS ARE FAIR AND REASONABLE
TO THE NON-ASSOCIATED SHAREHOLDERS OF THE COMPANY. PLEASE REFER TO THE
INDEPENDENT EXPERT’S REPORT SET OUT IN
Section E OF THIS NOTICE.
THIS DOCUMENT IS IMPORTANT AND REQUIRES
YOUR IMMEDIATE ATTENTION.
IF YOU ARE IN ANY DOUBT ABOUT THE ACTION YOU SHOULD TAKE
PLEASE CONSULT YOUR STOCKBROKER, SOLICITOR, ACCOUNTANT OR
OTHER PROFESSIONAL ADVISER.
NOTICE OF THE GENERAL MEETING TO BE HELD AT
AT SUITE 2.05B, 68 YORK STREET, SYDNEY, NEW SOUTH WALES AT
th
11AM SYDNEY TIME ON 16 FEBRUARY 2015
TO BE VALID, FORMS OF PROXY FOR USE AT THE GENERAL MEETING MUST BE
COMPLETED AND RETURNED TO THE COMPANY NO LATER THAN
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11AM SYDNEY TIME ON 14 FEBRUARY 2015
Table of Contents
Section A
Chairman’s Letter
Section B
Glossary
1.
Definitions
2.
Interpretation
Section C
Notice of General Meeting
1.
Ordinary business
2.
Voting exclusion statements
3.
Determination of membership and voting entitlement
4.
Votes of members
5.
Proxies
Section D
Explanatory Memorandum
1.
Introduction and Background Information on Proposed Investments 1
2.
Resolutions 1, 2 and 3 – Approval of issue of Subscription Shares, Options and
Convertible Notes to the Investor
3.
Resolution 4- Amendment to Constitution
Section E
Independent Expert's Report
Section F
New Constitution - Modification
Section G
Proxy Form
Page 2 of 200
Section A
Chairman’s Letter
th
15 January 2015
Dear Shareholder
The Directors of MGT Resources Limited ACN 131 715 645 (Company) have convened the General
th
Meeting of Shareholders to be held on 16 February 2015 to obtain the approval of Shareholders in
relation to the proposed investments.
The Proposed Investments
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On 19 December 2014, MGT announced that it had entered into an Investments and Implementation
Agreement with Auskong International Mining Investment Co., Limited which, subject to certain terms
and conditions, would result in the Company raising up to AUD$4,200,000. Consequently, MGT
Resources Limited has agreed to the following funding arrangements with Auskong International
Mining Investment Co., Limited, which are subject to Shareholder approval:
(a)
Auskong International Mining Investment Co., Limited subscribing for 30,000,000
Shares at an issue price of $0.05 per share via a placement, raising $1,500,000.
(b)
Auskong International Mining Investment Co., Limited investing $1,500,000 by
subscribing for 50,000,000 unsecured convertible notes with a term of 12 months,
interest free at an exercise price of $0.03 per note; and
(c)
Auskong International Mining Investment Co., Limited being issued 24,000,000
options in the Company with an exercise price of $0.05 per option and a term of 12
months, raising $1,200,000 if exercised,
(Proposed Investments).
Upon the Shareholder approval of the Proposed Investments and on or after the Effective Date,
Auskong International Mining Investment Co., Limited will appoint two non-executive Directors to the
Board. On or after the Effective Date, one current non-executive Director will retire from the Board
upon the appointment of the two new Auskong International Mining Investment Co., Limited nonexecutive Directors.
The Proposed Investments are conditional on a number of conditions precedents which include the
following transactions:
(a)
off-market transfer of 20,000,000 Shares held by Directors to Auskong International
Mining Investment Co., Limited for nil consideration;
(b)
off-market transfer of 10,000,000 Shares held by Taimetco International Co., Limited
(Taimetco) to Auskong International Mining Investment Co., Limited for $0.03 per
Share, Taimetco providing to MGT Mining Limited a $1.5 million secured loan and
Page 3 of 200
Taimetco terminating its off-take agreement with the Company for $750,000
compensation payable to Taimetco. The secured loan of $1.5 million from Taimetco to
MGT Mining Limited and the Deed of termination of the off-take agreement for
$750,000 between MGT Resources Limited and Taimetco remain unsigned as at the
date of this Notice of Meeting, however The Directors are confident that these will be
signed prior to the General Meeting and an announcement will be made to the ASX
once this occurs.
Whilst Shareholders are approving the Proposed Investments only, completion of the other
transactions set out above (Other Transactions) and the Proposed Investments are interdependent.
Shareholders should consider the effect of the Other Transactions as well as the effect of the
Proposed Investments in making their decision whether or not to approve the Proposed Transactions.
The Directors are seeking the approval of Shareholders for the:
(a)
issue of the Subscription Shares;
(b)
issue of the Convertible Notes; and
(c)
issue of the Options,
to Auskong International Mining Investment Co., Limited.
The Directors are also seeking the approval of Shareholders for the Company to modify its
Constitution to include new clause 39 as set out in Section F .
Notice of General Meeting and accompanying documents
This letter is accompanied by a Notice of General Meeting (Section C ), an Explanatory Memorandum
(Section D ) and an Independent Expert’s Report (Section E ). The Notice of General Meeting sets out
the Resolutions that Shareholders are to consider. The Explanatory Memorandum explains in greater
detail the background to the proposed Resolutions.
The Directors appointed Nexia Court Financial Solutions Pty Ltd as the Independent Expert to report
on the fairness and reasonableness of the Proposed Investments to the non-associated shareholders
of the Company. The Independent Expert has concluded that the Proposed Investments are fair and
reasonable to the non-associated shareholders of the Company. The Independent Expert's Report is
contained in Section E .
Shareholders are encouraged to read the enclosed Explanatory Memorandum and Independent
Expert’s Report closely and in their entirety and to attend the General Meeting and vote on the
Resolutions. A proxy form is enclosed to enable any Shareholder who is unable to attend the General
Meeting to vote at the meeting.
The Directors support the Resolutions contained in the Notice of General Meeting. We recommend
that you vote in favour of all Resolutions, full details of which are contained in the Notice of General
Meeting.
Yours faithfully
Jonathan Back
Chairman
Page 4 of 200
Section B
1.
Glossary
Definitions
The following definitions are used in the Chairman’s Letter, the Notice of General Meeting and
the Explanatory Memorandum:
ASIC
means the Australian Securities & Investments Commission.
Associate
has the meaning given to that term in sections 10 to 17 of the
Corporations Act.
ASX
means ASX Limited ACN 008 624 691 or the securities exchange
market operated by the ASX, as the context requires.
ASX Listing Rules
means the official listing rules issued and enforced by the ASX, as
amended from time to time.
Board or Board of
Directors
means the board of Directors of the Company.
Business Day
means a day which is not a Saturday, Sunday or public holiday in
Sydney.
Chairman
means the chairman of the Company, who is currently Mr Jonathan
Back.
Company or MGT
means MGT Resources Limited ACN 131 715 645.
Completion
means completion will occur after the Investments and Implementation
Agreement becoming binding and unconditional and completion has
occurred under each other Transaction Document.
Conditions
Precedent
means the conditions precedent to the Proposed Investments set out in
paragraph 2.2.
Constitution
means the constitution of the Company, as amended from time to time.
Page 5 of 200
Convertible Notes
means 50,000,000 unsecured convertible notes under the terms of the
Convertible Note Deed.
Convertible Note
Deed
means the unsecured convertible note deed dated 7 January 2015
between the Company and the Investor as part of the implementation
of the Proposed Investments.
Corporations Act
means Corporations Act 2001 (Cth).
Directors
means the directors of the Company.
Effective Date
means the date being the fifth Business Days after the date on which
the last Condition set out in section 2.2 of Section D is satisfied or
waived.
Explanatory
Memorandum
means the explanatory memorandum set out in Section D of this
document.
General Meeting
means the general meeting of the Company to be held on
th
16 February 2015 pursuant to the Notice of General Meeting.
Independent
Expert
means Nexia Court Financial Solutions Pty Ltd of Level 16,
1 Market Street, Sydney NSW 2000.
Independent
Expert's Report
means the expert report prepared by the Independent Expert and set
out in Section E of this document.
Investments and
Implementation
Agreement
means the master investment agreement entered into between the
th
Company, the Investor and MGTM dated 18 December 2014 and the
th
letter of variation dated 7 January 2015, under which the parties to
that agreement have agreed upon the terms and conditions for
initiating and implementing the Proposed Investments.
Investor
means Auskong International Mining Investment Co., Limited (Hong
Kong Company Number 2178046).
MGT or the
Company
means MGT Resources Limited ACN 131 715 645.
MGTM
means MGT Mining Limited ACN 120 236 142.
Notice of General
Meeting or Notice
means the notice of General Meeting set out in Section C of this
document.
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Page 6 of 200
Officially Quoted
and Official
Quotation
means, in relation to a Share, officially quoted by the ASX.
Options
24,000,000 options under the terms of the Option Deed which, when
exercised, convert into 1 Share per Option.
Option Deed
means the option deed between the Company and the Investor dated
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7 January 2015 as part of the implementation of the Proposed
Investments.
Other
Transactions
has the meaning given to in the Chairman's Letter.
Proposed
Investments
means the proposed investments to be made by the Investor to the
Company, in accordance with the terms and conditions of the
Investments and Implementation Agreement, and by way of the
following through the implementation of the Proposed Investments:
(a)
the Investor subscribing for 30,000,000 newly issued fully paid
ordinary shares of the Company for a subscription
consideration of $1,500,000 under the terms of the
Subscription Agreement;
(b)
the Investor investing $1,500,000 by subscribing for
50,000,000 unsecured convertible notes under the terms of the
Convertible Note Deed; and
(c)
the Investor being issued 24,000,000 Company Options, the
exercise price of which is $1,200,000 under the terms of the
Option Deed.
Resolution
means a resolution passed by the requisite majority of Shareholders of
the Company on a show of hands or by the requisite majority of votes
given on a poll.
Share
means a fully paid ordinary share in the issued capital of the Company
and Shares means any two or more of them.
Shareholder
means a holder of a Share.
Share Sale
Agreement
means the share sale agreements to be entered into between the
Investor as the purchaser and Mr Jonathan Back, Mr Gary Kuo and Mr
Li Hai Jun as the counterparties, as part of the implementation of the
Proposed Investments.
Page 7 of 200
Subscription
Agreement
means the subscription agreement between the Company and the
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Investor dated 7 January 2015 as part of the implementation of the
Proposed Investments.
Subscription
Shares
means 30,000,000 newly issued fully paid ordinary Shares.
Tin Assets
means the following leases, licences and licence applications:
(a)
ML 20547 – Summer Hills;
(b)
ML 4349 – Mt Veteran;
(c)
ML 20655 – Heads or Tails;
(d)
ML 20066 – Valetta;
(e)
EPM 16948 – Nymbool;
(f)
EPM 25433 – Nanyetta;
(g)
EPMA 25690 – Nymbool West;
(h)
EPMA 25716 – Fuzzy Hill; and
(i)
EPMA 25347 – Nymbool Extended,
and the mining information comprising all information, data, sketches,
maps, drawings, memoranda, drill cores, logs of those drill cores and
all other records and geological information relating to the above
leases, licences and licence applications in the Company's possession.
Transaction
Documents
means:
(a)
the Investments and Implementation Agreement;
(b)
the Subscription Agreement;
(c)
the Convertible Note Deed;
Page 8 of 200
(d)
the Option Deed; and
(e)
the Share Sale Agreement,
and any other document required under those documents or for the
transactions which they contemplate.
2.
Interpretation
For the purposes of interpreting the Chairman’s Letter, the Explanatory Memorandum and the Notice
of General Meeting:
(a)
the singular includes the plural and vice versa;
(b)
words importing any gender include both genders;
(c)
reference to any statute, ordinance, regulation, rule or other law includes all
regulations and other instruments and all consolidations, amendments, re-enactments
or replacements for the time being in force;
(d)
all headings, bold typing and italics (if any) have been inserted for convenience of
reference only and do not define limit or affect the meaning or interpretation of the
Chairman’s Letter, the Explanatory Memorandum and the Notice of General Meeting;
(e)
reference to persons includes bodies corporate and government authorities and in
each and every case, includes a reference to the person’s executors, administrators,
successors, substitutes (including without limitation persons taking by novation and
assignment); and
(f)
reference to A$, AU$, Australian Dollars or dollars is a reference to the lawful
tender for the time being and from time to time of the Commonwealth of Australia.
Page 9 of 200
Section C
Notice of General Meeting
NOTICE IS HEREBY GIVEN that the General Meeting of the Shareholders of MGT
Resources Limited ACN 131 715 645 (MGT or the Company) will be held at Suite 2.05B, 68
York Street, Sydney, New South Wales on 16th February 2015 at 11am Sydney time.
Defined terms used in this Notice of General Meeting have the meanings given to them in the
Glossary accompanying this Notice of General Meeting.
1.
Ordinary business
1.1
Resolution 1: Approval of issue of Subscription Shares to the Investor
To consider and, if thought fit, to pass the following Resolution:
“That, conditional on Resolutions 2 and 3 being passed in accordance with their terms and
Completion occurring, in accordance with section 611, item 7 of the Corporations Act and
ASX Listing Rule 7.1, the Company be permitted and authorised to issue the Investor the
Subscription Shares in accordance with the Investments and Implementation Agreement and
Subscription Deed, as described in the Explanatory Memorandum (Section D ).”
Note: Shareholders should carefully consider the Independent Expert's Report prepared by
Nexia Court Financial Solutions Pty Ltd for the purposes of the Shareholder approval required
under section 611, item 7 of the Corporations Act. The Independent Expert's Report
comments on the fairness and reasonableness of the Proposed Investments to the nonassociated Shareholders. The Independent Expert has determined the Proposed Investments
are both fair and reasonable to the non-associated Shareholders of the Company.
1.2
Resolution 2: Approval of issue of Convertible Notes to the Investor
To consider and, if thought fit, to pass the following ordinary Resolution:
“That, conditional on Resolutions 1 and 3 being passed in accordance with their terms
and Completion occurring, in accordance with section 611, item 7 of the Corporations
Act and ASX Listing Rule 7.1, the Company be permitted and authorised to:
(i)
issue the Investor the Convertible Notes; and
(ii)
the issue of the maximum number of Shares that may be required to be
issued on conversion of the Convertible Notes,
in accordance with the Investments and Implementation Agreement and Convertible
Note Deed, as described in the Explanatory Memorandum (Section D ).
Page 10 of 200
Note: Shareholders should carefully consider the Independent Expert's Report
prepared by Nexia Court Financial Solutions Pty Ltd for the purposes of the
Shareholder approval required under section 611, item 7 of the Corporations Act. The
Independent Expert's Report comments on the fairness and reasonableness of the
Proposed Investments to the non-associated Shareholders. The Independent Expert
has determined the Proposed Investments are both fair and reasonable to the nonassociated Shareholders of the Company.
1.3
Resolution 3: Approval of issue of Options to the Investor
To consider and, if thought fit, to pass the following ordinary Resolution:
“That, conditional on Resolutions 1 and 2 being passed in accordance with their terms
and Completion occurring, in accordance with section 611, item 7 of the Corporations
Act and ASX Listing Rule 7.1, the Company be permitted and authorised to:
(i)
issue the Investor the Options; and
(ii)
the issue of the maximum number of Shares that may be required to be
issued on conversion of the Options,
in accordance with the Investments and Implementation Agreement and Option Deed,
as described in the Explanatory Memorandum (Section D ).
Note: Shareholders should carefully consider the Independent Expert's Report prepared by
Nexia Court Financial Solutions Pty Ltd for the purposes of the Shareholder approval required
under section 611, item 7 of the Corporations Act. The Independent Expert's Report
comments on the fairness and reasonableness of the Proposed Investments to the nonassociated Shareholders. The Independent Expert has determined the Proposed Investments
are both fair and reasonable to the non-associated Shareholders of the Company.
1.4
Resolution 4: Approval of amendment to Company's constitution
To consider and, if thought fit, to pass the following Special Resolution:
“That, conditional on Resolutions 1, 2 and 3 being passed in accordance with their
terms and Completion occurring, in accordance with section 136(2) of the
Corporations Act, the Company modify its Constitution to include new clause 39 as
set out in Section F "
Page 11 of 200
2.
Voting exclusion statements
2.1
Resolution 1
In accordance with the notice requirements of ASX Listing Rule 7.3.8 for approval under ASX
Listing Rule 7.1 ASX Listing Rule 14.11.1 and the voting restrictions of item 7 section 611 of
the Corporations Act, the Company will disregard any votes cast on Resolution 1, and no
votes are cast in favour of Resolution 1, by:
(a)
the Investor;
(b)
a person who might obtain a benefit, except a benefit solely in the capacity of a
Shareholder, if the Resolution is passed; and
(c)
any Associate of the Investor including a person referred to in paragraph 2.1(b)
above.
However, the Company will not disregard a vote if:
2.2
(a)
it is cast by a person as proxy for a person who is entitled to vote, in accordance with
the directions on the proxy form; or
(b)
it is cast by the person chairing the meeting as proxy for a person who is entitled to
vote, in accordance with a direction on the proxy form to vote as the proxy decides.
Resolution 2
In accordance with the notice requirements of ASX Listing Rule 7.3.8 for approval under ASX
Listing Rule 7.1, ASX Listing Rule 14.11.1 and the voting restrictions of item 7 section 611 of
the Corporations Act, the Company will disregard any votes cast on Resolution 2, and no
votes are cast in favour of Resolution 2, by:
(a)
the Investor;
(b)
a person who might obtain a benefit, except a benefit solely in the capacity of a
Shareholder, if the Resolution is passed; and
(c)
any Associate of the Investor including a person referred to in paragraph 2.2(b)
above.
However, the Company will not disregard a vote if:
Page 12 of 200
2.3
(a)
it is cast by a person as proxy for a person who is entitled to vote, in accordance with
the directions on the proxy form; or
(b)
it is cast by the person chairing the meeting as proxy for a person who is entitled to
vote, in accordance with a direction on the proxy form to vote as the proxy decides.
Resolution 3
In accordance with the notice requirements of ASX Listing Rule 7.3.8 for approval under ASX
Listing Rule 7.1 ASX Listing Rule 14.11.1 and the voting restrictions of item 7 section 611 of
the Corporations Act, the Company will disregard any votes cast on Resolution 3, and no
votes are cast in favour of Resolution 3, by:
(a)
the Investor;
(b)
a person who might obtain a benefit, except a benefit solely in the capacity of a
Shareholder, if the Resolution is passed; and
(c)
any Associate of the Investor including a person referred to in paragraph 2.3(b)
above.
However, the Company will not disregard a vote if:
2.4
(a)
it is cast by a person as proxy for a person who is entitled to vote, in accordance with
the directions on the proxy form; or
(b)
it is cast by the person chairing the meeting as proxy for a person who is entitled to
vote, in accordance with a direction on the proxy form to vote as the proxy decides.
Resolution 4
No voting exclusion applies to Resolution 4.
3.
Determination of membership and voting entitlement
The Company has determined, in accordance with regulation 7.11.37 of the Corporations
Regulations 2001 (Cth), that for a person’s entitlement to vote at the General Meeting, a
person will be recognised as a member of the Company and the holder of Shares if that
person is registered as a holder of those Shares at 7pm Sydney time on 14th February 2015.
Page 13 of 200
4.
Votes of members
On a show of hands, each member present in person or by proxy (or, in the case of a body
corporate, by a representative) at the General Meeting shall have one vote.
On a poll, every member present in person or by attorney or by proxy (or, in the case of a
body corporate, by a representative) shall have one vote for each Share held by him, her or it,
provided that all Shares are fully paid.
5.
Proxies
Please note that:
(a)
a member entitled to attend and vote at the General Meeting is entitled to appoint no
more than two proxies;
(b)
an instrument appointing a proxy must be in the form of the proxy form attached to
this Notice of General Meeting;
(c)
where more than one proxy is appointed, each proxy must be appointed to represent
a specified proportion of the member's voting rights. If a member appoints two
proxies, neither person may vote on a show of hands and on a poll, each person may
only exercise the voting rights for the portion of votes the person holds;
(d)
a proxy may be a member of the Company;
(e)
a proxy need not be a member of the Company;
(f)
a proxy form may specify the manner in which the proxy is to vote in respect of a
particular Resolution and, where a proxy form so provides, the proxy is not entitled to
vote on the Resolution except as specified in the proxy form;
(g)
a proxy has the authority to vote on the member's behalf as he or she thinks fit, on
any motion to adjourn the General Meeting, or any other procedural motion, unless
the member gives a direction to the contrary;
(h)
a valid proxy form will be deemed to confer authority to demand or join in demanding
a poll;
(i)
to be valid, a proxy form must be signed by the member or the member's attorney or,
if the member is a corporation, executed in accordance with the corporation's
Page 14 of 200
constitution and the Corporations Act (and may be signed on behalf of the corporation
by its attorney); and
(j)
to be valid, a proxy form and the power of attorney or other authority (if any) under
which it is signed (or an attested copy of it) must be received by no later than 11am
Sydney time on 14th February 2015:
by the Company’s share registry:
- by mail:
Computershare Investor Services Pty Limited
GPO Box 242 Melbourne
Victoria 3001 Australia
(within Australia) 1800 783 447
or
- by facsimile:
(outside Australia) +61 3 9473 2555
or
- online
https://www.investorvote.com.au/Login
Page 15 of 200
By order of the Board:
Jacqueline Butler
Company Secretary
Dated: 15th January 2015
Sydney
Page 16 of 200
Section D
Explanatory Memorandum
1.
Introduction and Background Information on Proposed Investments
1.1
Introduction and Background
This Explanatory Memorandum contains the information needed for the Company's Shareholders
to assess Resolutions 1 through 4 to be put to them at the General Meeting of MGT on
th
16 February 2015. A Notice of General Meeting accompanies this document.
This Explanatory Memorandum, as well as the Notice of General Meeting, should be read
carefully and in their entirety.
th
On 19 December 2014, MGT announced that it had entered into an Investments and
Implementation Agreement with the Investor which, subject to the terms and conditions
summarised below, would result in MGT raising up to AUD$4,200,000.
1.2
Details of the Investor
The Investor is a Hong Kong mining investment entity focused on the resources sector, deploying
funds of Asian based investors. The sole shareholder and director of the Investor is Mr Qing
Chun, Cai.
2.
Resolutions 1, 2 and 3 – Approval of issue of Subscription Shares,
Options and Convertible Notes to the Investor
2.1
Proposed Investments
th
The Company had announced to the market on 19 December 2014 that it had entered into the
Investments and Implementation Agreement whereby the parties agreed to propose and
implement the Proposed Investments and enter into the Transaction Documents.
2.2
Conditions Precedent to the Proposed Investments
The Proposed Investments is conditional on the following conditions precedent being satisfied or
waived:
Page 17 of 200
(a)
the Proposed Investments are approved by the Board and the Board has approved to
unanimously recommend that the Shareholders vote in favour of the Proposed
Investments;
(b)
the Proposed Investments are approved by the Shareholders in accordance with the
Constitution, Corporations Act, Listing Rules and relevant ASIC regulatory guides
including Shareholders' approval that the Investor may acquire voting power in excess of
the restriction contained in section 606 of the Corporations Act by way of an approval
under 611 item 7 of the Corporations Act;
(c)
a share sale agreement entered into between the Investor as the purchaser and Taimetco
International Co., Limited of 306 Victoria House, Victoria, Mahe, Seychelles as the vendor
of 10 million Shares at $0.03 per Share is duly executed by all parties to such agreement;
(d)
the Independent Expert concluding in the Independent Expert's Report that in its opinion
the Proposed Investments are fair and reasonable to the non-associated Company
Shareholders and the Independent Expert not having publicly withdrawn or qualified this
conclusion on or before the Effective Date.;
(e)
all relevant conditions precedent to the proposed $1,500,000 secured loan facility to MGT
Mining Limited that is part of the proposed transaction with Taimetco International Co.,
Limited has been satisfied or waived;
(f)
a valuation of the Tin Assets by an independent appraiser (nominated and agreed by both
the Company and the Investor) is completed;
(g)
all Transaction Documents have been duly executed by all parties to each respective
Transaction Document. The Transaction Documents include that the Directors transfer, or
procure the transfer, of 20 million Shares for $nil consideration to the Investor;
(h)
a variation deed to an unsecured convertible note deed between Armstrong Industries HK
Limited and the Company dated 1 October 2013 is entered into between and fully
executed by the two parties to the effect of allowing early repayment of any outstanding
money owed by the Company to Armstrong Industries HK Limited;
(i)
no material adverse change and no company prescribed occurrence occurs on the date of
the Investments and Implementation Agreement and at 8.00am on the Effective Date;
(j)
the Company Warranties being true and correct in all material respects on the date of the
Investments and Implementation Agreement and at 8.00am on the Effective Date;
(k)
before 8.00am on the Effective Date, the Company has not materially breached any
material provision of this agreement that has not been remedied; and
(l)
no judgment, order, decree, statute, law, ordinance, rule of regulation, or other temporary
restraining order, preliminary or permanent injunction, restraint or prohibition, entered,
Page 18 of 200
enacted, promulgated, enforced or issued by any court or other regulatory authority of
competent jurisdiction remains in effect as at 8.00am on the Effective Date that prohibits,
materially restricts, makes illegal or restrains the completion of the Proposed Investments
or any Transaction Document,
(Conditions Precedent).
The Investor has acknowledged and agreed that any approvals obtained under item 7 of section
611 of the Corporations Act in respect of the transactions contemplated in the Investments and
Implementation Agreement may need to be refreshed at the time any Shares are issued on the
exercise of the Options and conversion of the Convertible Notes, pursuant to the requirements of
the Corporations Act and the Australian Securities and Investment Commission’s Regulatory
Guide 74.
2.3
Obligations under the Investments and Implementation Agreement
The Company has agreed to a number of contractual obligations under the Investments and
Implementation Agreement that are summarised in this section 2.3
(a)
Lock-up devices
The Company has agreed to give the Investor exclusivity by way of no shop, no talk and no due
diligence provisions in the Investments and Implementation Agreement. These obligations are
subject to the customary fiduciary duty carve outs in the event that an unsolicited superior
competing proposal is made.
(b)
Warranties and Indemnities
The Company has agreed to give the Investor a number of warranties and indemnities in the
Investments and Implementation Agreement, for which the Company's liability is limited to the
aggregate amount the Investor has actually paid to the Company. The warranties and indemnities
include the following:
(i)
the Investments and Implementation Agreement is binding;
(ii)
the compliance and accuracy of this Notice of Meeting
(iii)
the Company's compliance with the Listing Rules;
(iv)
the total issued capital of the Company is: 288,157,040 Shares; 7,875,000
Company options; and 79,188,312 Company convertible notes,
(v)
no litigation; and
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(vi)
2.4
accuracy of due diligence material provided to the Investor.
Subscription Shares
Pursuant to the Share Subscription Agreement, the Subscription Shares are subject to the
following terms and conditions:
2.5
(a)
the issue of the Subscription Shares is subject to the satisfaction or waiver of all of the
Conditions Precedent and the Convertible Notes will not be issued if all of the Conditions
Precedent are not satisfied or waived;
(b)
the issue price for each Subscription Share is $0.05 per Share; and
(c)
the Subscription Shares that are issued and allotted rank pari passu in all respects with
other Shares on issue at the date of the issue and allotment.
Convertible Notes
Pursuant to the Convertible Note Deed, the Convertible Notes are subject to the following terms
and conditions:
(a)
the issue of the Convertible Notes is subject to the satisfaction or waiver of all of the
Conditions Precedent and the Convertible Notes will not be issued if all of the Conditions
Precedent are not satisfied or waived;
(b)
subject to the satisfaction or waiver of all of the Conditions Precedents, the Convertible
Notes will be issued on 30 April 2015;
(c)
each Convertible Note has a face value of $0.03;
(d)
the Convertible Notes are unsecured;
(e)
each Convertible Note bears nil interest;
(f)
a the option of the Noteholder, the Convertible Notes may be converted into Shares at a
conversion price of $0.03 per Share at any time within a 12 months period after the
Completion (Conversion Period);
(g)
the Convertible Notes are redeemable at the election of the Investor on the occurrence of
an event of default or if no conversion occurs after the lapse of the Conversion Period.
Events of default include events of insolvency, the Company not remaining listed on ASX
and the Company breaching certain terms of the Convertible Note Deed and not
remedying that breach;
Page 20 of 200
(h)
any Shares in the Company that are issued and allotted pursuant to the conversion of the
Convertible Notes rank pari passu in all respects with other Shares on issue at the date of
the issue and allotment;
(i)
the rights of the Investor will change to the extent necessary to comply with the ASX
Listing Rules applying to a reorganisation of capital at the time of the reorganisation;
(j)
the Investor is not entitled to participate in any rights issue or dividend or other corporate
action unless the Convertible Notes are converted and Shares as allotted prior to the
record date for that corporate action;
(k)
the Convertible Notes will not be listed on the ASX;
(l)
upon the conversion of the Convertible Notes and the issue of the 50,000,000 Shares, the
Company will apply to the ASX to have the 50,000,000 Shares issued to the Investor
Officially Quoted and, subject to any ASX ruling regarding restricted securities, will rank
equally with all the other Shares on issue. In all other respects, the rights and entitlements
of the Investor in respect of the 50,000,000 Shares will be identical to the rights and
entitlements of the holders of issued Shares;
(m)
if the conversion of Convertible Notes into Shares would constitute a breach of section
606 of the Corporations Act, the number of Convertible Notes converted will be restricted
to the maximum number that may lawfully be converted to Shares without breaching
section 606 of the Corporations Act. The balance of the Notes remain as Notes and then
the expiry date of the Conversion Period will be automatically extended for a further 6
months, during which period the Company will use its best endeavours to seek
shareholder approval in relation to the conversion of such balance of the Notes within 6
months after the expiry of the last Conversion Period (Extended Period), failure of which
will make the principal money of such balance of the Convertible Notes become due and
payable immediately and the Company shall repay the total amount of such principal
money to the Investor within five business days upon the lapse of the Extended Period;
(n)
the Investor may assign, novate or otherwise transfer any of its rights or obligations under
the Convertible Note Deed to a third party with the prior written consent of the Company,
which consent that the Company should not unreasonably withhold. The Company must
consent if:
(i)
the Investor gives the Company evidence to the Company's reasonable
satisfaction that the proposed transferee is a sophisticated or professional
investor for the purposes of section 708(8) and (11) of the Corporations Act that
will not on-sell the Notes without the prior written consent of the Company; and
(ii)
section 707 of the Corporations Act is not otherwise breached.
Page 21 of 200
2.6
Options
Pursuant to the Option Deed, the Options are subject to the following salient terms and
conditions:
(a)
the issue of the Options is subject to the satisfaction or waiver of all of the Conditions
Precedent and the Options will not be issued if all of the Conditions Precedent are not
satisfied or waived;
(b)
the Options will be issued at no cost;
(c)
each Option entitles the Investor to subscribe for one Share in the Company;
(d)
the Options may be exercised, in whole or in part, at any time prior to 5pm on
31 December 2015 (Expiry Date);
(e)
all Options must be automatically exercised within 15 Business Days of the date of an
ASX announcement in which the Company announces on ASX that it has 1 million ounce
or above JORC Code compliant gold resources before 30 December 2015.
(f)
the exercise price of each Option is $0.05;
(g)
any Option not exercised on or before the Expiry Date will expire on the Expiry Date;
(h)
an option certificate will be issued for the Options;
(i)
all shares issued on the exercise of Options rank in all respects (including rights relating
to dividends) pari passu with the existing Shares at the date of issue;
(j)
If there is a reorganisation between the date of the Option Deed and the date of notice of
exercise of the Options (Exercise Date), the exercise price of $0.05 and the number of
Options must be changed to comply with the ASX Listing Rules at the time of the
reorganisation and such change or adjustment should be made in a principle to the effect
of avoiding a detriment to the Investor if there is a reorganisation before the Exercise
Date;
(k)
the Investor cannot participate in new issues without exercising the Option.
(l)
the Options will not be quoted on the official list of the ASX; The Company will make
application for any Shares issued upon the exercise of any Option to be granted Official
Quotation by the ASX.
Page 22 of 200
(m)
2.7
the Investor may assign, novate or otherwise transfer any of its rights or obligations under
the Option Deed to a third party with the prior written consent of the Company. The
Company must consent if:
(i)
the Investor gives the Company evidence to the Company's reasonable
satisfaction that the proposed transferee is a sophisticated or professional
investor for the purposes of section 708(8) and (11) of the Corporations Act that
will not on-sell the Options without the prior written consent of the Company; and
(ii)
section 707 of the Corporations Act is not otherwise breached.
Appointment of Directors
Upon the Shareholder approval of Resolutions 1, 2 and 3, the Investor will be entitled to appoint
two non-executive Directors to the Board, provided those persons provide to the Company's
reasonable satisfactory evidence they are of good fame and character to the standard of Listing
Rule 1.1, Condition 17 of the ASX Listing Rules. One current non-executive Director will retire
from the Board upon the appointment of the two new Investor appointed non-executive Directors.
2.8
Approval under Listing Rule 7.1
ASX Listing Rule 7.1 provides that a company must not issue equity securities, or agree to issue
equity securities (which includes shares and options) without the approval of shareholders if the
number of equity securities to be issued in any 12-month period (including equity securities issued
on the exercise of any convertible securities) exceeds 15% of the issued capital of the company
preceding the issue.
The effect of Resolutions 1, 2 and 3 will be to permit the Company to issue the Investor the
Subscription Shares and Options within 5 Business Days of Shareholder approval being given
and the Convertible Notes on or before 30 April 2015, and in any event no later than three months
after the date of this General Meeting or such later time as deemed appropriate by an ASX
waiver.
2.9
Approval under the Corporations Act
(a)
Relevant interests
Pursuant to section 606(1) of the Corporations Act, a person must not acquire a relevant
interest in issued voting shares in a company if the person acquiring the interest does so
through a transaction in relation to securities entered into by or on behalf of the person
and because of the transaction, that person’s or someone else’s voting power in the
company increases:
(i)
from 20% or below to more than 20%; or
(ii)
from a starting point that is above 20% to below 90%.
Page 23 of 200
The voting power of a person in a company is determined in accordance with section 610
of the Corporations Act. The calculation of a person’s voting power in a company involves
determining the voting shares in the company in which the person and the person’s
Associates have a relevant interest.
A person has a relevant interest in securities if they:
(i)
are the holder of the securities;
(ii)
have the power to exercise, or control the exercise of, a right to vote attached to
the securities; or
(iii)
have the power to dispose of, or control the exercise of a power to dispose of, the
securities.
It does not matter how remote the relevant interest is or how it arises. If two or more
people can jointly exercise one of these powers, each of them is taken to have that power.
(b)
Exception to the section 606 prohibition
Item 7 of section 611 of the Corporations Act provides an exception to the prohibition
under section 606 of the Corporations Act. This exception provides that a person may
acquire a relevant interest in a company’s voting shares with shareholder approval.
In order for the exemption of item 7 of section 611 of the Corporations Act to apply,
shareholders must be given all information known to the person making the acquisition
and their Associates or the company, that was material to the decision on how to vote on
the resolution, including:
(i)
the identity of the person proposing to make the acquisition and their Associates;
(ii)
the maximum extent of the increase in that person’s voting power in the company
that would result from the acquisition;
(iii)
the voting power that person would have as a result of the acquisition;
(iv)
the maximum extent of the increase in the voting power of each of that person’s
Associates that would result from the acquisition; and
(v)
the voting power that each of that person’s Associates would have as a result of
the acquisition.
For responses on these matters, see paragraph 2.12.
Page 24 of 200
(c)
Why Shareholder approval is required
As at the date of this Notice, the Investor does not hold any Shares in MGT. At the date of
this Notice, the total issued share capital of the Company is 288,157,040.
If the Investor completes the Other Transactions, it will acquire 30,000,000 Shares. If the
Company issues the Subscription Shares to the Investor in accordance with the terms of
the Subscription Deed and Resolution 1, the Investor will hold 30,000,000 Shares. The
aggregate resulting 60,000,000 shareholding would comprise 18.86% of the Shares on
issue.
Upon the exercise of the Options and conversion of the Convertible Notes, the Investor
will be issued with an additional 74,000,000 Shares and the Investor will hold a total of
134,000,000 Shares in aggregate comprising 34.17% of the Shares on issue.
The issue of the Subscription Shares in accordance with the Share Subscription Deed
and Resolution 1, the issue of the Shares on exercise of the Options and conversion of
the Convertible Notes will result in an increase in the Investor's voting power in the
Company to 34.17%.
The Directors have not taken into consideration the possibility of any of the existing
convertible notes converting into Shares, existing options converting into Shares or the
issue of further equity securities. If any of these possibilities eventuate, the Investor's
voting power will be diluted.
This increase in the Investor's relevant interest in the Company from less than 20% to
more than 20% is prohibited under section 606 of the Corporations Act. However, such
issue would be permitted if prior Shareholder approval is granted for the issue of the
Subscription Shares, Options and Convertible Notes to the Investors in accordance with
the terms of Resolutions 1, 2 and 3.
2.10
Information for Shareholders under item 7 of section 611 of the Corporations Act
The following information is provided to Shareholders for the purposes of the requirements under
the Corporations Act in respect of obtaining Shareholder approval for item 7 of section 611 of the
Corporations Act:
(a)
the Investor is the person proposing to make the acquisition (that is, the person who will
be issued with the Shares); and
(b)
if the Investor is issued with the Subscription Shares, and converts the Convertible Notes
and Options, the maximum extent of the increase in the Investor's voting power in the
Company will be 34.17%.
Page 25 of 200
2.11
Dilution as a result of the Proposed Investments
Assuming that Shareholders approve Resolutions 1, 2 and 3, the effect of the issue of all of the
securities pursuant to Resolutions 1, 2 and 3 on the capital structure of the Company is as
follows:
Type of Security
Shares on issue as at the date of this
Notice
Number
288,157,040
% Change
N/A
Shares acquired by Investor in Other
Transactions
Shares issued to Investor on issue of
Subscription Shares pursuant to
Resolution 1
Shares to be issued pursuant to the
conversion of the Convertible Notes
pursuant to Resolution 2
Shares issued to Investor on exercise of
Options pursuant to Resolution 3
30,000,000
10.41%
30,000,000
18.86%
50,000,000
29.88%
24,000,000
34.17%
Total Shares following Proposed
Investments
392,157,040
Undiluted share capital numbers have been provided in this Notice of General Meeting because
the Directors believe this is the information material to the Shareholder's decision whether or not
to approve the Resolutions. The existing options and convertible notes are significantly "out of the
money" and, in any event, fully diluted share capital numbers shows a lesser impact on control
than undiluted share capital numbers. The Directors believe fully diluted capital numbers that
include convertible notes that have an exercise or conversion price a number of times higher than
the current and recent market price and also a number of times higher than the price of the
Proposed Investments are not material to the Shareholder's decision whether or not to approve
the Resolutions.
2.12
Information for Shareholders required by RG 74
Further information required by ASIC Regulatory Guide 74 (RG 74) is set out in the following
paragraphs.
(a)
Identity of the allottee and any person who will have a relevant interest in the Issue
Shares
Auskong International Mining Investment Co., Limited (Hong Kong Company Number
2178046).
The sole shareholder of the Investor is 100% owned by Mr Qing Chun, Cai.
The sole director of the Investor is Mr Qing Chun, Cai.
(b)
Full particulars (including the number and the percentage) of the Shares to which the
Investor is or will be entitled immediately before and after the proposed allotment of the
Shares and considered in relation to the entire issued capital of the Company
Page 26 of 200
This information is set out in some detail in paragraph 2.11.
(c)
The identity, associations (with the Investor and with any of its Associates) and
qualifications of any person who it is intended will become a Director if Shareholders
approve the issue of the Shares to the Investor
It is intended that Christopher Chen will be appointed as directors of the Company
conditional on the issue of the Subscription Shares to the Investor occurring. Christopher
Chen's bio is set out below:
Christopher Chen (M.A. Administration)
Mr Christopher Chen worked for Otis Elevator Company (Tianjin, China) as Project
Coordinator in 2002 and was sent to Egypt to work for Electricity de France (EDF) on their
Suez Canal and the Port Said Power Plants. He returned to Australia in 2006 and was
working as Business Banking Associate for Commonwealth Bank Australia (CBA). Chris
left CBA in 2009 and has been involved in commodity trading and Financial Services to
small and medium size companies in the resource sector and is now based in Beijing,
China.
The Investor will also be entitled to appoint one more individual as a director of the
Company in the first directors meeting of the Company after the Effective Date. As at date
of this Notice, the Investor has not nominated this director.
(d)
A statement of the Investor's intentions regarding the future of the Company if
Shareholders agree to the issue of the Subscription Shares and, in particular:
(i)
any intention to change the business of the Company
Consideration is currently being given to whether or not Shareholders are
receiving full value for their Shares with both the Company's tin assets and gold
assets in the one entity. Subject to the above, the Investor has no present
intention to change the business of the Company.
(ii)
any intention to inject further capital into the Company, and if so how
The Investor does not have any present intention to inject any further capital of its
own into the Company as at the date of this Notice, other than the potential
conversion of the Convertible Notes and exercise of the Options.
The Company may also consider obtaining debt funding on an arm’s length basis
if such funding is considered appropriate and necessary by the Board.
(iii)
the future employment of the present employees of the Company
The Investor has no present intention to make any changes to the employment
arrangements of the present employees of the Company.
(iv)
any proposal whereby any property will be transferred between the Company and
the Investor or any Associate of the Investor
Page 27 of 200
The Investor has no present intention to transfer any property between the
Company and The Investor or any person associated with The Investor.
(v)
any intention to otherwise redeploy the fixed assets of the Company
The Investor has no present intention to redeploy the fixed assets of the
Company.
(vi)
any intention of the Investor to change significantly the financial or dividend
policies of the Company
The Investor has no present intention to change significantly the financial or
dividend policies of the Company.
(e)
Particulars of the terms of the proposed allotment and any other contract or proposed
contract between the Investor and the Company or any of their Associates which is
conditional upon, or directly or indirectly dependent on, the Transaction Documents to the
allotment of the Shares to the Investor.
The terms of the Subscription Agreement, Convertible Note Deed and Option Deed are
set out in paragraphs 2.4, 2.5 and 2.6.
Other than the Transaction Documents and the Other Transactions, there is no other
contract or proposed contract between the Investor and the Company or any of their
Associates which is conditional upon, or directly or indirectly dependent on the
Transaction Documents to the allotment of the Shares to the Investor.
(f)
When the allotment of the Shares to the Investor to be completed
The Subscription Shares, and Options will be issued to the Investor within 5 Business
Days of Shareholder approval being given and the Convertible Notes will be issued on or
before 30 April 2015 but in any case, no later than three months after that Shareholder
approval is obtained in accordance with this Notice or such later time as any ASX waiver
subsequently obtained permits.
(g)
An explanation of reasons for the proposed allotment
The Subscription Shares, Options and Convertible Note will be issued to the Investor as
part of the Proposed Investments in accordance with the terms of the Investments and
Implementation Agreement, the Share Subscription Deed, the Option Deed and the
Convertible Note Deed, summaries of which are set out in paragraphs 2.4, 2.5 and 2.6
respectively.
(h)
The interests of the Directors in Resolutions 1, 2 and 3
None of the Directors is a related party or Associate of the Investor or have an interest in
Resolutions 1, 2 and 3.
The number and description of Shares and Options held by or on behalf of each Director
as at the date of the Notice are as follows:
Page 28 of 200
Name of Director
Jonathan Back
Number of Shares
Number of Options
Direct: 79,029,727 Shares,
th
escrowed until 9 January
2015
Direct: 3,500,000 unlisted
options, exercisable @ 15
cents, expiry 7 November
2016
Indirect: 300,000 Shares
Gary Kuo
Direct: 50,000 Ordinary
fully paid shares
Indirect:
Direct: 2,500,000 unlisted
options, exercisable @ 15
cents, expiry 7 November
2016
27,208,000 Shares,
escrowed for 24 months
th
until 9 January 2015
140,000 Shares
Li Hai Jun
Direct: 22,800,000 Shares,
th
escrowed until 9 January
2015
Direct: 400,000 unlisted
options, exercisable @ 15
cents, expiry 7 November
2016
Indirect: 30,000 Shares
Robert Vagnoni
2.13
Indirect: 8,443,000 Shares,
th
escrowed until 9 January
2015
Direct: 400,000 unlisted
options, exercisable @ 15
cents, expiry 7 November
2016
Current and proposed interests in the Company
At the date of this Notice, the Investor does not hold any Shares in the Company.
Once the Investor completes the transfer of Shares from the Directors and Taimetco and the
Company issues the Subscription Shares to the Investor in accordance with the terms of the
Subscription Deed and Resolution 1, the Investor will hold 60,000,000 Shares comprising 18.86%
of the Shares on issue.
Upon the conversion of the Convertible Notes in accordance with the Convertible Note Deed and
Resolution 2, and exercise of the Options in accordance with the Option Deed and Resolution 3,
the Investor will be issued with an additional 74,000,000 Shares and the Investor will then hold a
total of 134,000,000 Shares in aggregate comprising 34.17% of the Shares on issue.
The transfer of Shares from the Directors and Taimetco and the issue of the Subscription Shares
in accordance with the Share Subscription Deed and Resolution 1, the issue of the Shares on
conversion of the Convertible Notes in accordance with the Convertible Note Deed and
Resolution 2, and exercise of the Options in accordance with the Option Deed and Resolution 3,
will result in an increase in the Investor's voting power in the Company to 34.17%.
Page 29 of 200
2.14
Independent Expert Report
In accordance with the requirements of RG 74, the Directors engaged the Independent Expert to
prepare and provide the Independent Expert Report which contains an analysis of whether the
proposed issue of the Subscription Shares, Convertible Note and Options to the Investor is fair
and reasonable for non-associated Shareholders.
The Independent Expert Report compares the likely advantages and disadvantages for the nonassociated Shareholders if the proposal is agreed to, with the advantages and disadvantages to
those Shareholders if it is not.
The Independent Expert has concluded that the proposed issue of the Shares to the Investor is
fair and reasonable to the non-associated Shareholders of the Company. For a summary of the
Independent Expert's findings please refer to pages 2 to 3 of the Independent Expert Report.
The Independent Expert has given, and not before the date of the Notice withdrawn, its consent to
the inclusion of the Independent Expert Report in Section E of this document and to the
references to the Independent Expert Report in this Explanatory Memorandum being made in the
form and context in which each such reference is included.
2.15
Advantages and disadvantages
The Board is of the opinion that the benefits of the issue of the Subscription Shares, Options and
Convertible Notes proposed to be undertaken by the Company may include that:
(a)
the Company will benefit from capital raised and will have funds to repay some of the
existing convertible notes as and when they reach maturity (or earlier if the noteholders
agree), working capital and further its exploration programmes on the tenements that the
Company holds; and
(b)
the Company will secure a strong strategic partner for the future funding requirements as
well as market awareness of the Company.
Potential disadvantages of the issue of the Subscription Shares, Options and Convertible Notes
include that:
(a)
Shareholders’ interests in the Company will be diluted from 100% to 90.57%, based on
the issue of the Subscription Shares;
(b)
Shareholders’ interests in the Company will be diluted from 100% to 73.48%, based on
the issue of the Shares on conversion of the Convertible Notes and exercise of the
Options,
however, the Directors consider that any dilution of Shareholders’ interests will be offset by the
immediate benefits of the long-term association of the Investor; and
(c)
the Investor will hold a relevant interest in the Company of 34.17%, which will place the
Investor in a position of some influence where the Investor may be able to obstruct the
decisions and operations of the Company. The Investor does not have any current
intention to obstruct the decisions and operations of the Company.
Page 30 of 200
2.16
Recommendation of the Directors
The Directors unanimously approved the proposal to put Resolutions 1, 2 and 3 to Shareholders
for their approval.
The Board has carefully considered the advantages and disadvantages and evaluated their
relative weight in the circumstances of the Company. The Board unanimously believes that the
sum of the advantages outweighs the sum of the disadvantages and that the issue of the
Subscription Shares, Convertible Notes and Options to the Investor is in the best interests of
existing Shareholders as a whole for the reasons set out in this Explanatory Memorandum and
the Independent Expert Report.
Mr Jonathan Back, Mr Gary Kuo, Mr Robert Vagnoni and Mr Li Hai Jun intend to vote in favour of
Resolutions 1, 2 and 3.
Mr Jonathan Back, Mr Gary Kuo, Mr Robert Vagnoni and Mr Li Hai Jun recommend Shareholders
vote in favour of Resolutions 1, 2 and 3.
2.17
ASX Listing Rule requirements
Pursuant to ASX Listing Rule 7.3, the following information is provided regarding ASX Listing
Rule 7.1 approval in relation to the Subscription Shares, Options and Convertible Notes:
(a)
ASX Listing Rule 7.3.1: Maximum number of securities to be issued pursuant to
Resolution 1
30,000,000 Shares.
50,000,000 unsecured Convertible Notes which on conversion, will convert into
50,000,000 Shares.
24,000,000 Options which on exercise, 24,000,000 Shares will be issued.
(b)
ASX Listing Rules 7.3.2 and 7.3.7: Date by which securities will be issued and allotted
If Shareholder approval is obtained for Resolutions 1, 2 and 3, the issue and allotment of
the Subscription Shares, and Options to the Investor will occur within 5 Business Days of
Shareholder approval being given and the Convertible Notes on or before 30 April 2015
but in any case no later than three months after the date of this General Meeting or such
later time as deemed appropriate by an ASX waiver.
(c)
ASX Listing Rule 7.3.3: Issue price of securities
AU$0.05 per Share in respect of the Subscription Shares.
AU$0.03 per Convertible Note, each of which may convert into $0.03 per Share.
Nil issue price for the Options, and $0.05 per Share upon exercise of each Option.
(d)
ASX Listing Rule 7.3.4: Names of allottees
Page 31 of 200
Auskong International Mining Investment Co., Limited (Hong Kong Company Number
2178046).
(e)
ASX Listing Rule 7.3.5: Terms of securities
Subscription Shares
The Company will apply to the ASX to have the Subscription Shares issued to the
Investor Officially Quoted and these Subscription Shares will rank equally with all the
other Shares on issue. In all other respects, the rights and entitlements of the holders in
respect of the Shares issued to the Investor will be identical to the rights and entitlements
of the holders of existing issued Shares.
A summary of the additional terms of the Subscription Shares is set out in paragraph 2.4.
Convertible Notes
A summary of the terms of the Convertible Notes is set out in paragraph 2.5.
Options
A summary of the terms of the Options is set out in paragraph 2.6.
(f)
ASX Listing Rule 7.3.6: Intended use of the funds
The Company shall use the funds raised under the Proposed Investments ($4.2 million) to
repay some of the existing convertible notes as and when they mature (or earlier if the
noteholder agrees), and fund the working capital requirements of the Company in the
ordinary course of business, including the continuation of its exploration programmes.
In terms of the existing convertible notes, the Company has entered into variations for the
two unsecured convertible note deeds with Armstrong Industries HK Limited and the
unsecured convertible note deeds with Cloud Adventurer Limited and Marvel Network
Limited on 19 December 2014. These variations allow the Company a right to have an
option to redeem all or part of the notes prior to the maturity date. Following Shareholder
approval of Resolutions 1, 2 and 3 and upon the receipt of funds from the Proposed
Investments, the Company proposes to exercise its right to redeem $1,500,000 of the
Armstrong Industries HK Limited unsecured convertible notes with a maturity date of
4 May 2015.
In terms of the balance of the existing convertible notes that will not be repaid with funds
from the Proposed Investments, the Company will consider its position with regards to
exercising its right to redeem the remaining unsecured convertible notes should funding
permit.
(g)
ASX Listing Rule 7.3.8: A voting exclusion statement
Voting exclusion statements are included at paragraph 2.1, 2.2, 2.3 of the Notice of
General Meeting (Section D ).
Page 32 of 200
3.
Resolution 4- Amendment to Constitution
Section 136(2) of the Corporations Act permits a company to modify its constitution provided that
this is done by special resolution. Such a resolution must be passed by at least 75% of the votes
cast by members present (in person or by proxy) and voting on the resolution.
Shareholder approval is being sought for Resolution 4 for the Company to modify its Constitution
to include new clause 39 as set out in Section F .
The proposed amendments to the Constitution are set out in mark-up in Section F .. Copies of the
existing Constitution and the Constitution incorporating the proposed amendments are available
on the Company's website www.mgt.net.au.
The Directors recommend that Shareholders vote in favour of Resolution 4.
Page 33 of 200
Section E
Independent Expert's Report
Page 34 of 200
MGT Resources Limited
Issue of shares, options and convertible notes to Auskong
International Mining Investment Co., Limited
Independent Expert’s Report
and Financial Services Guide
9 January 2015
1
Page 35 of 200
FINANCIAL SERVICES GUIDE
Dated: 9 January 2015
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x
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x
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Where you have engaged NCFS we act on your behalf when providing financial services. Where you have
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required to provide you with a FSG because you receive a Report or other financial services from NCFS.
Financial Services that NCFS is authorised to provide
NCFS holds an Australian Financial Services Licence, which authorises it to provide, amongst other
services, financial product advice for securities and interests in managed investment schemes, including
investor directed portfolio services, to retail clients.
We provide financial product advice when engaged to prepare a Report in relation to a transaction relating
to one of these types of financial products.
NCFS's responsibility to you
NCFS has been engaged by the independent directors of MGT Resources Limited (“MGTR” or the “Client”)
to provide general financial product advice in the form of an independent expert’s report to be included in
the notice of meeting and explanatory memorandum (“Document’) sent to MGTR shareholders dated on or
about 15 January 2015 (“Report”).
You have not engaged NCFS directly but have received a copy of the Report because you have been
provided with a copy of the Document. NCFS or the employees of NCFS are not acting for any person
other than the Client.
NCFS is responsible and accountable to you for ensuring that there is a reasonable basis for the
conclusions in the Report.
General Advice
As NCFS has been engaged by the Client, the Report only contains general advice as it has been prepared
without taking into account your personal objectives, financial situation or needs.
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You should consider the appropriateness of the general advice in the Report having regard to your
circumstances before you act on the general advice contained in the Report.
You should also consider the other parts of the Document before making any decision in relation to the
Scheme.
Fees NCFS may receive
NCFS charges fees for preparing Reports. These fees will usually be agreed with, and paid by, the Client,
Fees are agreed on either a fixed fee or a time cost basis. In this instance, the Client has agreed to pay
NCFS $15,000 (excluding GST and out of pocket expenses) for preparing the Report. NCFS and its
officers, representatives, related entities and associates will not receive any other fee or benefit in
connection with the provision of this Report.
Referrals
NCFS does not pay commissions or provide any other benefits to any person for referring customers to
them in connection with a Report.
Associations and Relationships
Through a variety of corporate and trust structures NCFS is controlled by and operates as part of the Nexia
Court & Co Partnership. NCFS's directors and authorised representative may be partners in the Nexia
Court & Co Partnership. Mr Brent Goldman, authorised representative of NCFS and partner in the Nexia
Court & Co Partnership, has prepared this Report. The financial product advice in the Report is provided by
NCFS and not by the Nexia Court & Co Partnership.
From time to time NCFS, the Nexia Court & Co Partnership and related entities (Nexia entities) may provide
professional services, including audit, tax and financial advisory services, to companies and issuers of
financial products in the ordinary course of their businesses.
Over the past two years no work has been performed for the Client by NCFS or Nexia Court & Co
Partnership.
No individual involved in the preparation of this Report holds a substantial interest in, or is a substantial
creditor of, the Client or has other material financial interests in the Proposed Transaction.
Complaints Resolution
If you have a complaint, please let NCFS know. Formal complaints should be sent in writing to:
Nexia Court Financial Solutions Pty Ltd
Head of Compliance
PO Box H195
Australia Square NSW 1215
If you have difficulty in putting your complaint in writing, please telephone the Complaints Officer, Craig
Wilford, on +61 2 9251 4600 and he will assist you in documenting your complaint.
Written complaints are recorded, acknowledged within 5 days and investigated. As soon as practical, and
not more than 45 days after receiving the written complaint, the response to your complaint will be advised
in writing,
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External Complaints Resolution Process
If NCFS cannot resolve your complaint to your satisfaction within 45 days, you can refer the matter to the
Financial Ombudsman Service (FOS). FOS is an independent company that has been established to
provide free advice and assistance to consumers to help in resolving complaints relating to the financial
services industry.
Further details about FOS are available at the FOS website www.fos.org.au or by contacting them directly
at:
Financial Ombudsman Service Limited
GPO Box 3, Melbourne Victoria 3001
Telephone:
1300 56 55 62
Facsimile
(03) 9613 6399
Email:
info@fos.org.au
The Australian Securities and Investments Commission also has a free call infoline on 1300 300 630 which
you may use to obtain information about your rights.
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Contact Details
You may contact NCFS at:
Nexia Financial Solutions Pty Ltd
PO Box H195
Australia Square NSW 1215
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9 January 2015
The Directors
MGT Resources Limited
2.05B, 68 York Street
Sydney NSW 2000
Dear Sirs,
Independent Expert’s Report on Issue of shares, options and convertible notes to Auskong
International Mining Investment Co., Limited
INTRODUCTION
1.1
Outline of transaction
On 19 December 2014, MGTR announced that Auskong International Mining Investment Co., Limited
(“Auskong”) a company incorporated in Hong Kong will:
x
for a cash placement of $1.5 million be issued 30 million shares at a nominal price of $0.05 a share and
be issued with 24 million share options with an exercise price of $0.05 a share. The share options are
automatically exercised if MGTR announces that it has 1 million ounce or above JORC compliant gold
resources before 31 December 2015;
x
subscribe for a $1.5 million interest free convertible note with a 12 month term and an exercise price of
$0.03 a share (50 million shares);
x
receive 20 million shares transferred off-market for nil consideration from the Directors;
x
acquire 10 million shares from Taimetco and its associates at $0.03 a share off-market; and
x
appoint two non-executive directors to the MGTR board;
(the “Proposed Transaction”).
The Proposed Transaction is conditional upon further investment of $1.5m being received from a third party
to fund the repayment of convertible notes due in May 2015.
On approval of the Proposed Transaction, Taimetco, which has a 2.49% interest in MGTR will provide a
$1.5 million secured loan to MGTM. The secured loan will have a term of 2 years. Interest will be incurred
at 6.5% and is payable at maturity. These funds will be partially used to extinguish an off-take agreement
in place between MGTR and Taimetco for consideration of $750,000
The off-market purchases and shares issued under the placement will give Auskong an 18.86% interest in
MGTR. If the options and convertible notes are exercised then Auskong’s interest in MGTR will increase to
34.17% on an undiluted basis (27.96% on a fully diluted basis).
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1.2
Purpose of Report
The purpose of this Report is to advise the non-associated shareholders of MGTR on the fairness and
reasonableness of the Proposed Transaction to the non-associated shareholders.
Under s606 of the Corporations Act, a transaction that would result in an entity and its associates
increasing their voting power in an entity from:
x
20% or below to greater than 20%; or
x
a position above 20% and below 90%
is prohibited without making a takeover offer to all shareholders unless an exemption applies.
Item 7 of s611 of the Corporations Act provides an exemption from the above if the transaction is approved
by shareholders in a general meeting.
As noted above, Auskong’s voting power will increase to 34.17% on an undiluted basis (27.96% on a
diluted basis) following the Proposed Transaction if Auskong exercises its options and convertible notes.
As Auskong’s voting power increases to a position above 20% to a position but less than 90% the
transaction requires shareholder approval.
The Australian Securities and Investments Commission (“ASIC”) has issued Regulatory Guide 74:
Acquisitions approved by members (“RG 74”) that sets out the material disclosure requirements to
shareholders when seeking their approval under item 7 of s611 of the Corporations Act. As part of the
disclosure requirements, ASIC requires a detailed analysis of the transaction that complies with Regulatory
Guide 111: Content of experts report (“RG111”). This can either be undertaken by the directors if they
believe they have sufficient skill and expertise or an independent expert.
The Directors have appointed Nexia Court Financial Solutions Pty Ltd as independent expert for the
Proposed Transaction.
2.
SUMMARY AND OPINION
This section is a summary of our opinion and cannot substitute for a complete reading of this Report. Our
opinion is based solely on information available as at the date of this Report.
The principal factors that we have considered in forming our opinion are summarised below.
2.1
Assessment of Fairness
In determining whether the transaction is fair to non-associated shareholders, we have compared the fair
value of a MGTR share on a control basis with the consideration received for a share. This is summarised
below:
Fair value of a MGTR share on a control basis (see
section 7)
Fair value of consideration received (see section 8)
Low
$0.0000
Preferred
$0.0150
High
$0.0290
$0.0324
$0.0415
$0.0522
The fair value of the consideration received for a share under the Proposed Transaction is greater than the
fair value of a controlling interest in MGTR. Therefore, we have concluded that the Proposed
Transaction is fair to the non-associated shareholders.
2.2
Assessment of Reasonableness
In accordance with RG 111, a transaction is reasonable if:
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x
the transaction is fair; or
x
despite not being fair, but considering other significant factors, shareholders should obtain an
overall benefit if the transaction proceeds.
In forming our opinion we have considered the following relevant factors (see section 7).
Advantages
Disadvantages
x
The investment from Auskong and related funding
commitment from Taimetco provides additional
resources to continue exploration activities in a
difficult funding environment
x
On completion of the Proposed Transaction
Auskong will potentially hold 34.17% of MGTR and
have two board positions giving it significant
influence over MGTR
x
Auskong potentially provides access to alternative
funding arrangements with third parties to assist
future capital requirements
x
Auskong’s holding may negatively impact liquidity
and prevent current shareholders from receiving a
premium for control
x
Auskong has significant commercial relationships in
Asia, a main market for MGTR’s resources providing
future opportunities for the Company
The Directors have advised us that there are currently no other alternatives to the Proposed Transaction.
If the Proposed Transaction is not approved, MGTR will need to seek further funding from third parties to
continue operations. If additional funding is not received then the Directors will need to explore other
options for the Group including voluntary administration.
As the Proposed Transaction is fair, and taking into consideration the matters above, we have concluded
that the Proposed Transaction is reasonable to the non-associated shareholders.
2.3
Opinion
Accordingly, in our opinion, the Proposed Transaction is fair and reasonable to the non-associated
shareholders.
The ultimate decision on whether to approve the Proposed Transaction should be based on shareholders’
own assessment of their circumstances. We strongly recommend that shareholders consult their own
professional advisers, carefully read all relevant documentation provided, including the notice of meeting
and explanatory memorandum, and consider their own specific circumstances before voting in favour of or
against the Proposed Transaction.
Yours faithfully
Nexia Court Financial Solutions Pty Ltd (AFSL 247300)
Brent Goldman
Authorised Representative
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STRUCTURE OF REPORT
Our Report is set out under the following headings:
3.
BASIS OF EVALUATION ..................................................................................................................... 5
4.
OVERVIEW OF MGTR RESOURCES LIMITED.................................................................................. 6
5.
INDUSTRY ANALYSIS....................................................................................................................... 15
6.
VALUATION METHODOLOGIES ...................................................................................................... 18
7.
FAIR VALUE OF MGTR ..................................................................................................................... 19
8.
FAIR VALUE OF CONSIDERATION RECEIVED .............................................................................. 20
9.
ASSESSMENT OF FAIRNESS .......................................................................................................... 22
10. ASSESSMENT OF REASONABLENESS.......................................................................................... 23
11. OPINION............................................................................................................................................. 24
APPENDICES
APPENDIX A – GLOSSARY ...................................................................................................................... 25
APPENDIX B - SOURCES OF INFORMATION......................................................................................... 26
APPENDIX C - STATEMENT OF DECLARATION & QUALIFICATIONS ................................................. 27
APPENDIX D - VALUATION METHODOLOGIES ..................................................................................... 29
APPENDIX E – VERONICA WEBSTER PTY LTD - INDEPENDENT VALUATION REPORTS ............... 33
APPENDIX F – JORC CODE TABLE 1 FOR PYRAMID PROJECT AND MT GARNET PROJECT......... 34
4
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3.
BASIS OF EVALUATION
RG 74 and RG 111 provide guidance as to matters that should be considered in determining whether a
transaction is fair and reasonable in a range of circumstances.
RG 74 and RG 111 state that in deciding an appropriate form of analysis, the expert needs to consider that
the main purpose of the report is to deal with the concerns that could reasonably be anticipated by those
persons affected by the transaction. An expert should focus on the purpose and outcome of the
transaction; that is the substance of the transaction, rather than the legal mechanism used to effect the
transaction.
RG 111 requires analysis of a transaction under two distinct criteria being:
x
is the offer ‘fair’?; and
x
is it reasonable?
That is the opinion of fair and reasonable is not considered as a compound phrase.
In determining what is fair and reasonable for a control transaction, RG 111 states that:
x
an offer is fair if the value of the offer price or consideration is equal to or greater than the value of the
securities the subject of the offer, assuming a 100% interest of the target and irrespective of whether
consideration is cash or scrip; and
x
an offer is reasonable if it is fair, or if the offer is not fair, the expert believes that there are sufficient
reasons for security holders to accept the offer in the absence of a higher bid before the close of an
offer.
In determining whether the transaction is fair, the fair value is assumed to be based on a knowledgeable
and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm’s
length.
For the purpose of considering whether or not the Proposed Transaction is fair we have compared the fair
value of a share in MGTR on a control basis with the consideration received per share from Auskong under
the issue of shares, options and convertible notes.
In our assessment of the reasonableness of the Proposed Transaction, our consideration has included the
following matters:
x
Auskong’s pre-existing voting power in securities in MGTR;
x
other significant security holding blocks in MGTR;
x
the liquidity of the market in MGTR’s securities;
x
taxation losses, cash flow or other benefits through achieving 100% ownership of MGTR;
x
any special value to MGTR, such as technology, the potential to write-off outstanding loans from
MGTR, etc;
x
the likely market price if the Proposed Transaction does not proceed;
x
the value to an alternate bidder and the likelihood of an alternative bid being made; and
x
other significant matters set out in section 10.
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3.1
Individual shareholders’ circumstances
The ultimate decision whether to approve the Proposed Transaction should be based on each
shareholder’s assessment of the Proposed Transaction, including their own risk profile, liquidity preference,
tax position and expectations as to value and future market conditions. If in doubt about the Proposed
Transaction or matters dealt with in this Report, shareholders should seek independent professional advice.
3.2
Limitations on reliance on information
The documents and information relied on for the purposes of this Report are set out in Appendix B. We
have considered and relied upon this information and believe that the information provided is reliable,
complete and not misleading and we have no reason to believe that documents and material facts have
been withheld. The information provided was evaluated through analysis, enquiry and review for the
purpose of forming an opinion as to whether the Proposed Transaction is fair and reasonable to the nonassociated shareholders. However, we do not warrant that our enquiries have identified or verified all of the
matters which an audit or extensive examination might disclose.
We understand the accounting and other financial information that was provided to us has been prepared in
accordance with generally accepted accounting principles.
An important part of the information used in forming an opinion of the kind expressed in this Report is the
opinions and judgement of Directors and management. This type of information has also been evaluated
through analysis, enquiry and review to the extent practical. However, it must be recognised that such
information is not always capable of external verification or validation.
NCFS are not the auditors of MGTR. We have analysed and reviewed information provided by the Directors
and management of MGTR and made further enquiries where appropriate. Preparation of this Report does
not imply that we have in any way audited the accounts or records of MGTR.
In forming our opinion we have assumed:
x
matters such as title, compliance with laws and regulations and contracts in place are in good standing
and will remain so and that there are no material legal proceedings, other than as publicly disclosed;
x
the information set out in the notice of meeting and explanatory memorandum to be sent to
shareholders is complete, accurate and fairly represented in all material respects; and
x
the publicly available information relied upon by NCFS in its analysis was accurate and not misleading.
This Report has been prepared after taking into consideration the current economic and market climate. We
take no responsibility for events occurring after the date of this Report which may impact upon this Report
or which may impact upon the assumptions referred to in the Report.
4.
OVERVIEW OF MGTR RESOURCES LIMITED
4.1
Corporate History
MGT Resources Limited (“MGTR”) is a listed public company headquartered in Sydney, Australia. The
company was incorporated on 30 June 2008 and was admitted to the NSX on 8 December 2008 under its
previous name Mono Resources Limited and subsequently listed on the ASX on 9 January 2014.
In April 2009 the company acquired a 73.76% interest in Xtreme Resources Limited (“Xtreme”) an unlisted
public company. Through 2012 and 2013 MGTR increased its stake in Xtreme and currently owns 89.43%
of the company.
On 29 June 2010 Mono Resources Limited changed its name to MGT Resources Limited and also changed
Xtreme’s company name to MGT Mining Ltd.
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As at 8 December 2014, MGTR had 288,157,040 ordinary shares on issue.
4.2
Business Activities
The Group operates three projects which are set out below:
1. Mt Garnet Project
2. The Pyramid Project
3. Southern Queensland Project
4.2.1
Mt Garnet Project
The Mt Garnet Project is situated in far North Queensland and includes the following tenements:
1. The Mount Veteran Mill (ML 4349)
2. Summer Hills (ML 20547)
3. Nymbool (EPM 16948) including Heads or Tails (ML 20655)
4. Nanyetta (EPM 25433)
5. Valetta (ML 20066)
The Mt Garnet Project’s primary focus is tin exploration and mining. Further details of the tenements are
listed below:
x
Summer Hills (ML 20547)
The Summer Hills mining lease is the main tenement on MGTR’s Mt Garnet Project covering 1,163.4 Ha.
The mining lease was granted late January 2013 for a period of 21 years. Within the Summer Hills Mining
Lease sits the Mt Veteran Tin Processing Plant, on its own mining lease, along with numerous tin mining
and exploration targets, including the Dalcouth and Extended Prospects.
In 2013 a Drilling Program focused on the Dalcouth Prospect and confirmed a tin mineralisation which is
suitable for mining and processing at the Mount Veteran Mill. The Extended Prospect has a tin mineralised
zone that is 5m wide though further exploration is to be completed to better define areas of mineralisation.
x
The Mount Veteran Mill (ML 4349)
The Mount Veteran Mill tenement covers an area of 17.85Ha and constructed a mill in 1984 with the initial
purpose of treating hard rock tin ores from deposits in the area. However, the mill operation ceased shortly
afterwards due to tin prices declining dramatically during the period 1984 – 2003. MGTR has since
refurbished the Mount Veteran Plant for approximately $2.6million to process hard rock tin ore. Although
not in current operation, the plant is in reasonable condition to be quickly brought back into operation
should it be needed. However, the Directors have advised us that the tin price would need to be
substantially higher to make this economically viable.
x
Nymbool (EPM 16948), including Heads or Tails (ML 20655)
The Nymbool tenement is located in north east of Mount Garnet and within 20km of the Mount Veteran Tin
Processing Plant and covers 20 sub-blocks. The major area within the tenement is The Smiths Creek Mine
which is a historical tin mine consisting of an open pit and an extensive underground working. The tin
mineralisation is associated with copper sulphide mineralisation. The tenement was renewed on 17
February 2014 for a term of five years.
Heads or Tails lies within Nymbool and was granted on 1 December 2011. The mining lease holds fine tin
tailings from the historical tin processing in the Smiths Creek area however these tailings have been
considered immaterial to valuations performed on the tenement.
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x
Nanyetta (EPM 25433)
The Nanyetta exploration licence was granted for 5 years on 25 June 2014 and covers 3 sub-blocks.
4.2.2
The Pyramid Project (EMP 12887)
The Pyramid Project is located in the North Queensland Drummond Basin and covers 12 sub-blocks lying a
major north-east trending belt of mineralisation developed over a strike length of 20km. The Pyramid
tenement contains several prospects, including the Gettysburg prospect, which shows gold bearing
epithermal style quartz veins.
Drilling by MGTR in 2012 confirms that the Pyramid Project has the potential to become a large, low grade
gold resource. The value of the resources, therefore, lies in exploration potential and the ability to generate
appealing targets for drilling.
4.2.3
Southern Queensland Project
MGTR has three separate gold prospect areas in Southeast Queensland detailed below:
1. Yarrol (EPM 8402)
2. Mt Steadman (EPM 12834)
3. Gooroolba (EPM 15426)
MGTR aims to advance these projects with further drilling. Further details regarding these tenements are
below:
x
Yarrol (EPM 8402)
The Yarrol tenement covers 4 sub-blocks and the deposits have been extensively drilled over a number of
years; however, the resources have been considered too small to be economically viable. It is likely that a
gold price of plus USD$1500/ounce would be required to make this economical, subject to exchange rates.
x
Mt Steadman (EPM 12834)
The Mount Steadman prospect covers 4 sub-blocks and belongs to a class of bulk style mineralisation
known as intrusion-related gold deposits, which are economically important due to its distinct chemical
characteristics. The estimated indication of resources at the Mount Steadman prospect is uneconomical to
be trucked to the nearest processing plant due to the low current gold prices.
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x
Gooroolba (EPM 15426)
The Gooroolba prospect covers 30 sub-blocks and is considered prospective for its intrusive-related gold
and copper mineralisation. MGTR is currently considering further exploration drilling of this area to confirm
prospective resources.
Further details of the tenements are set out in Veronica Webster Pty Ltd’s geologist reports included in
Appendix E and MGTR’s JORC Code Table 1 for the Mt Garnet Project and Pyramid Project in Appendix F.
4.3
Directors
The board of MGTR is as follows:
Jonathan Back
Chairman
Robert Vagnoni
Li Hai Jun
Non Executive
Director
Non Executive
Director
Gary Kuo
Executive Director
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4.4
Financial Information
MGTR’s auditor’s Reports for the years ending 30 June 2012, 2013 and 2014 were unqualified, however
each year they contain an emphasis of matter regarding the company’s ability to continue as a going
concern. It is noted in the financial statements that the ability of MGTR to continue as a going concern is
dependent on the Group’s ability to raise capital.
4.4.1
Financial Performance
Set out below are the audited consolidated profit and loss accounts of MGTR for the years ended 30 June
2012, 2013 and 2014:
$
FY2012
Audited
Revenue
Cost of Sales
Gross Loss
Investment income
Other gains and losses
Employee benefits expense
Depreciation and amortisation expense
Impairment losses
Interest expense
Administration expense
Exploration and evaluation expenditure written off
Other expenses
Loss before tax
Income tax expense/(benefit)
Loss for the period
Other comprehensive income
Total comprehensive income
Non-controlling interest
Loss for the period attributable to MGTR shareholders
1
2
3
4
5
58,188
(144,000)
(1,625,181)
(291,655)
(130,249)
(385,214)
(2,663)
(510,116)
(3,030,890)
(3,030,890)
199,887
(2,831,003)
(467,445)
(2,363,558)
FY2013
Audited
172,461
(173,580)
(1,119)
79,818
63,428
(904,012)
(347,093)
(264,032)
(323,284)
(241,245)
(646,580)
(2,584,119)
(2,584,119)
(6,000)
(2,590,119)
(297,165)
(2,292,954)
FY2014
Audited
123,624
11,182
(1,052,488)
(357,226)
(1,336,116)
(719,754)
(352,213)
(70,158)
(682,951)
(4,436,100)
(4,436,100)
(2,454)
(4,438,554)
(379,391)
(4,059,163)
Source: MGTR 30 June 2012, 2013 and 2014 audited financial statements
1. The revenue in FY2013 is a one-off transaction from the sale of tin concentrate consisting of
approximately 50% purchased from hobby tin miners and 50% from MGT Mining Limited’s existing
stock and mill trial runs.
2. Investment income relates to the interest income from cash on hand in bank.
3. The impairment loss recognised in FY2014 is a one-off transaction which relates to the fair value
revaluation of the MGTR Group’s infrastructure performed by Andrew Nock Pty Ltd, independent
valuers.
4. The exploration and evaluation expenditure written off relates to tenement abandonment.
5. Other comprehensive income relates to the movement in fair value of quoted shares available for
sale.
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4.4.2
Financial Position
Set out below is the audited consolidated balance sheet of MGTR as at 30 June 2012, 2013 and 2014.
$
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
FY2012
Audited
FY2013
Audited
FY2014
Audited
3,185,842
113,920
3,299,762
1,104,967
142,647
31,581
1,279,195
2,318,454
140,005
38,166
2,496,625
36,108
10,364
4,719,367
3,856,618
8,622,457
11,922,219
4,364
5,845,931
3,721,158
9,571,453
10,850,648
1,910
8,278,021
2,136,704
10,416,635
12,913,260
(2,226,756)
(21,932)
(60,144)
(2,308,832)
(670,910)
(1,494,948)
(77,907)
(2,243,765)
(934,214)
(1,488,124)
(40,839)
(2,463,177)
(2,945,321)
(21,823)
(2,967,144)
(5,275,976)
(1,475,343)
(104,747)
(1,580,090)
(3,823,855)
(7,357,499)
(116,016)
(7,473,515)
(9,936,692)
6,646,243
7,026,793
2,976,568
9,831,962
1,942,503
(4,881,246)
(246,976)
6,646,243
12,919,634
1,202,062
(7,426,907)
332,004
7,026,793
12,917,947
850,921
(11,216,725)
424,425
2,976,568
1
Non-current assets
Trade and other receivables
Other financial assets
Exploration and evaluation expenditure
Plant & equipment
2
Total assets
Current liabilities
Trade and other payables
Borrowings
Other liabilities
3
4
Non-current liabilities
Borrowings
Provisions
5
6
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings/(losses)
Non-controlling interest
Total equity
Source: MGTR 30 June 2012, 2013 and 2014 audited financial statements
1. The current trade and other payables consist of trade payables, other payables and accrued
expenses. In FY2012, trade and other payables consisted of one-off cash received on shares
which were not yet issued, accounting for $1,622,400.
2. The non-current trade and other receivables in FY2012 relate to the rental bond. This amount was
settled in FY2013.
3. The current borrowings in FY2012 relate to a commercial loan which was entered into on 17 July
2009. The loan was fixed over 37 months with interest of 10.99% per annum. The commercial
loan was repaid in full in FY2013.
The current borrowings in FY2013 and FY2014 relate to convertible notes issued by MGTR to
Armstrong Industries HK Limited in 11 November 2011 with a principal sum of $1,500,000 and a
term of 2 years. The convertible note was rolled into a new convertible note for a further term of 3
years and this note matures in May 2015.
4. Other liabilities account for provisions including employee benefits and rental provisions.
5. The non-current borrowings relate to convertible notes. Details of the convertible notes are below.
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4.5
Capital Structure and Ownership
MGTR’s issued capital as at 8 December 2014 comprised 288,157,040 fully paid ordinary shares and
7,875,000 options. The top 20 shareholders, as at 5 December 2014, hold 74.85% of the issued capital of
MGTR and are set out below:
Shareholder
Jonathan Paul Back
Kuokai Pty Ltd <Kuo'S Group Family A/C>
Li Hai Jun
Armstrong Industries Hk Ltd
Hsbc Custody Nominees (Australia) Limited
Mr Alan Kai-Yuan Cheng
Taimetco International Co Ltd
Mr Koki Inomata
Iron Ore Trading Pty Ltd <Mono A/C>
William Richard Pirie
Mr David Harper
Tsumo H.K. Co. Limited
Ms Lisa Huang
Jason Ralph Cox
Mr Sing Fung Steve Ngan
Miss Jenny Cheng
Eriditus Pty Ltd <The Robert Vagnoni Fam A/C>
Robert Howe +
Mr Clive James Mckerr + Mrs Sarah Jayne Sandra Mckerr <Mckerr
Super Fund A/C>
Citicorp Nominees Pty Limited
Top twenty shareholders
Other
Total shareholders
Source: MGTR Share registry as at 5 December 2014
Shareholding
% Total
79,029,727
27,208,000
22,800,000
15,450,000
8,431,172
8,352,500
7,187,500
6,700,000
4,732,354
4,200,000
3,779,334
3,500,000
3,364,000
3,200,000
3,200,000
3,000,000
3,000,000
2,920,000
27.43%
9.44%
7.91%
5.36%
2.93%
2.90%
2.49%
2.33%
1.64%
1.46%
1.31%
1.21%
1.17%
1.11%
1.11%
1.04%
1.04%
1.015
2,900,000
1.01%
2,722,559
215,677,146
72,479,894
288,157,040
0.94%
74.85%
25.15%
100.00%
Since 1 July 2011, the following share issues occurred:
x
February 2012 – 6,400,000 shares at $0.0625 a share on exercise of a convertible note
x
March 2012 – 2,600,000 shares at $0.125 a share on exercise of director share options
x
October 2012 – 13,212,000 shares issued at $0.16 a share
x
December 2012 – 6,310,000 shares issued at $0.20 a share
12
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MGTR has the following options outstanding. All options have an exercise price of $0.15 and expire three
years from the grant date:
Option holder
Grant date
Vest date
Units
% Total
Jonathan Paul Back
Gary Kuo
Jacqueline Butler
Li Hai Jun
Robert Vagnoni
Anthony King
Verity Borthwick
Stephen Frost
Rodney Finch
Geoffrey Clark
Total option holders
7/11/2013
7/11/2013
17/12/2013
7/11/2013
7/11/2013
17/12/2013
17/12/2013
17/12/2013
17/12/2013
17/12/2013
immediately
immediately
17/12/2015
immediately
immediately
17/12/2015
17/12/2015
17/12/2015
17/12/2015
17/12/2015
3,500,000
2,500,000
400,000
400,000
400,000
350,000
150,000
100,000
50,000
25,000
7,875,000
44.44%
31.75%
5.08%
5.08%
5.08%
4.44%
1.90%
1.27%
0.63%
0.32%
100.00%
Source: MGTR Option registry as at 5 December 2014
MGTR has the following convertible notes outstanding. All notes have an 8% coupon rate and to be
redeemed the share price must be lower than the conversion price set out below at maturity. If the quoted
share price is above the conversion price below then the convertible notes must be converted to shares:
Note holder
Face value
Maturity
Armstrong Industries HK Limited
Armstrong Industries HK Limited
Cloud Adventurer
Marvel Network Limited
$1,500,000
$1,500,000
$3,000,000
$3,000,000
$9,000,000
11 May 2015
11 Nov 2016
19 Aug 2016
19 Aug 2016
Number of
shares
7,500,000
17,142,857
27,272,727
27,272,727
79,188,131
Conversion
price
$0.20
$0.0875
$0.11
$0.11
Source: MGTR 30 June 2012, 2013 and 2014 audited financial statements
13
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4.6
Share Price and Volume Trading Analysis
The following chart provides a summary of the trading volumes and prices for MGTR shares from
admission to the ASX on 9 January 2013 to 4 December 2014.
0.14
1,600,000.00
0.12
1,400,000.00
1,200,000.00
Share Price ($)
0.10
1,000,000.00
0.08
800,000.00
0.06
600,000.00
0.04
400,000.00
0.02
200,000.00
0.00
-
Volume
Share Price
Source: S&P CapitalIQ
The chart above shows that the closing share price of MGTR has traded within a range of $0.13 and $0.02
from the period since admission to ASX to 4 December 2014 with a closing price of $0.05.
The volume of MGTR shares that have been traded over the period has been low. Prices and volumes for
the last 180 days prior to 4 December 2014 are summarised in the table below.
Period prior to 4
December 2014
1 Day
30 Days
60 Days
90 Days
180 Days
Share Price Low
Share Price High
0.045
0.026
0.015
0.015
0.015
0.045
0.045
0.045
0.055
0.065
Cumulative volume
traded
286,592
1,236,912
2,570,246
3,200,246
5,649,433
Trading as a % of
current issued
capital
0.099%
0.429%
0.892%
1.111%
1.961%
Source: S&P CapitalIQ and Nexia analysis
MGTR’s shares have a low level of liquidity, with 1.111% of MGTR’s capital being traded in the last 90 days
and 1.961% in the last 180 days prior to 4 December 2014.
14
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5.
INDUSTRY ANALYSIS
5.1
Tin
1234
Tin use in Australia consists of exports, domestic iron smelters, metal ore processors, steel processors, and
battery manufacturers. Globally, the greatest end use for tin is solder. China is Australia’s largest export
recipient and is expected to account for 34.2% of revenue in 2014-15 for the manganese and other
minerals industries. This is higher than the 2009-10 proportion of 33.3%, suggesting that Chinese demand
is expected to remain resilient despite forthcoming challenges to the sustainability of China’s strong
economic growth.
This has contributed to commentary which argues that there will be future shortages in supply as emerging
economies continue to grow and increase their consumption of electronic goods. Challenging this
viewpoint are recent trends that suggest that tin prices are more in line with global economic performance,
with output fluctuating in recent years. For example, Australian tin output remained high in 2010-11 in
response to higher prices, but as prices declined over the following two years, output also decreased.
In 2014-15 tin prices are expected to continue falling from the highs of 2011-12, with global output
anticipated to ease during this time. Specifically, Australian production is forecast to remain stable at
around 6,000 tonnes in 2014-15 and revenue expected to be about $93,600,000. As such it can be noted
that tin is a relatively niche industry in Australia. Also worth noting is how historically there has been
substantial volatility in Australia’s tin production as output stems from only a few mines which can open and
close in response to changing prices and operating conditions.
Globally, tin output was estimated at 334,700 tonnes in 2013, illustrating Australia’s relatively small global
market share. Asian producers such as China, Malaysia and Indonesia dominate global output and
represent the greatest proportion, at 83% of global output.
It is unlikely that demand will significantly deteriorate as it is a crucial component of products demanded
from a range of consumers. If demand were to significantly increase, it is likely that in the long-run prices
would remain relatively stable. This can be attributed to the large capacity to expand production given it is
estimated that global tin reserves total about 7,000,000 tonnes.
1
https://www.lme.com/metals/non-ferrous/tin/production-and-consumption/ ‘Production and consumption’
Accessed 8 December 2014.
2
http://www.businesswire.com/news/home/20141208006046/en/Research-Markets-Research-GlobalChina-Tin-Industry ‘Research and Markets’ Accessed 8 December 2014
3
http://www.australianminesatlas.gov.au/education/fact_sheets/tin.html ‘Tin Fact Sheet’ Accessed 8
December 2014.
4
IBISWorld Pty Ltd, Manganese and Other Mineral Mining in Australia, September 2014
15
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The historical tin price movement from 1 January 2013 is set out below:
Tin (LME)
$29,000.00
$28,000.00
$27,000.00
$26,000.00
$25,000.00
$24,000.00
$23,000.00
Tin (LME) Price ($AUD)
Source: S&P Capital IQ
5.2
Gold
56
Gold is both a commodity and an international store of monetary value. During periods of weak economic
growth and political turbulence the demand for gold increases as it is seen to be a safe haven investment.
This is particularly evident in financial markets since gold is viewed as more resilient and less risky than
world currencies. Demand for gold has an inverse relationship with global economic performance as when
the global economy improves demand for gold and its value decreases. These trends were demonstrated
during the global financial crisis with investors investing in gold due to the volatility on financial markets.
Gold mining production increased by 6% in 2013 with growth again increasing by 4.1% for the first half of
2014 calendar year. For the full calendar year of 2014, forecasts estimate gold mine production growth to
increase 2.1% and total 3,088 tonnes. The tapering off of this growth in the second half of 2014 can be
attributed to the anticipated closure of several large, high-cost mines. The development of new mines is
also expected to become less frequent as interest rates are expected to rise while prices fall in the next 18
months. In the long-run production is forecast to increase at a much slower rate of 1% on average per year
to around 3,180 tonnes in 2019.
Global gold fabrication consumption is forecast to decrease 4.6% to around 2,250 tonnes in 2014. This
follows world fabrication demand for the June quarter 2014 declining sharply by 25% to the same period the
previous year. This decline largely stems from lower jewellery consumption by India and China of 18% and
45%, respectively, despite lower gold prices. These fluctuations are anticipated to be temporary, however,
as forecasts estimate global fabrication consumption to increase at an average annual rate of 3.1% and
5
6
BREE 2014, Resources and Energy Quarterly, September Quarter 2014, BREE, Canberra, September 2014
IBISWorld Pty Ltd, Gold Ore Mining in Australia, March 2014
16
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reach 3,151 tonnes by 2019. In addition to this slowing of production, one should consider the high costs of
mining production including capital intensity expenditure and many associated indirect costs for exploration,
royalties, overheads, marketing, native title laws and research & development. With these costs, industry
performance and profitability largely depends on movement in the world price of gold.
Average gold prices in 2014 are forecast to be US$1,283/oz after reaching a high of US$1,379/oz in March
and dropping to US$1,260/oz in September. It is expected that the average price of gold will decrease
further in 2015 by 4.7% to US$1,223/oz per ounce. This decline is linked to an anticipated higher US
interest rate which is expected to reduce the appeal of gold as opposed to other investment assets. In the
long run gold prices are projected to recover to an average around US$1,336/oz by 2019 (in 2014 dollars).
This recovery will be underpinned by growth in emerging economies and central banks whom are expected
to remain net purchasers.
The historical gold price movement from 1 December 2013 is set out below:
Gold (^GC) (COMEX)
$1,400.00
$1,350.00
$1,300.00
$1,250.00
$1,200.00
$1,150.00
$1,100.00
Gold (COMEX) ($USD)
Source: S&P Capital IQ
17
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6.
VALUATION METHODOLOGIES
6.1
Definition of market value
In forming our opinion as to whether or not the Proposed Transaction is fair and reasonable to the nonassociated shareholders, we have assessed the value of the issued shares of MGTR on a fair value basis.
RG 111 defines fair value as the amount:
“assuming a knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not
anxious, seller acting at arm’s length...”
6.2
Selection of Methodology
RG 111 provides guidance on the valuation methods that an independent expert should consider. These
methods include:
x
the discounted cash flow method and the estimated realisable value of any surplus assets;
x
the application of earnings multiples (appropriate to the business or industry in which the entity
operates) to the estimated future maintainable earnings or cash flows of the entity, added to the
estimated realisable value of any surplus assets;
x
the amount that would be available for distribution to security holders on an orderly realisation of
assets;
x
the quoted price for listed securities, when there is a liquid and active market and allowing for the fact
that the quoted price may not reflect their value, should 100% of the securities be available for sale;
x
any recent genuine offers received by the target for the entire business, or any business units or assets
as a basis for valuation of those business units or assets; and
x
the amount that an alternative bidder might be willing to offer if all the securities in the target were
available for purchase.
Each methodology is appropriate in certain circumstances. The decision as to which methodology to apply
generally depends on the nature of the asset being valued, the methodology most commonly applied in
valuing such an asset and the availability of appropriate information.
Appendix D summarises different valuation methodologies available.
In determining the fair value of MGTR, we have applied the realisation of assets methodology. As a
secondary valuation methodology we have considered the quoted market price. We have determined the
realisation of assets to be the most appropriate methodology as:
x
Exploration companies have no history of sustainable profitability.
earnings approach is not applicable for MGTR.
x
The main value of MGTR is the interest in the underlying exploration tenements. Therefore, the
realisation of assets is an appropriate methodology. We note that the realisation methodology for
assets is a commonly applied methodology for exploration companies.
x
Although MGTR is listed, the shares are thinly traded with only 8.02% traded since gaining admission
to the ASX and 1.111% in the last 90 days. However, we have considered the traded share price as a
secondary valuation methodology.
Therefore a capitalisation of
18
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7.
FAIR VALUE OF MGTR
As discussed in section 3, in evaluating the transaction we are considering the fair value of MGTR on a
control basis in accordance with RG 111.
7.1
Realisation of assets of MGTR shares
The realisation of assets value reflects the value of an MGTR share on a control basis. This reflects an
interest where a shareholder has advantages such as the ability to exert influence over the strategic
direction and cash flow of a company, amongst other areas.
The fair value of MGTR based on the realisation of assets is set out below:
Notes
Net Assets as at 30 June 2014 (section 4.4.2)
Less: non-controlling interest
Net assets attributable to MGTR shareholders
Adjustments:
Decrease in cash to 31 November 2014
Carrying value of Group tenements
Fair value of tenements
Net adjustment for tenements
Less non-controlling interest in tenements
Adjusted Net Assets
Preferred
High value
1
2,976,568
(424,425)
2,552,143
2,976,568
(424,425)
2,552,143
2,976,568
(424,425)
2,552,143
2
(1,570,261)
(1,570,261)
(1,570,261)
3
4
(8,278,021)
2,800,000
(5,478,021)
576,288
(3,919,852)
(8,278,021)
6,850,000
(1,428,021)
150,228
(295,912)
(8,278,021)
11,350,000
3,071,979
(323,172)
3,730,688
288,157,040
NA
288,157,040
NA
288,157,040
$0.0129
5
Shares on issue
Value per share on a control basis
Low value
1. MGTR only holds a 89.48% interest in MGTM. This adjustment represents the non-controlling interest
denoted in MGTR’s 30 June 2014 audited financial statements
1. As at 31 November 2014 MGTR’s cash and cash equivalents have decreased to $757,078 from
$2,318,454 at 30 June 2014. The minority interest of 10.52% in MGTM’s 31 November 2014 cash
balance of $84,461 included in this adjustment.
2. Exploration expenditure capitalised on MGTR’s balance sheet has been removed to incorporate the
fair value of the tenements.
3. Veronica Webster Pty Ltd has prepared independent valuations of the tenements. Copies of the
valuations are included in Appendix E. The tenement values are summarised below:
Location
Mt Garnet Project
The Pyramid Project (EPM 12887)
Yarrol (EPM 8402)
Mt Steadman (EPM 12834)
Gooroolba (EPM 15426)
Totals
4.
Low $m
Preferred $m
High $m
2.50
0.05
0.15
0.05
0.05
2.80
6.25
0.15
0.30
0.10
0.05
6.85
10.25
0.20
0.60
0.20
0.10
11.35
All the tenements within the company are held by MGTM. Therefore an adjustment for the noncontrolling interest of MGTM has been made.
19
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7.2
Quoted market price of MGTR shares
There has been a low volume of share trading in MGTR since IPO. The low, high and volume weighted
average price for interim periods to 4 December 2014 are set out below.
$/share
1 Day
30 Days
60 Days
90 Days
180 Days
Low
0.045
0.026
0.015
0.015
0.015
High
0.045
0.045
0.045
0.055
0.065
VWAP
0.045
0.036
0.031
0.035
0.043
Source: S&P Capital IQ and Nexia Australia calculations
The quoted market price reflects a minority interest in MGTR. Based on the analysis above we consider
the fair value for a controlling interest based on the quoted market price to be:
Quoted market price
Control premium
Price per share on a control basis
Low
Preferred
High
$0.015
25%
$0.019
$0.023
25%
$0.029
$0.031
25%
$0.039
In determining the fair value based on the quoted market price we have considered the low price and
VWAP over the 60 day period as our low and high. A control premium of 25% has been applied to reflect
the voting interest and board positions Auskong will hold following the Proposed Transaction.
7.3
Conclusion on fair value of a controlling interest in MGTR
Based on the preferred values determined under the realisation of assets and quoted market price
methodologies we have concluded that the fair value of a share in MGTR to be:
Fair value of a MGTR share on a control basis
8.
Low
Preferred
High
$0.0000
$0.0150
$0.0290
FAIR VALUE OF CONSIDERATION RECEIVED
In respect of the Proposed Transaction the consideration received is:
x
30 million shares and 24 million share options (with an exercise price of $0.05) for cash consideration
of $1.5 million; and
x
50 million shares under a $1.5 million convertible note with, no coupon, a 12 month term and an
exercise price of $0.03 a share.
We consider the fair value of each component of the consideration below:
20
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8.1
Assessment of consideration for shares and options
The $1.5 million received reflects consideration for 30 million shares and 24 million options. To allocate the
consideration between the shares and options we have calculated the value of the options using the BlackScholes option pricing model with the residual value reflecting the consideration for a MGTR share. The key
assumptions for this calculation are as follows:
Fair value of cash consideration a share
Option assumptions
Risk-free rate¹
Time to expiry
Volatility²
Exercise price
Fair value of an MGTR share
Value of option
2.28%
1 year
114.36%
$0.0500
$0.0150
$0.0022
Fair value of consideration per share
Nominal consideration
Value of option (24 million x $0.0050)
Consideration related to shares
Number of shares
Consideration per share
$1,500,000
($52,387)
$1,447,612
30,000,000
$0.0483
1. Based on the Australian 2 year government bond rate at 12 December 2014 (S&P Capital IQ).
2. Based on the median one year volatility of identified listed companies.
8.2
Assessment of consideration per share under convertible note
Under the terms of the convertible notes MGTR received the cash component as well as a one year interest
free period. To determine the fair value received per share under the convertible note we have determined
fair value of additional benefit received from the interest free period.
The key assumptions and consideration received under the convertible note is summarised below:
Fair value of consideration under convertible note
Assumptions
Comparable interest rate for other issued convertible notes¹
Consideration received
Face value of note
Benefit of interest free period
Shares to be issued under convertible note
Consideration per share under the convertible note
8%
$1,500,000
$120,000
$1,620,000
50,000,000
$0.0324
1. MGTR has issued convertible notes to other parties at an interest rate of 8% p.a. We have assumed if
this note was not interest free than the rate would be 8% p.a.
21
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8.3
Conclusion of consideration receivable under the Proposed transaction
The table below summarises our conclusion on the overall consideration received per share under the
Proposed Transaction:
Number of
shares
(m)
30,000,000
24,000,000
50,000,000
104,000,000
Issue of share
Options ($0.0022 premium and $0.05 exercise price)
Convertible notes
Consideration
per share
($)
$0.0483
$0.0522
$0.0324
$0.0415
Total related
consideration
($)
1,447,612
1,252,388
1,620,000
4,320,000
Under the terms of the Proposed Transaction, MGTR is receiving between $0.0324 and $0.0522 a share
with a weighted average of $0.0415.
9.
ASSESSMENT OF FAIRNESS
As discussed in section 3, in determining whether the transaction is fair to non-associated shareholders, we
have compared the fair value of a MGTR share on a control basis with the consideration received for a
share. This is summarised below:
Low
$0.0000
$0.0324
Fair value of a MGTR share on a control basis
Fair value of consideration received
Preferred
$0.0150
$0.0415
High
$0.0290
$0.0522
The fair value of the consideration received for a share under the Proposed Transaction is greater than the
fair value of a controlling interest in MGTR. Therefore, we have concluded that the Proposed
Transaction is fair.
22
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10.
ASSESSMENT OF REASONABLENESS
10.1
Approach to assessing Reasonableness
In forming our conclusions in this Report, we have compared the advantages and disadvantages to
shareholders if the Proposed Transaction proceeds.
10.2
Advantages of the transaction
We outline below potential advantages of the issue of options:
Advantage
Explanation
The investment from Auskong and
related funding commitment from
Taimetco provides additional resources
to continue exploration activities
The funding provided by Auskong and Taimetco’s committed funding
on the basis of Proposed Transaction proceeding gives MGTR the
available resources to continue operations and further explore their
existing tenements. Without additional funding they would not be able
to proceed to the next stages of exploration of their tenements.
Auskong potentially provides access to
alternative funding arrangements with
third parties to assist future capital
requirements
By adding another significant shareholder to MGTR, there is the
potential that this entity will provide access to further funding resources
that were not previously available to MGTR.
Auskong has significant commercial
relationships in Asia, a main market for
MGTR’s resources providing future
opportunities for the Company
Auskong has significant connections with Asia which provides
commercial opportunities for the Company. These connections may
provide additional opportunities for MGTR to fully explore its existing
assets.
10.3
Disadvantages of the transaction
We outline following the potential disadvantages of the issue of options:
Disadvantage
Explanation
On completion of the Proposed
Transaction Auskong will potentially
hold 34.17% of MGTR and have two
board positions giving it significant
influence over MGTR
Auskong’s interest will provide it effective significant control over MGTR
subject to minority shareholder protections. As a result it will have a
strong influence over the strategic direction of the business and other
matters such as dividend policy and other investment decision.
Auskong’s holding may negatively
impact liquidity and prevent current
shareholders from receiving a premium
for control
The significant interest may also affect the ability for MGTR to attract a
takeover offer, preventing MGTR’s shareholders from receiving a
control premium for their shares.
The large holding may also negatively impact liquidity as a significant
holding may reduce interest in trading in MGTR’s shares.
10.4
Alternatives to the transaction
The Directors have advised us that there are currently no other alternatives to the Proposed Transaction.
23
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10.5
Implications of the transaction not proceeding
If the Proposed Transaction is not approved, MGTR will need to seek further funding from third parties to
continue operations. If additional funding is not received then the Directors will need to explore other
options for the Group including voluntary administration.
10.6
Conclusion as to Reasonableness
In accordance with RG 111, a transaction is reasonable if:
x
the transaction is fair; or
x
despite not being fair, but considering other significant factors, shareholders should obtain an
overall benefit if the transaction proceeds.
As the Proposed Transaction is fair and taking into account other significant factors, we have concluded
that the Proposed Transaction is reasonable.
11.
OPINION
Accordingly, in our opinion, the Proposed Transaction is fair and reasonable to the non-associated
shareholders.
The ultimate decision on whether to approve the Proposed Transaction should be based on shareholders’
own assessment of their circumstances. We strongly recommend that shareholders consult their own
professional advisers, carefully read all relevant documentation provided, including the notice of meeting
and explanatory memorandum, and consider their own specific circumstances before voting in favour of or
against the Proposed Transaction.
24
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APPENDIX A – GLOSSARY
Term
Definition
ASIC
ASX
Auskong
Australia Securities and Investment Commission
Australian Securities Exchange
Auskong International Mining Investment Co., Limited (Hong Kong
Company Number 2178046)
MGT Resources Limited (ACN 131 715 645)
Corporations Act 2001 (Cth)
Document to be sent to shareholders on or about 15 January 2015 in which
this Report is included
Financial Services Guide
the financial year ended or as at 30 June 2012
the financial year ended or as at 30 June 2013
the financial year ended or as at 30 June 2014
Tenement EPM 15426 that is 100% owned by MGTM.
MGTR and its subsidiaries
Tenement ML 20655 that is 100% owned by MGTM.
Initial Public Offering
Tenement EPM 12834 that is 100% owned by MGTM.
Tenement ML 4349 that is 100% owned by MGTM.
MGT Mining Limited (ACN 120 236 142)
MGT Resources Limited (ACN 131 715 645)
Tenement EPM 24333 that is 100% owned by MGTM.
Nexia Court Financial Solutions Pty Ltd (AFSL 247300)
National Stock Exchange of Australia
Tenement EPM 16948 that is 100% owned by MGTM.
Issue of shares, options and convertible notes to Auskong International
Mining Investment Co., Limited
Tenement EMP 12887 that is 100% owned by MGTM
Independent Expert’s Report
ASIC Regulatory Guide 111: Content of expert Reports
ASIC Regulatory Guide 74: Acquisitions approved by members
Tenement ML 20547 that is 100% owned by MGTM.
Taimetco International Co Ltd
Volume Weighted Average Price of shares
Tenement EPM 8402
Company or MGTR
Corporations Act
Explanatory Memorandum
FSG
FY2012
FY2013
FY2014
Gooroolba
Group
Heads or Tails
IPO
Mount Steadman
Mount Veteran Mill
MGTM
MGTR
Nanyetta
NCFS
NSX
Nymbool Projects
Proposed Transaction
Pyramid Project
Report
RG 111
RG 74
Summer Hills
Taimetco
VWAP
Yarrol
25
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APPENDIX B - SOURCES OF INFORMATION
x
APES 225 – Valuation Services
x
Australia Securities and Investment Commission’s (ASIC) database
x
Audited financial statements of MGT Resources Limited for the years ended 30 June 2012, 2013 and
2014
x
Australian Government, Geoscience Australia, Tin Fact Sheet, viewed 8 December 2014
http://www.australianminesatlas.gov.au/education/fact_sheets/tin.html
x
Business Wire, Research and Markets: Research on Global and China Tin Industry, 2014-2018, viewed
8 December 2014
x
http://www.businesswire.com/news/home/20141208006046/en/Research-Markets-Research-GlobalChina-Tin-Industry
x
IBIS World Industry Report – Gold Ore Mining in Australia as at August 2014
x
IBIS World Industry Report – Manganese and Other Mineral Mining in Australia as at September 2014
x
London Metal Exchange, Production and Consumption, LME London, viewed 8 December 2014
https://www.lme.com/metals/non-ferrous/tin/production-and-consumption/
x
Unaudited balance sheet of MGT Mining Limited as at 31 October 2014 and 30 November 2014
x
Unaudited balance sheet of MGT Resources Limited as at 31 October 2014 and 30 November 2014
x
Regulatory Guide 74: Acquisitions approved by members
x
Regulatory Guide 111: Content of expert Reports
x
Regulatory Guide 112: Independence of expert’s Reports
x
S&P Capital IQ
26
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APPENDIX C - STATEMENT OF DECLARATION & QUALIFICATIONS
Confirmation of Independence
Prior to accepting this engagement Nexia Court Financial Solutions Pty Ltd (“NCFS”) determined its
independence with respect to MGTR and Auskong with reference to ASIC Regulatory Guide 112:
Independence of expert’s Reports (“RG 112”). NCFS considers that it meets the requirements of RG 112
and that it is independent of MGTR and Auskong.
Also, in accordance with s648(2) of the Corporations Act we confirm we are not aware of any business
relationship or financial interest of a material nature with MGTR or Auskong, its related parties or
associates that would compromise our impartiality.
Mr Brent Goldman, authorised representative of NCFS, has prepared this Report. Neither he nor any
related entities of NCFS have any interest in the promotion of the Proposed Transaction nor will NCFS
receive any benefits, other than normal professional fees, directly or indirectly, for or in connection with the
preparation of this Report. Our fee is not contingent upon the success or failure of the Proposed Transaction,
and has been calculated with reference to time spent on the engagement at normal professional fee rates for work
of this type. Accordingly, NCFS does not have any pecuniary interests that could reasonably be regarded as
being capable of affecting our ability to give an unbiased opinion under this engagement.
NCFS provided a draft copy of this Report to the Directors and management of MGTR for their comment as
to factual accuracy, as opposed to opinions, which are the responsibility of NCFS alone. Changes made to
this Report, as a result of the review by the Directors and management of MGTR, have not changed the
methodology or conclusions reached by NCFS.
Reliance on Information
The statements and opinions given in this Report are given in good faith and in the belief that such
statements and opinions are not false or misleading. In the preparation of this Report NCFS has relied upon
information provided on the basis it was reliable and accurate. NCFS has no reason to believe that any
information supplied to it was false or that any material information (that a reasonable person would expect to
be disclosed) has been withheld from it. NCFS evaluated the information provided to it by MGTR and
Auskong as well as other parties, through enquiry, analysis and review, and nothing has come to its
attention to indicate the information provided was materially mis-stated or would not afford reasonable
grounds upon which to base its Report. Accordingly, we have taken no further steps to verify the accuracy,
completeness or fairness of the data provided.
Our procedures and enquiries do not include verification work, nor constitute an audit or review in accordance
with Australian Auditing Standards. NCFS does not imply and it should not be construed that it has audited or
in any way verified any of the information provided to it, or that its enquiries could have verified any matter
which a more extensive examination might disclose.
The sources of information that we relied upon are outlined in Appendix B of this Report.
Qualifications
NCFS carries on business at Level 16, 1 Market Street, Sydney NSW 2000. NCFS holds Australian
Financial Services Licence No 247300 authorising it to provide financial product advice on securities to
retail clients. NCFS’s representatives are therefore qualified to provide this Report.
Brent Goldman specifically was involved in the preparing and reviewing this Report. Brent Goldman is a
Fellow of the Institute of Chartered Accountants in Australia and New Zealand, a Business Valuation
Specialist of the Institute of Chartered Accountants in Australia and New Zealand and a Fellow of the
27
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Financial Services Institute of Australasia. He has over 15 years of corporate finance experience in both
Australia and the UK.
Consent and Disclaimers
The preparation of this Report has been undertaken at the request of the Directors of MGTR. It also has
regard to relevant ASIC Regulatory Guides. It is not intended that the Report should be used for any other
purpose than to accompany the notice of meeting and explanatory memorandum to be sent to MGTR
shareholders. In particular, it is not intended that this Report should be used for any purpose other than as
an expression of NCFS’s opinion as to whether or not the issue of options is fair and reasonable to nonassociated shareholders.
NCFS consent to the issue of this Report in the form and context in which it is included in the notice of
meeting and explanatory memorandum to be sent to MGTR shareholders.
Shareholders should read all documents issued by MGTR that consider the issue of options in their entirety,
prior to proceeding with a decision. NCFS had no involvement in the preparation of these documents, with the
exception of our Report.
This Report has been prepared specifically for the non-associated shareholders of MGTR. Neither NCFS,
nor any member or employee thereof undertakes responsibility to any person, other than a shareholder of
MGTR, in respect of this Report, including any errors or omissions howsoever caused. This Report is
"General Advice" and does not take into account any person's particular investment objectives, financial situation
and particular needs. Before making an investment decision based on this advice, you should consider, with or
without the assistance of a securities advisor, whether it is appropriate to your particular investment needs,
objectives and financial circumstances.
Our procedures and enquiries do not include verification work, nor constitute an audit or review in
accordance with Australian Auditing Standards.
Our opinions are based on economic, market and other conditions prevailing at the date of this Report.
Such conditions can change significantly over relatively short periods of time. Furthermore, financial
markets have been particularly volatile in recent times. Accordingly, if circumstances change significantly,
subsequent to the issue of this Report, our conclusions and opinions may differ from those stated herein.
There is no requirement for NCFS to update this Report for information that may become available
subsequent to its date.
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APPENDIX D - VALUATION METHODOLOGIES
In preparing this Report we have considered valuation methods commonly used in practice and those
recommended by RG 111. These methods include:
x
the discounted cash flow method;
x
the capitalisation of earnings method;
x
asset based methods; and
x
analysis of share market trading.
Discounted Cash Flow Method
Description
Of the various methods noted above, the discounted cash flow method has the strongest theoretical
standing. It is also widely used in practice by corporate acquirers and company analysts. The discounted
cash flow method estimates the value of a business by discounting expected future cash flows to a present
value using an appropriate discount rate. A discounted cash flow valuation requires:
x
a forecast of expected future cash flows;
x
an appropriate discount rate; and
x
an estimate of terminal value.
It is necessary to project cash flows over a suitable period of time (generally regarded as being at least five
years) to arrive at the net cash flow in each period. For a finite life project or asset this would need to be
done for the life of the project. This can be a difficult exercise requiring a significant number of assumptions
such as revenue growth, future margins, capital expenditure requirements, working capital movements and
taxation.
The discount rate used represents the risk of achieving the projected future cash flows and the time value
of money. The projected future cash flows are then valued in current day terms using the discount rate
selected.
A terminal value reflects the value of cash flows that will arise beyond the explicit forecast period. This is
commonly estimated using either a constant growth assumption or a multiple of earnings (as described
under capitalisation of future maintainable earnings below). This terminal value is then discounted to
current day terms and added to the net present value of the forecast cash flows.
The discounted cash flow method is often sensitive to a number of key assumptions such as revenue
growth, future margins, capital investment, terminal growth and the discount rate. All of these assumptions
can be highly subjective sometimes leading to a valuation conclusion presented as a range that is too wide
to be useful.
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Use of the Discounted Cash Flow Method
A discounted cash flow approach is usually preferred when valuing:
x
early stage companies or projects;
x
limited life assets such as a mine or toll concession;
x
companies where significant growth is expected in future cash flows; or
x
projects with volatile earnings.
It may also be preferred if other methods are not suitable, for example if there is a lack of reliable evidence
to support a capitalisation of earnings approach. However, it may not be appropriate if reliable forecasts of
cash flow are not available and cannot be determined.
Capitalisation of Earnings Method
Description
The capitalisation of earnings method is a commonly used valuation methodology that involves determining
a future maintainable earnings figure for a business and multiplying that figure by an appropriate
capitalisation multiple. This methodology is generally considered a short form of a discounted cash flow,
where a single representative earnings figure is capitalised, rather than a stream of individual cash flows
being discounted. The capitalisation of earnings methodology involves the determination of:
x
a level of future maintainable earnings; and
x
an appropriate capitalisation rate or multiple.
A multiple can be applied to any of the following measures of earnings:
Revenue – most commonly used for companies that do not make a positive EBITDA or as a cross-check of
a valuation conclusion derived using another method.
EBITDA - most appropriate where depreciation distorts earnings, for example in a company that has a
significant level of depreciating assets but little ongoing capital expenditure requirement.
EBIT - in most cases EBIT will be more reliable than EBITDA as it takes account of the capital intensity of
the business.
NPAT - relevant in valuing businesses where interest is a major part of the overall earnings of the group
(e.g. financial services businesses such as banks).
Multiples of EBITDA, EBITA and EBIT value the whole businesses, or its enterprise value irrespective of
the gearing structure. NPAT (or P/E) values the equity of a business
The multiple selected to apply to maintainable earnings reflects expectations about future growth, risk and
the time value of money all wrapped up in a single number. Multiples can be derived from three main
sources.
Using the guideline public company method, market multiples are derived from the trading prices of stocks
of companies that are engaged in the same or similar lines of business and that are actively traded on a
free and open market, such as the ASX or the NSX. The merger and acquisition method is a method
whereby multiples are derived from transactions of significant interests in companies engaged in the same
or similar lines of business. In Australia this has been called the comparable transaction methodology.
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Use of the Capitalisation of Earnings Method
The capitalisation of earnings method is widely used in practice. It is particularly appropriate for valuing
companies with a relatively stable historical earnings pattern which is expected to continue. This method is
less appropriate for valuing companies or assets if:
x
there are no suitable listed company or transaction benchmarks for comparison;
x
the asset has a limited life;
x
future earnings or cash flows are expected to be volatile; or
x
there are negative earnings or the earnings of a business are insufficient to justify a value
exceeding the value of the underlying net assets.
Asset Based Methods
Description
Asset based valuation methods estimate the value of a company based on the realisable value of its net
assets, less its liabilities. There are a number of asset based methods including:
x
orderly realisation;
x
liquidation value;
x
net assets on a going concern basis;
x
replacement cost; and
x
reproduction cost.
The orderly realisation of assets method estimates Fair Market Value by determining the amount that would
be distributed to shareholders, after payment of all liabilities including realisation costs and taxation charges
that arise, assuming the company is wound up in an orderly manner. The liquidation method is similar to
the orderly realisation of assets method except the liquidation method assumes the assets are sold in a
shorter time frame.
Since wind up or liquidation of the company may not be contemplated, these methods in their strictest form
may not necessarily be appropriate. The net assets on a going concern basis method estimate the market
values of the net assets of a company but do not take account of realisation costs.
The asset / cost approach is generally used when the value of the business’s assets exceeds the present
value of the cash flows expected to be derived from the ongoing business operations, or the nature of the
business is to hold or invest in assets. It is important to note that the asset approach may still be the
relevant approach even if an asset is making a profit. If an asset is making less than an economic rate of
return and there is no realistic prospect of it making an economic return in the foreseeable future, an asset
approach would be the most appropriate method.
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Use of Asset Based Methods
An asset-based approach is a suitable valuation method when:
x
an enterprise is loss making and is not expected to become profitable in the foreseeable future;
x
assets are employed profitably but earn less than the cost of capital;
x
a significant portion of the company’s assets are composed of liquid assets or other investments
(such as marketable securities and real estate investments); or
x
it is relatively easy to enter the industry (for example, small machine shops and retail
establishments).
Asset based methods are not appropriate if:
x
the ownership interest being valued is not a controlling interest, has no ability to cause the sale of
the company’s assets and the major holders are not planning to sell the company’s assets; or
x
a business has (or is expected to have) an adequate return on capital, such that the value of its
future income stream exceeds the value of its assets.
Analysis of Share Trading
The most recent share trading history provides evidence of the Fair Market Value of the shares in a
company where they are publicly traded in an informed and liquid market. There should also be some
similarity between the size of the parcel of shares being valued and those being traded. Where a
company’s shares are publicly traded then an analysis of recent trading prices should be considered, at
least as a cross-check to other valuation methods.
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APPENDIX E – VERONICA WEBSTER PTY LTD - INDEPENDENT VALUATION REPORTS
Page 71 of 200
INDEPENDENT VALUATION OF CERTAIN MINERAL PROPERTIES OF MGT RESOURCES
LIMITED 18 OCTOBER 2014
VERONICA WEBSTER PTY. LIMITED
(Incorporated in Queensland; ACN 010 299 224)
Consultants to the Mining Industry
Les W Davis - Minerals Exploration Consultant
Brisbane Office
7 O'Quinn Street
Nudgee Beach, QLD. 4014
Telephone & Fax: 07 3267 3355
L Davis 0411 484 295
V Davis 0407 596 301
Email lesdavis@ozemail.com.au
POSTAL ADDRESS: P O Box 619, Hamilton QLD 4007
Saturday, 18 October 2014
Dr Verity Borthwick, Operations Geologist
MGT Resources Limited
Suite 2.05B, Level 2,
68 York St., Sydney,
NSW 2000, Australia.
Dear Verity
RE: INDEPENDENT VALUATION OF THE TIN PROPERTIES OF MGT
RESOURCES LIMITED
THE MOUNT GARNET PROJECT
1.0 INTRODUCTION
Outline of commission
MGT Resources Limited (“MGTR”) commissioned Veronica Webster Pty. Limited ("VWPL") to
provide an Independent Valuation Report (“Valuation”) on nominated tin assets in Queensland.
The tenements are held in the name of MGTR’s 89.48%-owned subsidiary MGT Mining
Limited, are collectively known as the “Mt Garnet Project”.
The Mount Garnet Project includes the following tenements:Mount Veteran/Summer Hill
ML 4349 “Mt Veteran”
ML 20547 “Summer Hills”
EPM 25433 “Nanyetta”
Smith’s Creek
ML 20655 “Heads or Tails”
EPM 16948 “Nymbool”
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These properties were previously assessed by VWPL in 08 March 2010 (updated 21 October
2010) for DMR Corporate Pty Limited of Melbourne: report entitled, Independent Valuation of
the Mineral Properties of Xtreme Resources Limited. MGTR has carried out exploration
and mine development activities on the relevant Mineral Properties since that report was
completed, the Mount Veteran tin processing plant was successfully commissioned, and has
produced a limited quantity of saleable tin concentrate from old stockpiled material on the Mt
Veteran ML.
VWPL understands that MGTR may use the Valuation of these tin assets to support a corporate
transaction. Mr. P.N Scott (mining engineer) of VWPL has prepared the Valuation Report and
consulted with Mr. L.W Davis (geologist). The views and conclusions expressed in this report
are solely those of VWPL, Mr Scott and Mr Davis.
This Valuation may be included in an Independent Expert’s Report (as per VALMIN Code 2005)
if deemed appropriate by MGTR.
Information
Mr. P.N. Scott of VWPL has prepared this Valuation Report and consulted with Mr. L.W. Davis.
He was supplied with mining, exploration and other information by MGTR and has been
instructed to rely on the information being accurate and complete. Mr Scott has relied on his
own discretion on the observations and interpretations of previous explorers, exploration
consultants and MGTR geological staff. However, the views and conclusions expressed in this
report are solely those of VWPL, P.N. Scott and Mr L.W. Davis.
Mr Scott conducted a site inspection of the properties on the 14th/15th October 2014. This
included a detailed inspection of the tenements, available exploration information, a review of
the treatment plant, and discussions with the various North Queensland based MGTR staff and
consultants that have worked on the project.
Previously in 2009 and subsequently in March 2010, VWPL conducted a valuation of the
properties (then owned by Xtreme Resources Ltd) for DMR Corporate. L. Davis and P. Scott
visited the mineral property of Mount Veteran in March 2007 and inspected the tin lodes and
treatment plant of the Mount Veteran Mining Lease No 4349 “Mt Veteran”.
An appraisal of all the above mentioned information forms the basis of this report.
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2.0 VALUATION SUMMARY
MGTR has an advanced tin project, the Mount Garnet Project, in far north Queensland under
Mining Lease plus exploration areas where there is opportunity for tin (and gold) discovery.
The Mount Garnet project contains a treatment plant currently under care and maintenance,
which currently has an annual throughput capacity of 50,000 - 70,000 tpa (tonnes per annum).
MGTR has plans to upgrade the plant to 250,000 tpa capacity at a cost of approximately $7M.
Tin mineralisation within the Mt Garnet Project consists of:x
Smiths Creek Exploration Target 250,000 tonnes – 300,000 tonnes @ between 1% and 2% tin. JORC
Code 2012 (Davis 2014). The potential quantity and grade is conceptual in nature as
there has been insufficient exploration to define a Mineral Resource and it is uncertain
if further exploration will result in the determination of a Mineral Resource.
x
Summer Hills (excludes Dalcouth and Extended) Exploration Target 250,000 tonnes – 450,000 tonnes @ between 0.3% - 0.7% tin JORC
Code 2012 (Davis 2014). The potential quantity and grade is conceptual in nature as
there has been insufficient exploration to define a Mineral Resource and it is uncertain
if further exploration will result in the determination of a Mineral Resource.
The Summer Hills Resource estimate is expected to be upgraded as soon as the current
drilling program is completed, with appropriate geological interpretation/block model.
The new resource can be expected to be a combination of indicated/inferred under the
2012 JORC Code (VWPL recommends a cut-off grade of 0.2% Sn be considered for
the new resource work).
x
Dalcouth and Extended
Inferred Resource 110,000 tonnes @ 0.34% Sn JORC 2004 Code Compliant (2011
Callaghan).
VWPL recommends that Dalcouth and Extended are remodelled with the same criteria
as the new Summer Hill work, (including a 0.2% Sn cut-off) and reported under JORC
2012 Code in due course.
This valuation considers MGTR’s suggested development of the project to process 250,000
tpa over a 5 year mine life. It should be noted that currently the Mount Garnet Project has no
Ore Reserves (as defined by the JORC Code), and currently very limited sub economic
resources at Dalcouth and Extended. The project relies on successful exploration defining
sufficient Ore Resources and Reserves to support the planned plant throughput in both tonnage
and grade terms.
VWPL considers a tin price of plus USD$ 25,000/t will be required to support future
development of the Mount Garnet Project.
Summary Valuation
In valuing the Mount Garnet Project, VWPL has considered the recent market for tin, and the
available projections of future tin supply, and likely tin prices. VWPL has adopted a modified
discounted-cash-flow-rate-of-return (“DCFROR”) approach to valuation, which takes into
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account the current status of the project (particularly with respect to the Exploration Targets on
both Summer Hills and Smiths Creek).
In VWPL’s opinion the current market would pay a range of between $2.5M and $10.25M
for the Mount Garnet Project, with a preferred value of $6.25M.
It should be noted that while not economic at current tin prices the Mount Garnet Project offers
potentially excellent returns at higher tin prices (essentially providing a level of “optionality” on
the tin price).
In April 2009, Mono Resources obtained control of Xtreme Resources (then holder of the assets
that now constitute the Mt Garnet Project) by payment of $1.86 million to purchase 73.76% of
the equity in Xtreme. Allowing for other assets held by Xtreme VWPL considers that at that
time an implied price of approximately $2 million was placed on the Mt Garnet Tin Project. At
the time Independent Expert DMR Corporate described the transaction as “not fair” but “is
considered reasonable”.
Since April 2009, MGTR has spent approximately $2.6 million on capital upgrade works to bring
the treatment plant to an operable condition, and more than $8 million on exploration on the
Mount Garnet Project leases. Mining licences have also been granted for ML 20547 “Summer
Hill”, and ML 20655 “Heads or Tails”.
Tin price is a prime driver in the valuation of the Mount Garnet Tin Project and tin prices in the
past 5 years have ranged from a low of 15,600/tonne (December 2009), to a high of
USD$32,500 /tonne (May 2011). Att the time of this valuation the price is USD$20,096/tonne
(14th October 2014).
The geology of the area is complex, with closely spaced drilling likely to be required to allow
mineralising structures to be defined. Historically hard rock tin deposits exploited in the Mt
Garnet area have been small high grade structures; the success of the Mount Garnet Project
will require sufficient number of these structures being identified to meet the mill throughput
requirements. While individual drilling results from the key tenements are encouraging, VWPL
considers that a major drilling program(s) will be required to properly define the required
resources, this is likely to take a minimum of two years, and will require significant funding ($3
million-$4 million).
This valuation is only valid at the date of this Valuation Report
All estimates are in Australian dollars and rounded to the nearest A$0.25 million.
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3.0 TENEMENTS
The following Table lists the tenements relevant to this Report (collectively known as the Mount
Garnet Project), all of which are warranted by MGTR to be in good standing. VWPL has sighted
correspondence from MGTR’s tenement managers (AMETS Pty Ltd) confirming the veracity of
the tables below.
It should be noted that MGTR has native title agreements in place for the mining licences
(where appropriate), and accesses the Exploration Licence using the expedited procedures
legislation. Future mining at Smiths Creek will require negotiation of a native title agreement
prior to commencement.
Mining Licences
Tenure
Holder
Share Project
Status
Grant date
Expiry Date
Area
Document
Obligations
Indirect
Native Title
Interest
Financial
Assurance
Mining Leases
ML20547 - "Summer Hills"
MGT Mining Ltd
ML4349 - "Mt Veteran"
MGT Mining Ltd
ML20655 - "Heads or Tails"
MGT Mining Ltd
$20/Ha
Landholder
compensation
Landholder
100% Mt Garnet Granted 1st April 1985
31st March 2027
18.1848 Ha Grant documen
compensation
$20/Ha
100% Mt Garnet Granted 1st December 201131st December 2016 45.5 Ha
Landholder
Grant letter
compensation
100% Mt Garnet Granted 1st February 2013 31st January 2034
1163.40 Ha Grant letter
RTN with Bar Barrum
$76,132
People
Granted prior to 23d
$5,698
Dec 1996
RTN with Bar Barrum
$1,620
People
Exploration Licences
Tenure
Holder
Share Project
Exploration Permits
EPM16948 - "Nymbool"
EPM25433 - "Nanyetta"
Status
MGT Mining Ltd
MGT Mining Ltd
100% Mt Garnet Granted
100% Mt Garnet Granted
Grant date
Expiry Date
Area
Document
Indirect
Obligat
Native Title
Interests
17th February 200916th February 2019 Sub-blocks - 20 Grant documen None
25th June 2014
24th June 2019
Sub-blocks - 3 Grant documen None
Financial
Assurance
Expedited procedures$2,500
Expedited procedures$2,500
Map showing MGTR’s Mount Garnet Project
Showing location of ML’s, EL in relation to Mt Garnet township
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4.0 Mount Garnet Tin Project
The Mount Garnet Project is situated in the Mount Garnet district of Far North Queensland.
The area is recognised as one of Australia’s major tin provinces where tin mining has been
carried out over a period of more than 100 years. Mining has been conducted from this area at
times of favourable tin demand and prices. The district has a history of small tonnage
operations based on very rich mineralisation. Two groups of tenements are considered to make
up MGTR’s Mount Garnet Project: the Mt Veteran/Summer Hill area, and the Smiths Creek
area.
4.1 Mount Veteran ML 4349 and Summer Hill ML 20547
Granted MLs 4349 and 20547
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Mount Veteran/Summer Hills MLs and lode systems.
7
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Current Status
Dalcouth ML 4349 and Extended ML20547
In mid-2011, Tim Callaghan – Resource and Exploration Geology, provided a three
dimensional digital interpretation and resource estimation of the Dalcouth, Extended and
Summer Hill deposits in the Veteran Mill locality of the Mt Garnet Tin Field. Insufficient data
was available to estimate the Summer Hill deposit, therefore only the Dalcouth and Extended
resources were estimated. The estimate was carried out by geostatistical methods and
because of grade variability and a high nugget-effect the result should not be regarded as
precise; uncertainty in drillhole locations, no surveyed topographic surface available, no QAQC
programs or reports, limited geological information, no bulk density data, unknown extent of
historic workings; hence the designation of Inferred Resource by Callaghan.
The contained mineral resource at Dalcouth and Extended, using a 0.1% tin cut-off is 111 900
(110 000) tonnes grading 0.34% tin. The mineral resource has been classified as an Inferred
Resource according to the 2004 edition of the JORC Code. A Cut-off to grade domains of 0.1%
tin and a top-cut at 97.5th percentile of the assay population was used.
VWPL has reviewed and agrees with the findings of the report, noting that MGTR will have to
selectively mine within the 110 000 tonnes, raising the cut-off above 0.1% tin to achieve a
satisfactory mill feed.
Summer Hills ML 20547
In the absence of critical intersection data, plans and sections, etc, VWPL considers that the
mineralisation on the Summer Hills ML constitutes an Exploration Target of 250 000 to 450 000
tonnes grading between 0.3% and 0.7% tin) in accordance with the JORC Code (note we have
excluded the Dalcouth and Extended mineralisation which is located on ML 20547 now subject
to a separate estimate); 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.
Historical Estimates
G Kater in 1985, wrote that the mineralisation within the current ML 4349 and ML 20547:“Recent bulk testing and past mining experience indicates head grade tenor varies between
0.15% and 1% tin overall, whilst observation of numerous exposures indicates patches of
higher grades (several percentages) of tin can be easily selected for quality control of head
grade. Based on the large quantity of mineralised Lode available, there is a high probability
that at least 500,000 to 1,000,000 tonnes could be produced, using careful quality control and
blending, to maintain a head grade of 0.6% to 0.7% Sn. On current exposure and
development, there is sufficient; resource to easily achieve this head grade by quality
control at a rate of 30,000 to 60,000 tonnes per year for at least 10 years.”
This was clarified by Davis in February 2008 who wrote:“In the opinion of VWPL (Davis) later workers have confirmed Kater’s findings. In the last 30
years small parcels of measured and indicated resources have been estimated and some of
these have been exploited. In 1998, with surface sampling only, John Sainsbury Associates
8
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estimated a combined Indicated and Inferred resource of 491 000 tonnes grading 0.5% tin
within the larger previously identified lode zones.
Sainsbury’s 491 000 tonnes of 0.5% tin (classified by Sainsbury in 1998 as Indicated and
Inferred JORC Code Resource) is made up of many smaller parcels.
MGTR now has an independent Resource estimate (JORC 2012 Code Compliant Resource)
for Dalcouth and Extended, see above and will provide another estimate (JORC Code 2012)
for the Summer Hill prospect in due course when MGTR complete drilling and geological
interpretation work.
MGTR carried out evaluation drilling in 2010 and 2011, mainly on the Dalcouth and Extended
vein systems. A fewer number of holes were drilled into the prospects of Summer Hill, May Day
and Veteran but there is insufficient information to estimate resources.
Summer Hill Tin Lodes…recent drilling
Recent drilling by MGTR was announced in August 2014
“Summer Hill Prospect:
•
8m @ 0.41% tin from 10m (including 1m @ 1.7% tin) (SH14)
•
7m @ 0.41% tin from 5m (includinq 1m @ 1.01% tin) (SH22)
•
11m @ 0.61% tin from 1m (including 2m @ 1.13% tin) (SH23)
•
7m @ 1.65% tin from 10m (including 1m @ 1.66% and 3m @ 2.96% tin) (SH25)
•
4m @ 1.76% tin from 37m (including 1m @ 3.99% tin) (SH26)
•
15m @ 0.79% from 32m (includinq 5m @ 1.53%) (SH03 infill samples from previouslydrilled hole)
Viking Prospect:
•
1m @ 1.14% tin from 25m (VK07)
•
1m @ 1.18% tin from 12m (VK08)
•
2m @ 1.72% tin from 27m (including 1m @ 3.05% tin), (VK15)
The geometry of mineralisation at parts of the Summer Hill and Viking prospects is uncertain.
It is probable that true widths are less than the reported downhole intercepts for a number of
holes”.
Photo 14/10/14 showing old open pit workings at the Viking prospect
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A Plan with drill traces and intersections shows that information is increasing to the extent that
resource estimation may soon be possible. More drilling is planned.
Recent Summer Hill Drilling by MGTR
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Mount Veteran tin plant
Photo 14/10/14 showing treatment plant at Mount Veteran
The Mount Veteran plant was built in 1984. It reportedly operated for about 6 months before
being closed due to low tin prices at the time.
MGTR has refurbished and briefly operated the plant at Mt Veteran. The refurbishment cost
was approximately $ 2.6 million, after refurbishment the plant produced a small quality of tin
concentrates from old stockpiles, prior to being placed on ‘care and maintenance ”, pending
environmental approval of the larger project. Current capacity of the plant is in the range 50,000
tpa to 70,000 tpa. The plant appears to be in reasonable condition, and reportedly could be
quickly brought back into operation if desired.
Photo 14/10/14 Mt Veteran Plant from crusher
MGTR has received estimates that an upgrade to the plant to a 250,000 tpa capacity would
cost approximately $7 million (this includes replacing the existing ball mill and upgrading the
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tailings storage facilities). The plant is currently connected to the Queensland State grid power,
an upgrade of the power line will be necessary if the plant is upgraded to 250,000 tpa capacity.
Tabling tin at Mt Veteran in 2009 (Photo MGTR)
Potential project economics could be enhanced by arranging the toll treatment of future
production off site. The proposed construction of a large tin (1MTPA) processing facility at the
town of Mt Garnet by Consolidated Tin Mines Limited, may provide an opportunity to explore
this alternative further.
Environmental Issues
MGTR has been working towards site specific environmental approval for ML4349 and
ML20547 (same Environmental Authority). MGT has engaged to environmental consultants
Biotropica Australia to assist with this work.
The current status is that MGT is engaged in collecting further baseline data, and will proceed
with a site-specific application once a mining plan is finalised.
Work is also currently being conducted to address known issues (i.e. seepage and overflow of
the Tailings Storage Facility (TSF) (more detail below) and erosion control).
Discussions with Biotropica have identified a number of areas that need to be addressed in
order for production to proceed. It is possible that Environmental Impact Statement (EIS) may
be necessary and this will require public approval. An EIS is usually required for large-scale
impacts associated with resource projects (dependent on trigger assessment). In addition, a
decision may be made to require an EIS application, even if no EIS criteria are triggered, if
DEHP or the Minister determines that the project applied for would involve a significant
environmental impact, or a high level of uncertainty about potential impacts, or involve a high
level of public interest. It is estimated that to progress the EIS process through to approval will
take some 18 months and cost an additional $500,000.
Areas to be further addressed by MGTR ahead of environmental approval include:Air, dust and particulates monitoring programme
Waste Management Plan
Waste Rock / Soil / Tailings Management Plan
Noise Management Plan
Groundwater modelling
Surface water modelling
Receiving Environment Monitoring Plan (REMP)(edits to existing)
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Water Management Plan
Erosion and Sediment Control Plan
Rehabilitation Plan
Flora and Fauna impact and mitigation strategy
Biodiversity Offset Strategy (if applicable)
Environmental Management Plan
It should be noted that MGTR has made significant progress on some of the above, exact
requirements will be addressed once the mining plans have been finalised.
Tailings Storage Facility
MGTR has been addressing issues of non-compliance regarding the historical Tailings Storage
Facility (TSF) on site. The TSF overflowed during Cyclone Ita (February 2011) and has been
experiencing seepage at both the toe of the TSF, and from the Freshwater dam located above
the TSF (into the TSF). MGT is currently addressing this problem by using polymer based
sealants. If the measure does not succeed MGTR will build a small dam catchment to contain
the seepage.
MGTR is in the process of submitting a Transitional Environmental Plan (TEP) for DEHP
approval, detailing measures to be taken.
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4.2 Smiths Creek Tin Mine ML 20655 “Heads or Tails”,EPM 16948 “Nymbool” and
EPM 25433 “Nanyetta
Photo showing recent diamond drill hole at Smiths Creek, with old mine dump and buildings in the back ground .
Historical information
The Smiths Creek Tin Mine was discovered in 1901 and produced tin from both open cut and
underground workings between 1903 and 1909. When the mine closed in 1909, the
underground operation was estimated to have produced about 60 000 tonnes of ore at an
average grade of about 4% tin per tonne. An additional 23 800 tonnes were won by opencutting mineralisation estimated to have graded approximately 0.7% tin.
After closure, drilling by the Goldfields Drilling Company intersected grades ranging from trace
to 10.4% tin (widths not reported) at the 92 m level. The Geological Survey of Queensland
drilled three diamond holes between 1955 and 1966 targeting possible tabular extensions with
negative and non-conclusive results. Past records suggest there is possibly a second body to
the east (see figure).
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Smiths Creek Longitudinal Section and Exploration Targets
In 1980, Robinson conducted an economic evaluation for Otter Exploration NL (“Otter”) based
on an Inferred Resource of 250 000 tonnes grading 1.68% tin. In 1981, Otter drilled three
diamond drill holes (260 m total) to test magnetic features. Core recovery was poor. Chloritic
shear zones were intersected and the grades were less than 0.1% tin.
In 1996, Foord undertook a feasibility study for Strike Mining NL (”Strike”) for the exploitation
of mineral deposits that Strike controlled in the Mount Garnet district. This included mining the
Smiths Creek Tin Mine and the Adelaide block with processing proposed at the Mount Veteran
Plant. The study was based on the estimate by Otter of 250 000 tonnes grading 1.68% tin left
in remnants and extensions and another 10 000 tonnes down to 30 m depth in the Adelaide
block. The projects were considered unattractive at this time of relatively weak metal prices.
The ML 20655 “Heads or Tails” was granted on 1st December 2011, MGTR planned to mine a
quantity of tailings (from the old Smith Creek Mine workings) and process through the Mt
Veteran plant. This plan has been suspended, the probable grade and volume of these tailings
makes them immaterial in the context of this valuation.
Recent Exploration by MGTR
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In 2012 MGTR conducted a drilling program at Smiths Creek, drilling at both the Smiths Creek
Mine area, and the Adelaide Block immediately to the east.
Two combination RC percussion/diamond drill holes (total depth 520.8m) and eight RC
percussion holes (total depth 441m) were drilled. (see figure 2a) Results strongly support the
prospectivity of the area. Best results for tin mineralisation were:-
Plan showing MGTR’s 2012 Smiths Creek Drilling
Smiths Creek Exploration Target
VWPL considers Smiths Creek to be an Exploration Target (200 000 to 250 000 tonnes
between 1% and 2% tin. Target Mineralisation (target tonnes and target grades) are not precise
figures, being based on projections of mineralisation in drill holes and workings. The potential
quantity and grade is conceptual in nature as 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.
5.0 VALUATION OF MGTR PROJECTS
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Methods of valuation
The Mount Garnet Tin Project is valued by referring to modified discounted-cash-flow-rate-ofreturn (“DCFROR”) procedures (Appendix I), to obtain a net present value (“NPV”) for the
mining project. This involves designing a basic mine plan and making the necessary estimates
and assumptions to mine and treat the mineralisation.
Comparison with other tin asset transaction has been made to check on the reasonableness
of the DCFROR, together with an analysis of the Mono/Xtreme transaction in 2009.
Mount Garnet Tin Project Valuation
VWPL stresses that a detailed mining and financial model has not been derived from classified
resources under the JORC Code: the valuation is based on a likely scenario based on the
outcomes of previous mining ventures and the current geological information. The target tonnes
of contained tin are considered likely but the exact distribution of tonnage and tenor of
mineralisation has to be established by evaluation drilling and trenching. The project is an
advanced exploration scenario.
Assumptions
The following case study (with sensitivities) was examined:
x
x
x
x
x
x
x
x
x
x
x
x
x
Mined grade – 0.55% Sn
Metal prices: current tin prices are around ~US$20, 000 [spot on 14th October 2014 was
US$ 20,009]. Potential project economics were examined at a range of tin prices from
USD$20,000 to USD$30,000
A$/USD$ exchange rate of 0.88 was used
Mine Life-10 years at 250,000 tpa, assuming ongoing exploration to support future ore
supply.
Pre-start capital costs of $7.2M primarily to upgrade the plant to 250,000 tpa and to
construct a new tailings dam.
Exploration costs of $3.0 M ahead of commencement of production, thereafter $1M per
annum for the life of the operation.
Mining strip ratio of 4:1.
Mining cost of $19.6/tonne of ore mined
Processing cost of $25.4/tonne milled
Smelter return of 82% (includes charge for impurities).
Tin plant recovery of 74.8%. (from MGTR test work)
Tin concentrate grade of 60%.
Tax rate 30%.
While the mill and other facilities are on ML 4349, the bulk of the expected future resources are
located on ML 20547. An allowance $500,000 over 18 months has been made for conducting
environmental studies and obtaining the requisite environmental approvals to allow the operation
to commence.
Preferred Valuation
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The resultant after-tax NPVs (20% discount rate) assuming a long term average tin price of
between USD$ 22,500/tonne and USD$ 26,000/tonne from a variety of scenarios range from
negative $1.25M to plus $10.25M. In the case of the low valuation VWPL has adopted the sale
value of plant and equipment on site of $2.5M (see below).
Our valuation range is accordingly
$2.5 million to $10.25 million
Preferred value of $6.25 million
Note this valuation is for 100% of the Mt Garnet Tin Project it includes both the Mt
Veteran/Summer Hill and Smiths Creek projects. The Valuation takes into account a high level of
risk for changes in tin prices and the grade of mineralisation treated. Estimates have been rounded
to the nearest $0.25 million. VWPL believes that in current economic conditions the valuation
provided is a fair and reasonable estimate.
The financial exposure to treatment plant upgrade and exploration is considered an acceptable
risk. The valuation of the Mount Veteran tin property provided by VWPL in all cases assumes that
the current infrastructure is upgraded and utilised.
VWPL notes that a recent independent valuation of the plant and equipment on site has quoted a
replacement (with new) cost of $5.936 million and a “fair” (an expected sale value) of $2.532 milion
(Andrew Nock Pty Ltd 10th July 2014).
COMPARISON WITH PREVIOUS VALUATIONS
Mount Garnet Tin Project
Prior VWPL valuations
VWPL provided valuations for the Mt Veteran Tin Project in April 2009, and most recently in March
2010. Preferred values were $4.25 million (2009) and $4.00 million (2010).
In August 2007, VWPL placed a preferred value on Mount Veteran of between $3.1 million and
$4.1 million.
Historical valuations
In 1984, Terrence Willstead and Associates valued Mount Veteran Minerals Pty Limited at about
$4 million which included $3 million (replacement value) for the plant and equipment (included
earthworks, dams and reservoirs) and $590 000 for the MLs (includes tin resources assumed as
100 000 tonnes grading 0.5% tin).
Mono Resources/Xtreme Resources transaction
In April 2009, Mono Resources obtained control of Xtreme Resources (then holder of the assets
that now constitute the Mt Garnet Project) by payment of $1.8 million 6 to purchase 73.76% of
the equity in Xtreme. Allowing for other assets held by Xtreme VWPL considers that at that
time an implied price of approximately $2 million was placed on the Mt Garnet Tin Project. At
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the time Independent Expert DMR Corporate described the transaction as “not fair” but “is
considered reasonable”.
Since April 2009, MGTR has spent approximately $2.6 million on capital upgrade works to bring
the treatment plant to an operable condition, and more than $8 million on exploration on the
Mount Garnet Project leases. Mining licences have also been granted for ML 20547 “Summer
Hill”, ML 20655 “Heads or Tails” and ML 20066 “Valetta”. It should also be noted that the tin
price has increased from USD$ 12,000/t to USD$ 20,000/t in the period April 2009 to October
2014.
Other tin transactions
On examination of available public information VWPL believes that the market is likely to pay
in the range of A$75/tonne to A$150/tonne for in situ tin contained within Exploration Targets,
with up to A$550/t paid of in situ JORC Code Compliant resources in the vicinity of an existing
treatment facility. The relevance of these transactions is limited, given the relatively advanced
state of the Mount Garnet Project, particularly the granted mining licences, and existing
treatment plant.
Transactions examined include Stella Resources Ltd/Gippsland (November 2011), Malachite
Resources/Mancala Resources Pty Ltd (June 2012), Monto Minerals Baal Gammon Mine,
purchase from Conquest Mining Ltd (February 2011).
Key Risks and Opportunities
Risks specific to the Mount Garnet Project include
x The requirement to delineate a resource of sufficient tonnes and grade to support an
economic mining operation. In VWPL’s opinion the Mount Garnet area has historically
been the source of numerous small scale higher grade tin occurrences, finding larger
ore bodies with reasonable grades will be necessary to support a mining operation.
MGTR needs to establish at least a two-year Ore Reserve base (backed up by an
inventory of Inferred Resources that can be converted to Reserves as mining
progresses) prior to commencing any mining operations, there is no certainty as to
when or at what cost this can be achieved.
x While Mount Veteran and Summer Hills are granted Mining Leases, specific
environmental approval will be necessary prior to the commencement of mining.
x There are a number of highly prospective drill targets on both the Summer Hills, and
Smiths Creek areas, these should be followed by MGTR.
x Tin price volatility increases the risk associated with future mining operations
6.0 THE TIN MARKET
Tin is primarily used for solder in electrical equipment, given tins non-toxic nature it has largely
replaced lead in this regard. Other uses of tin are for tin plate, chemical production and glass
manufacture.
Demand for tin is primarily driven by the requirements of the Chinese electrical industry.
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Tin prices over the past 5 years have been very volatile, between a high of USD$ 32,500/t and
a low of USD$15,600/t.
Tin prices since 2007 (source LME)
Many commentators are forecasting higher future tin prices, citing a tightening in future supply
in traditional alluvial tin mining counties, particularly Indonesia and Malaysia. With this supply
being replaced by hard rock sources, which can be expected to require higher price levels to
support future mine development. Longer term demand is expected to be driven by rising
demand for consumer electronic goods. Substitution and miniaturisation are considered to be
possible threats to future tin demand.
BNP has a forecast 2015 tin price of USD$ 27,000/t, (Research Note 29th May 2014).
VWPL has chosen to examine the potential project economics, focussing on a range of tin
prices, with a mid-point long term price of USD$ 25,000/t.
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7.0 SOURCES OF INFORMATION
Abundant technical information from MGTR has been made available to VWPL this is mainly
unpublished.
Key internal reports referred to in this valuation are listed below
Smiths Creek High Grade Ore Test
Tableland Analytical Pty Ltd
12 January 2010
Smiths Creek Ore Characterisation.
Tableland Analytical Pty Ltd
2 August 2009
Dalcouth Tin Recovery Test
Tableland Analytical Pty Ltd
7 July 2014
Dalcouth Ore Characterisation
Tableland Analytical Pty Ltd
1 August 2009
Viking Ore Characterisation
Tableland Analytical Pty Ltd
1 August 2009
Concentrate production Target
Tableland Analytical Pty Ltd
13 November 2011
Throughput Upgrade
Tableland Analytical Pty Ltd
28 July 2011
Heads & Tail Tabling Test Work
Tableland Analytical Pty Ltd
5 May 2014
Tailing Volume for Dalcouth Pit Design
AMC Consultants Pty Ltd
26 August 2013
BASELINE ENVIRONMENTAL REPORT
GARIMPEROS PTY LTD
9 September 2013
Plant and Equipment Valuation
Andrew Nock Valuers
10 July 2014
Scoping Study For Mt Veteran Mill
ML20547 & ML4393
Summer Hills
– Review of 2014 Phase 1 Drilling
Rangott Mineral Exploration Pty Ltd 4th September 2014
External References
MGT’s various ASX market releases for period 2012- 2014
MGT Resources Prospectus 7th January 2013
Xtreme Reources Ltd’s Notice of Annual General Meeting dated 9th April 2009
(Contains details of transaction with Mono Resources – and Independent Expert Report by DMR Corporate
31/3/09 relating to the transaction)
Callaghan T. 2011: Dalcouth and Extended Mineral Resource Estimate, Mt Garnet Project, Resource and
Exploration Geology
.
Foord G., 1996. Strategic Review of The Mount Garnet Projects. Prospector Enterprises PTY LTD for Strike Mining
NL.
Gallo J., 1996 ; Various Notes and Files . Strike Mining NL
McLean, D.S., 1985: Summary of Drilling and Results of Drilling Program for Mount Veteran Minerals.
McLean D., 1984 Mount Veteran Tin Mine North Queensland
Robinson H. A., 1980. Smiths Creek Tin Mine Mount. Garnet. Otter Exploration NL.
Sainsbury J., 1998: Mount Veteran Hard Rock Tin Potential Mls 4071 & 4349
Sainsbury J., 2007 : Summer Hill summary of Previous Work. John Sainsbury Consultants Pty Ltd
Sainsbury J., 2007 : Hardrock Tin Deposits Within EPM 14185., John Sainsbury Consultants Pty Ltd
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8.0 DECLARATION
Qualifications and Experience
This report has been prepared by Veronica Webster Pty Limited which has operated in
Australia serving the mining industry since 1980.
Mr. P.N. Scott who is a duly authorised representative of VWPL has prepared the opinion
report, which includes an assessment of fair market value of MGTR’s Mount Garnet Project.
Mr Scott has over 30 years’ experience in the minerals industry, particularly mining for precious
metals and base metals; has held senior positions with Mungana Goldmines Ltd, Foxleigh
Mining Pty Ltd, Otter Gold Mines Group, Normandy Group, Aztec Mining and a number of
overseas mining companies. His responsibilities have frequently included the evaluation and
subsequent development of open pit and underground ore bodies.
Mr Scott holds an honours degree in mining engineering from the Royal School of Mines
London (UK), is an Associate of the Royal School of Mines (UK), is a Fellow of the Australian
Institute of Mining and Metallurgy, a member of the Institute of Materials (UK), and is a
Chartered Engineer (UK).
Mr Scott holds first class mine manager certificates for both the Northern Territory and Western
Australia for the management of open pit and underground metalliferous mines.
Mr L.W. Davis (a Director of VWPL) assisted in the Valuation Report Mr Davis has had over 40
years’ experience in the minerals industry, is a registered Chartered Professional (Geology),
and is affiliated with the Aus. I.M.M., and the A.I.G. He specialises in mineral resource/reserve
estimations, advanced project assessment and exploration management.
Mr Davis has held senior positions with Electrolytic Zinc Co of Australasia Limited, Freeport
Minerals Corporation of Australia, Tenneco Oil & Minerals and Amad NL before joining
Veronica Webster Pty Limited in 1985. Mr. Davis is a registered Chartered Professional
(Geology) and is affiliated with The Australasian Institute of Mining and Metallurgy and the
Australian Institute of Geoscientists.
His principle qualification is Bachelor of Science (Special Geology) Leics., UK. His professional
affiliations are as follows:Fellow The Australasian Institute of Mining & Metallurgy No 103477
Chartered Professional Geology CPGeo
Fellow Australian Institute of Geoscientists
Member Geological Society of Australia
Independence
Veronica Webster Pty Limited L. W. Davis and P. N. Scott have no conflict of interest in
preparing this report. The report has been commissioned by MGTR with payment to be made
for services on a fixed fee basis. The companies and consultants preparing this report have no
association with MGTR nor have they any financial interest in or entitlement to MGTR or any
associates of MGTR.
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It is noted that VWPL separately conducted a valuation report of MGTR’s gold assets in
September 2014, together with an independent review of MGTR’s resources. VWPL has
received payment for both these reports on a standard fee basis.
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Limitations and requirements
The views expressed in this report are solely those of Veronica Webster Pty Limited, P.N. Scott
and L. W. Davis. When conclusions and interpretations credited specifically to other parties are
discussed within the report, then these are not necessarily the views of Veronica Webster Pty
Limited, P. N. Scott or L. W. Davis.
VWPL observes Section 947B of the Corporations Act 2001. In accordance with Corporations
Regulation 7.6.01 (1) (u) and Corporations Amendment Regulations 2003 (No. 7) 2003 No.
202, the Valuation Report is not financial product advice but is intended to provide expert
opinion on matters relevant to the mineral properties of MGTR. P. Scott, L. Davis and VWPL
are not operating under an Australian financial services licence and the advice in the Valuation
is an opinion on matters other than financial products and does not include advice on a financial
product.
All references to mineral resources are consistent with the most recent Australasian Code (and
Guidelines to the Code) for Reporting of Identified Mineral Resources and Ore Reserves:
Reports prepared by the Joint Committee of The Australasian Institute of Mining and
Metallurgy, the Australian Institute of Geoscientists and the Minerals Council of Australia
(JORC).
In preparing the Report, VWPL has observed Guidelines for Technical Assessment and/or
Valuation of Mineral and Petroleum Assets and Mineral and Petroleum Securities for
Independent Expert Reports (The Valmin Code), which is referred to by the Australian
Securities and Investment Commission (“ASIC”) and the Australian Securities Exchange
(“ASX”). As well, ASIC Practice Notes 43, ASIC Practice Note 55; former NCSC Release 149,
has also been observed.
Consents
Veronica Webster Pty Limited has consented to the use of this report by MGTR to support a
corporate transaction if appropriate
For and on behalf of
VERONICA WEBSTER PTY LIMITED
P.N.Scott
BSc (Mining) ARSM MIMM FAIMM C Eng
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APPENDIX I
VALUATION PROCEDURES
Valuation Methodology
Projects, which contain indicated or measured resources from which mining reserves can be defined may then be
the subject of feasibility studies based on estimations for amounts, rates and the costs of production together with
the revenue defined from sales. The discounted cash-flow-rate-of-return ("DCFROR") method may then be applied
to express the value of the project in terms of present day money, often called the Net Present Value ("NPV") using
a variety of interest rates. For selected cases the return on invested funds or internal rate of return ("IRR") expressed
as a percentage is estimated.
DCFROR is obviously the more accurate when the assumptions for the financial models are known with
confidence; contracts for work and sales, etc. The more reliable the assessment of the resources/reserves, costs of
mining and treatment, capital costs of mining and treatment, recovery in the mining and treatment processes, metal
prices, exchange rates and all the associated operation issues, the more accurate the DCFROR method becomes.
But it is always subject to assumptions and uncertainties of the estimations of a current nature and also for those in
the future life of the project. The DCFROR technique cannot take into account abrupt and radical changes to market
conditions.
For long-life projects where operations are expected to continue to sometime in the future with only rough estimates
for costs and sales and based on resources which may not be Indicated or Measured resources, a modified DCFROR
can be applied. The NPV derived from such models may be discounted to obtain an Expected value or an Expected
NPV (“ENPV”). This is a probabilistic approach and the probability factors are judged by and are the responsibility
of the valuer.
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VERONICA WEBSTER PTY. LIMITED
(Incorporated in Queensland; ACN 010 299 224)
Consultants to the Mining Industry
Les W Davis - Minerals Exploration Consultant
Brisbane Office
7 O’Quinn Street
Nudgee Beach QLD. 4014
Telephone & Fax: 07 3267 3355
L Davis 0411 484 295
V Davis 0407 596 301
Email lesdavis@ozemail.com.au
POSTAL ADDRESS: P O Box 619, Hamilton QLD 4007
25th September 2014
Dr Verity Borthwick, Operations Geologist
MGT Resources Limited
Suite 2.05B, Level 2,
68 York St., Sydney,
NSW 2000, Australia.
Dear Verity
RE: INDEPENDENT GEOLOGIST’S VALUATION OF MGT RESOURCES LIMITED GOLD
ASSETS IN QUEENSLAND.
1.0 INTRODUCTION
1.1 Outline of commission
MGT Resources Limited (“MGTR”) commissioned Veronica Webster Pty. Limited ("VWPL")
to provide an Independent Geologist’s Valuation Report (“Valuation”) on nominated gold
assets of in Queensland. The tenements are held in the name of MGTR’s 89.48%-owned
subsidiary MGT Mining Limited, and those nominated for Valuation are the Mineral
Properties of Yarrol, Mount Steadman and Gooroolba, in south-east Queensland and
Pyramid in central Queensland.
These properties were previously assessed by VWPL in 08 March 2010 (updated 21
October 2010) for DMR Corporate Pty Limited of Melbourne: report entitled, Independent
Valuation of the Mineral Properties of Xtreme Resources Limited. MGTR has carried out
limited exploration activity on the relevant Mineral Properties since that report was
completed.
VWPL understands that MGTR may use the Valuation of gold assets to transfer those
assets to another related company. Mr. L Davis of VWPL has prepared the Valuation Report
and consulted with Mr. P N Scott, mining engineer. The views and conclusions expressed in
this report are solely those of VWPL, L W Davis and associate Mr P N Scott.
1.2 Personnel
Mr. L W Davis who is a duly authorised representative and director of VWPL will supervise
the Reporting. VWPL will engage Mr P N Scott, mining engineer, of P S Associates Pty
Limited to assist in the valuation and the Resource reviews. Mr Scott assisted Mr Davis with
the valuations of these tenements in 2010. Mr Scott is a duly authorised representative of
VWPL and therefore has the ability to sign off on reporting.
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Mr. Davis has had 40-years experience in the minerals industry, particularly exploration for
precious metals and base metals, mining geology, ore resource/reserve estimation and
property evaluation. He held senior positions with Electrolytic Zinc Co of Australasia Limited,
Freeport Minerals Corporation of Australia, Tenneco Oil & Minerals and Amad NL before
joining Veronica Webster Pty Limited in 1985. Mr. Davis is a registered Chartered
Professional (Geology) and is affiliated with The Australasian Institute of Mining and
Metallurgy and the Australian Institute of Geoscientists.
His principle qualification is Bachelor of Science (Special Geology) Leics., UK. His
professional affiliations are as follows:Fellow The Australasian Institute of Mining & Metallurgy:103477
Chartered Professional Geology CPGeo
Fellow Australian Institute of Geoscientists
Member
-Geological Society of Australia
Mr P N Scott of PS Associates Pty Limited assisted in the Valuation Report. Mr Scott has
over 30-years experience in the minerals industry, particularly mining for precious metals
and base metals; has held senior positions with Mungana Goldmines Ltd, Ivernia Inc, Otter
Gold Mines Group, Normandy Group, Aztec Mining and a number of overseas mining
companies. His responsibilities have frequently included the evaluation and subsequent
development of open pit and underground ore bodies.
Mr Scott holds an honours degree in mining engineering from the Royal School of Mines
London (UK), is an Associate of the Royal School of Mines (UK), is a Fellow of the Australian
Institute of Mining and Metallurgy, a member of the Institute of Materials (UK), and is a
Chartered Engineer (UK).
Mr Scott holds first class mine manager certificates for both the Northern Territory and
Western Australia for the management of open pit and underground metalliferous mines.
1.3 Tenements
The tenement areas have changed for some Mineral Properties since 2010, but MGTR has
ensured that all the known prospective ground is secure. Therefore VWPL considers that
tenement changes have a bearing on this current Valuation.
Mount Steadman gold prospect is located south of the township of Mt Perry. It is subject to a
5% net proceeds royalty, originally to Probe Resources NL, now with Equatorial Coal
Limited. The existence of this royalty significantly detracts from the value of the property,
together with the statutory state royalty, and any settlement reached with aboriginal land
claimants, makes the future development of this property highly unlikely.
1.4 Information and data perusal
The majority of information was available in 2010 and perused for the Valuation of that year.
This has been reassessed along with the results of ground inspections, geochemical
sampling work and drilling carried out by MGTR. More extensive information is contained in
the 2010 Valuation Report, which has been appendiced.
Since 2010, at Yarrol and Mount Steadman, MGTR only visited the sites for orientation and
carried out some sampling at Mount Steadman.
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Yarrol
At Yarrol, mineralisation is associated with a sodic-altered tonalite in diorite-gabbro terrane
but dissimilar to classic porphyry copper systems elsewhere in Australia or overseas. The
deposits have been extensively drilled over a number of years and Indicated Resources
have been defined (reference Gallo 1996 and 2006; Murray 2007); too small to be economic.
877,000 t @ 1.6 g/t Gold Yarrol North
273,000 t @ 1.5 g/t Gold Central Ridge
VWPL considers that it is possible a small scale heap leach operation could be considered
for Yarrol North, subject to metallurgical testing of the amenability of the unweathered
material to heap leach extraction. A key issue with Yarrol North is the fact that 86% of the
ore identified is primary; with only 14% oxide (any further down dip drilling will increase the
primary ore tonnage). It is likely a gold price of plus USD$1500/ounce would be required to
make this economic (subject to exchange rate).
Mount Steadman
Mount Steadman is considered to belong to a class of bulk-style mineralisation known as
intrusion-related gold deposits (“IRGS”), which was under-recognized until around a decade
ago. IRGS are an economically important class of intrusion-related gold deposits that are
hosted primarily within or in the immediate wall rocks to intrusions and show distinct chemical
characteristics different to other bulk systems such as porphyry copper systems.
IGRS are now sought eagerly because they do form rich gold deposits in their own right.
Copper-molybdenum porphyry deposits on the other hand often have gold as a bi-product but
it is generally very low-grade gold. Therefore it is important to recognize the IGRS
environment. The most commonly discussed IGRS is that of Fort Knox (>5 million ounces
gold) in Alaska. The Pogo gold deposit (~9 million tonnes at an average grade of 17.7 g/t
gold; >5.0 million ounces) also in Alaska is a high grade example of an intrusion-hosted
IGRS and extremely valuable.
The Mount Steadman resources are defined by some 50 drill holes, drilled by various
companies since the mid 1970’s. Historic mining on the lease dates back to the late 1800’s,
with a number of small high grade mines being worked intermittently until the 1940’s. An
uneconomic Indicated Resource 1,200,000 tonnes grading 0.9 g/t gold has been estimated
(Gallo 1996). At current gold prices the economics of trucking this material to the nearby
Mount Rawdon processing plant are unfavourable (a grade of plus 2 g/t gold would be
required to justify examining this option). A small scale heap leach operation could be
considered if test work shows the resource is amenable to heap leach, if gold prices improve
from current levels. The 5% NSR royalty, mentioned previously, will be a major impediment
to any future development at Mount Steadman.
At Mount Steadman, in an effort to generate another exploration target, MGTR collected six
samples situated within a previously defined 0.5 - 1.0 ppm gold in soils anomaly at a site
known as Fitzroy North. Grab and rock chip samples were collected with a deliberate bias for
either granite or quartz in an area of quartz veined granite outcrop and float, within the gold
anomaly. A shallow prospecting shaft situated at the southern end of the Fitzroy Prospect
was dump sampled and a 0.5m-wide pale grey quartz vein was channel sampled. All gold
assay results were less than 1 ppm.
Gooroolba
The geology within Gooroolba (EPM15426) is dominated by acid to intermediate volcanics
and minor sediments of the Triassic volcaniclastics which has been intruded by late Triassic
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dacitic and rhyolitic phases. The area covered by the tenement was considered prospective
for intrusive related gold and copper mineralization (including “porphyry” styles).
The area is considered prospective for intrusive related gold-copper mineralisation
(including “porphyry” styles) but there are no resources.
MGTR field investigations were focused on areas considered to be prospective for gold and
base metals, particularly those with recorded mineral occurrences or in catchments
containing reported stream sediment gold anomalies. The investigations did not establish
definitive explanations for the reported catchment gold anomalies. A total of 21 rock chip
samples at old workings gave elevated assay results.
Pyramid
The Drummond Basin region is important for economic gold deposits such as Pajingo,
Yandan and Wirralie - high-grade gold mineralisation of the low-sulphidation, epithermal
style.
The Pyramid tenement contains several prospects showing gold bearing epithermal style
quartz veins and a low-grade gold zone containing patchy higher-grade intersections has
been discovered at Gettysberg prospect in several older drill campaigns.
MGTR carried out a reverse circulation percussion drilling (“RC”) program at Gettysberg
prospect in 2012. The 11 hole (1265m program) was completed and intersected significant
gold mineralisation over sizeable downhole widths in holes drilled over a 350m strike length.
The aim of the program was to target mineralisation underneath and along strike from
previous drilling. Preliminary modelling of drill sections shows that mineralisation is open at
depth on some sections, and probably plunging to the north east. Gold mineralisation
appears to be associated with fine sulphide-graphite-chlorite network veining and quartzsericite-pyrite alteration within sediments.
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Higher grades are contained within a broadly continuous, low grade gold envelope which is
in the order of 100 m of 0.5 g/t gold (all thicknesses expressed as down hole intersections).
The mineralisation envelope is open to the north and, in some sections, at depth: more
drilling is required to determine its extent.
A soil sampling programme was conducted at Pyramid prosects having similar geology and
style of gold mineralisation occur in the same structural position as Gettysberg Prospect.
MGTR collected 450 samples at 200 m line spacing with 50 m spaced samples, over a strike
length of ~5km. The results are incomplete.
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2.0 VALUATION SUMMARY
In central and south-east Queensland the Yarrol and Mount Steadman gold prospects
contain Indicated Resources (JORC Code 2004), which are currently sub-economic. At
Gooroolba and Pyramid, there are no resources and the value lies in exploration potential
and the ability to generate appealing targets for drilling. Extra work by MGTR has not
changed the exploration data base very except that at Pyramid drilling failed to find
economic mineralisation underneath and along strike from previous drilling, but instead
produced zones of low-grade gold assays containing sporadic high-grade gold assays.
Therefore we have used Expected Value techniques similar to the 2010 Valuation and have
borne in mind the following circumstances:x
Examination of the all-important gold price showed that in October 2010 the gold
price was around US$1340 compared with US$1220 in September 2014. It is worth
noting that the past three years have seen a declining gold price, with many
commentators forecasting further falls in the price (Goldman Sachs long term gold
price forecast is US$1200/ounce (real)).
x
The exchange rate AU/US was ~0.97 in October 2010 compared to ~0.90 in
September 2014. A decline in the A$/USD$ exchange rate will assist the various
project economics. (Goldman Sachs forecast a long term exchange rate of
USD$0.74.)
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x
x
x
x
x
x
x
Therefore the AUD gold prices for each Valuation are very similar; A$1381/ounce in
October 2010 compared to ~A$1372/ounce in September 2014.
The CPI has risen from 96.5-96.9 in October 2010 to 105.9 in June 2014 (September
figure not yet available).
Mining costs have increased at least by the CPI.
As far as market sentiment is concerned we know from geological and mining
underemployment figures and the general difficulty junior miners are having rising
capital for high-risk ventures that 2014 is worse than 2010 for operators.
During 2009 and later, Xtreme Limited held discussions with companies exploring for
and mining gold on adjacent tenements with a view of arranging a farm-out Joint
Venture but they failed to do so.
VWPL considers that the changes in tenements; reductions and additions do not
affect the Valuation when comparing previous valuations.
Costs of holding these tenements are increasing, particularly in terms of meeting the
minimum work requirements necessary to maintain the tenements in good standing.
2.1 Summary Valuation Table
Project/Prospect
South-east Queensland
Yarrol
Mount Steadman
Gooroolba
Central Queensland
Pyramid
TOTAL
HIGH
LOW
PREFERRED
0.60
0.20
0.10
0.15
0.05
0.05
0.30
0.10
0.05
0.20
0.05
0.15
1.10
0.30
0.60
Table 1 Valuation of Xtreme Resources Limited Mineral Properties.
In the absence of scoping studies the resources and exploration projects were valued by
“Expected Value” methods and the “Multiples of exploration expenditure method, considered
occasionally for comparison but not reported. With Expected Value, a NPV target is
7
Page 103 of 200
assumed. For each of the Mineral Properties of has assigned probabilities (the cumulative
probability for the NPV, less the discounted exploration expenditure) for discovering deposits
for which NPVs or cash values have been estimated. Methods are described in Appendix I.
The valuations are only valid at the date of this Valuation Report and conditional on the
granting of applications for new tenements and the granting of renewal applications for
existing tenements.
All estimates are in Australian dollars and rounded to the nearest and A$0.05 million.
Comparison with 2010 Valuation
For the reasons stated above, the preferred Value in 2014 has been reduced from $0.9
million to $0.6 million; the high Value in 2014 has been reduced from $1.8 million to $1.1
million and the low Value in 2014 has been reduced from $0.9 million to $0.3 million.
Comparison with recent transactions
The sub economic grade and the small size of the resources subject to this valuation makes
comparisons with most recent transactions of limited relevance. The total in ground
resources (indicated plus inferred) subject to this valuation is 93,000 ounces, at the preferred
valuation of A$0.6 million this equates to A$6.4/per resource ounce.
Yours sincerely,
For and on behalf of Veronica Webster Pty Limited.
Les Davis
Patrick Scott
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APPENDIX –
INDEPENDENT VALUATION OF THE MINERAL PROPERTIES OF XTREME RESOURCES
LIMITED IN 2010
VERONICA WEBSTER PTY. LIMITED
(Incorporated in Queensland; ACN 010 299 224)
Consultants to the Mining Industry
Les W Davis - Minerals Exploration Consultant
Brisbane Office
7 O'Quinn Street
Nudgee Beach, QLD. 4014
Telephone & Fax: 07 3267 3355
L Davis 0411 484 295
V Davis 0407 596 301
Email lesdavis@ozemail.com.au
POSTAL ADDRESS: P O Box 619, Hamilton QLD 4007
08 March 2010
Mr D M Ryan
DMR Corporate Pty Limited
470 Collins Street
Melbourne Victoria 3000
Dear Sir
RE: INDEPENDENT VALUATION OF THE MINERAL PROPERTIES OF XTREME RESOURCES
LIMITED
3.0 INTRODUCTION
1.1 Outline of commission
DMR Corporate Pty Limited (“DMR”) commissioned Veronica Webster Pty Limited ("VWPL") to prepare an
Independent Valuation (“Valuation” or “Valuation Report”) for the mineral properties of Xtreme Resources
Limited (“XRL”), a subsidiary of Mono Resources Limited (“MNX”) in Queensland.
The Valuation Report is an update of a similar Valuation carried out in early 2009 which was
included in an independent expert’s report to accompany an Information Memorandum to
XRL shareholders. The updated Valuation of 2010 will be included in an independent
expert’s report in relation to a Scheme of Arrangement1 between MNX which is listed on the
National Stock Exchange of Australia and XRL shareholders.
1.2 Information
Mr. L Davis of VWPL has prepared the Valuation Report and consulted with Mr. P N Scott, mining engineer.
He was supplied exploration data by XRL and has been instructed to rely on the information being accurate and
complete. Mr Davis has relied at his own discretion on the observations and interpretations of previous
explorers, exploration consultants and XRL geological staff. However, the views and conclusions expressed in
this report are solely those of VWPL, L W Davis and associate Mr P N Scott.
In 2009 and subsequently in March 2010, VWPL engaged Mr P N Scott, mining engineer, of PS Associates Pty
Limited to assist in the valuation of those properties containing resources and mining plans. L Davis and P Scott
1
MNX has announced that it has agreed with its 73.76% owned subsidiary, XRL, to acquire all of the shares in XRL which it does not
presently own. The proposed acquisition is to take place by way of a Scheme of Arrangement which needs to be approved by ASIC and the
Federal Court of Australia pursuant to the provisions of Section 411 of the Corporations Act and an Originating Process has been filed in the
Federal Court of Australia and served on ASIC in relation to the proposed Scheme of Arrangement. Under the Scheme of Arrangement it is
proposed that MNX will pay shareholders in XRL holding less than 40,000 shares 5¢ cash for each share that they presently own in XRL
and in respect of shareholders in XRL holding more than 40,000 shares it is proposed to allot one (1) MNX share for every six (6) shares
held by those shareholders.
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visited the mineral property of Mount Veteran in March 2007 and inspected the tin lodes and treatment plants of
the Mount Veteran Mining Lease No 4349 “Summer Hills”. Mr Davis had visited most of the other properties of
XRL in 1994, 1998, 2002, 2004 and 2006. All the properties have been examined in the field except the
Pyramid Project.
An appraisal of all the above mentioned information forms the basis of this report.
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4.0 VALUATION SUMMARY
Xtreme Resources Limited has an advanced tin project, the Mount Veteran project, in far north Queensland
under Mining Lease and Mining Lease application plus exploration areas where there is opportunity for tin and
gold discovery.
In central and south-east Queensland, four gold projects are available and two of these, Yarrol and Mount
Steadman gold prospects, contain Indicated Resources which are currently marginal to sub-economic.
The Mount Veteran project contains a treatment plant which needs about $1.2 million to make it fully
operational and upgrade it to 150 000 tonne-per-annum (“tpa”) capacity. Nearby tin resources are available
sometimes as Indicated Resources and Inferred Resources but most have to be proved with further exploration.
The valuation is based on a 150 000 tpa (tonnes per annum) operation, lasting a minimum of seven years.
2.1 Summary Valuation Table
Project/Prospect
HIGH
LOW
PREFERRED
$ million
$ million
$ million
7.50
0.25
1.50
0.10
4.00
0.10
Yarrol
0.80
0.40
0.40
Mount Steadman
0.40
0.20
0.20
Gooroolba
0.20
0.10
0.10
0.40
0.20
0.20
Far north Queensland
Mount Veteran
Mount Garnet
South-east Queensland
Central Queensland
Pyramid
TOTAL
9.55
2.50
Table 1 Valuation of Xtreme Resources Limited Mineral Properties.
5.00
The Mount Veteran Project has been valued by referring to modified discounted-cash-flow-rate-of-return
financial models, with net-present-value (“NPV”) reported after tax. The essential differences between the 2009
and 2010 Valuations are as follows:
1) Major changes of price and exchange rates. There has been a strong increase in the tin price since the 2009
Valuation. This is part of strong growth since circa 2006-2007 only marred by the “global financial crisis”
in 2008.
2) Exploration carried out in 2009 at the Dalcouth, Viking and Smiths Creek tin deposits.
3) Recognition of the extra costs and difficulties in obtaining ML grants and mining approvals.
These factors have caused modification of the financial model assumptions of the 2009 Valuation.
2.2 Mount Veteran Tin Project - Valuation 2009 versus Valuation 2010
Valuation
High
low
Preferred
2009
2010
10.50
7.50
1.00
1.50
4.25
4.00
We believe that the better tin price is sustainable in the mid term and has a marked positive affect on the project.
Negative aspects are mainly:
x From recent drilling it is considered less likely that tin head grades of average 0.7% Sn for 150 000
tonnes per annum can be achieved.
x Likely increased costs and delays in obtaining granted mining title and permitting and approvals for
operations.
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x
Forecast changes in Queenland State royalty
The lower estimate is higher in 2010, influenced by tin price. For the preferred and high cases we have used
discount rates of not less than 20%; this been seen as appropriate given the current status of the projects. In 2009
a 15% discount was applied more frequently.
In 2009, exploration projects were valued by “Expected Value” methods and the “Multiples of exploration
expenditure method, considered occasionally for comparison but not reported. With Expected Value, a NPV
target is assumed. For the exploration mineral properties of Xtreme Resources Limited, VWPL has assigned
probabilities (the cumulative probability for the NPV, less the discounted exploration expenditure) for
discovering deposits for which NPVs or cash values have been estimated. Methods are described in Appendix I.
The valuations are only valid at the date of this Valuation Report and conditional on the granting of applications
for new tenements and the granting of renewal applications for existing tenements.
All estimates are in Australian dollars and rounded to the nearest A$0.25 million for Mount Veteran Tin
Projects and A$0.05 million for other projects.
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5.0 TENEMENTS
The following Table lists the tenements relevant to this Report, all of which are warranted by XRL to be in good
standing.
State
QLD
Tenement
Name
Mount Veteran
Tenement ID
ML 4349
Area
Km2
17.85Ha
Holder
%
Garimperos
Limited
100
QLD
Summer Hill
MLA 20547
1200Ha
Garimperos
Limited
100
QLD
Yarrol
EPM 8402
12
XRL
100
QLD
Mount
Steadman
EPM 12834
12
XRL
100
QLD
Gooroolba
EPM 15426
155
XRL
100
QLD
Pyramid
EPM 12887
189
XRL
100
QLD
Mount Garnet
EPM 16948
77
XRL
100
Comments
Covers former EPM’s 8994 &
8998
3.1 MLA 20547
XRL expects to have the MLA approved by the end of April because EPA (Environmental
Protection Agency) Level 2 approval has been obtained and only the land owner’s consent is
now required. EPA Level 2 allows an annual mill feed up to 100 000 metric tonnes. If XRL
desires to process more than that quantity, EPA Level 1 approval is necessary.
Concerns are raised as to the rapid granting of the MLA 20547 which is crucial to the tin
project because it contains the majority of the resources. Approvals and Licences have now
to be obtained from the Department of Environmental and Resource Management (“DERM”)
as well as the Department of Queensland Mines and Energy (“QME”) within the Department
of Employment, Economic Development and Innovation (“DEEDI”).
On 27 January 2009, Queensland Mines and Energy, at the direction of the Premier, established arrangements to
control Queensland's mining and petroleum exploration and development approval processes. DEEDI was
assigned as lead agency for guiding projects, other than State significant projects, through all parts of the
regulatory approvals process across relevant agencies, including the DERM and the Department of
Infrastructure and Planning (“DIP”). This also involves co-ordinating the assessments of Environmental Impact
Statements (“EIS”). Particular attention has been given to mapping the EIS process for mining projects under
the Environmental Protection Act 1994 (EP Act) managed by DERM.
Once MLA 20547 has been granted XRL will still need an approved environmental management plan (EMP),
and Plan of Operations (POOP) from DERM.
3.2 Mount Steadman royalty
Equatorial Coal Limited holds a royalty over the Mount Steadman Prospect amounting to 5% of the value of
gold produced after deducting mining and treatment expenses.
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4.0 BRIEF OVERVIEW OF XRL PROJECTS
XRL has several advanced exploration areas for tin and gold in Queensland which are now cotrolled by MNX.
XRL has decided to farm-out joint venture or sell all projects except those containing tin prospects; that is all
apart from the Mount Veteran lease areas and the surrounding EPM 16948, Mount Garnet. Discussions with
companies exploring for and mining gold on adjacent tenements have been initiated. The main reason for
farming out or divesting gold projects is that the effort of XRL will be focused on tin in the Mount Garnet
district.
Consequently, we have discussed the tin projects in similar detail to that of 2009, adding the new exploration
organised by XRL. This Valuation update in 2010 does not provide the details of other projects, gold mainly, as
in the 2009 Valuation.
4.1 Mount Veteran (Mount Veteran ML 4349 and Summer Hill MLA 20547).
The Mount Veteran tin project is situated in the Mount Garnet district of Far North Queensland. The area is
recognised as one of Australia’s major tin provinces where tin mining has been carried out over a period of more
than 100 years. Mining has been conducted from this area at times of favourable tin demand and prices. The district
has a history of small tonnage operations based on very rich mineralisation.
The Mount Veteran project contains a treatment plant which in 2009 was considered to
require about $1.2 million to make it fully operational and upgrade it to 150 000 tpa capacity.
Nearby tin resources are available as Indicated Resources and Inferred Resources but most
have to be proved with further exploration. The valuation is based on a 150 000 tonne-perannum (“tpa”) operation, lasting a minimum of seven years.
The 17 ha mining lease contains a 20 tonne per hour Processing Mill and a Smelter (the smelter has only a
licence for 3.5 tonnes of metal per year), 300 mega litres of dam capacity, three phase power and camp and
offices. In 2009, VWPL was instructed to rely on the previous (1999) on “going operation” valuation by Ellis
Hughes of $1 088 000. In April 2007, R & L Atkinson estimated a current indicative “replacement value” of $5
000 000 to $6 000 000.
The Annual Report 2009 states that XRL has commenced upgrade and refurbishment work
at the Mount Veteran Mill and premises. XRL purchased and re-installed the Hazmag
crusher, which was originally part of the plant in mid 2009. Apart from general cleaning and
maintenance of the mill, XRL spent around $500 000 and purchased a Falcon Concentrator,
triple deck Derreck screen, FM1 spirals, new tables and a new 20 m conveyor belt, all of
which are expected to be installed by end the of June 2010.
4.1.1 Summer Hill tin lodes
No systematic exploration of the whole potential of the Summer Hill tin field has been carried out but rather ad
hoc searching for high-grade patches to fulfil the immediate requirements of the treatment facilities for cashflow generation.
In 1985, Greg Kater and Associates Pty Ltd (“Kater”) estimated the tonnes for the principle lodes in the vicinity
of the treatment plant, see Figure 1.
Tonnes
500 000
6 000 000
4 000 000
700 000
2 000 000
800 000
250 000
600 000
14 850 000
Dalcouth
Summer Hill
Tom Hood
Mt Veteran
Vi ki n g
Divide
Extended
May Day
TOTAL
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Kater also estimated other mineralisation, not yet investigated by XRL and produced a total estimate of 15 100
000 tonnes.
Figure 1 Summer Hill lodes (after XRL)
Kater classified these tonnes as inferred and stated:“Recent bulk testing and past mining experience indicates head grade tenor varies between 0.15%
and 1% tin overall, whilst observation of numerous exposures indicates patches of higher grades
(several percentages) of tin can be easily selected for quality control of head grade.
Based on the large quantity of mineralised Lode available, there is a high probability that at least
500,000 to 1,000,000 tonnes could be produced, using careful quality control and blending, to maintain
a head grade of 0.6% to 0.7% Sn.
On current exposure and development, there is sufficient; resource to easily achieve this head
grade by quality control at a rate of 30,000 to 60,000 tonnes per year for at least 10 years.”
In 2009, VWPL believed that if XRL explored systematically (trenching and drilling) with a budget of $300
000 per annum then it is possible to discover resources sufficient to provide a feed of 150 000 tonnes grading
0.7% tin, each year for several years. The Valuation is accordingly based on a 150 000 tpa operation, but recent
exploration drilling has shown that it might be more difficult to achieve this outcome than was first thought.
4.1.2 Exploration by XRL in 2009.
Drill testing of targets defined by study of old reports and surface exploration of tenements has commenced. In
EPM 16948, the Smith Creek Tin prospect area (in immediate vicinity of the historic Smith Creek underground
tin mine). Six inclined drill holes have been completed with an average depth of holes approximately 50 m.
XRL reports that the results are disappointing but in our view there is ample scope for testing other targets at the
15
Page 111 of 200
prospect. XRL were testing for shallow open pittable resources but some of the interpreted targets are much
deeper and along strike from the XRL drilling.
In MLA 20547, at the Dalcouth and Tom Hood prospect areas, inclined drill holes have been completed
(average depth of holes approximately 30 m); tin mineralisation was intersected in some of the holes.
At Dalcouth the recent drilling campaign completed a total of forty 30m-drill holes for a total of 1200 m. All
holes were inclined scissor holes, intersecting the mineralised zone from both sides. Drill holes were relatively
short because the weathered oxidised zone is being tested. Mineralisation was intersected in most holes and
assay results identified high-grade zones of mineralisation, see Figure 2.
The weighted mean grade of 18 intersections seen on Figure 2 is 0.54% Sn.
Openpitting of the mineralisation was investigated but XRL decided that it would not be economical due to high
percentage of waste rock and moderate grade of tin.
Figure 2- Dalcouth tin deposit -selected drill Intervals and new drill hole locations (after XRL)
Samples for preliminary metallurgical tests have been collected from the Dalcouth Prospect.
XRL reports that “A 100 kg sample representing weathered oxidised ore obtained from Dalcouth open cut, has
been processed by consultant Mr. Tony King at his laboratory at Wandecla (near Herberton). Average grade
(determined on the basis of tin recovered in concentrates and tin in tailings) is 0.86% Sn. The grain size of
cassiterite (tin oxide mineral) is in 10 – 350 micron range, with the bulk in 75 – 180 micron range (relatively
coarse grain size). Clean liberation of cassiterite is obtained at top grind size of 260 microns (a relatively
favourable outcome). Recovery of tin to rougher concentrate was 67.2% and recovery to middlings concentrate
was 9% for a total recovery of 76.3%.”
XRL reports that the results from Tom Hood deposit are disappointing.
Assays from seven inclined 30 m-drill holes are all negative – the best 1 m interval gave only 0.081% SnO2 and
there are broad zones of about 0.01% SnO2. The mineralised zone contains quartz veining and limonite and is
16
Page 112 of 200
up to 40 m wide and at least 800 m long. The drilling is therefore considered to be a light test of the zone but it
has shown that a visual assessment of grade from surface exposure is difficult.
4.1.3 Conclusions – tin exploration in Summer Hill MLA 20547.
The Dalcouth drilling has shown that vein tin mineralisation is patchy and difficult to outline. Close spaced
drilling and trial mining will be required to assess resources.
Only the Dalcouth deposit has been tested sufficiently so that high-grade intersections can be investigated
further
4.1.4 Mount Veteran tin plant refurbishment
XRL considers that the Mount. Veteran Plant could be upgraded to process in the order of 250 000 tonnes of ore
per annum; however in the first stage the focus will be on mining and processing relatively high grade ore so
that the initial production will be based on processing approximately 125 000 tonnes of ore per annum (based on
assumption that the mill will operate 16 hours a day, 312 days a year (5000 hours per year); to process 125 000
tonnes per annum, the plant would process about 25 tonnes per hour). The current environmental approval is for
up to 100 000 per annum.
4.2 Mount Garnet (Mt Garnet EPM 16948)
EPM 16948 was granted on 17 February 2009 for a term of five years covers the Nymbool gold-copper prospect
and the Smiths Creek Tin mine.
4.2.1 Nymbool gold-copper prospect
The Nymbool gold-copper prospect is situated immediately north-west of the township of Mount Garnet in
Northern Queensland. XRL plans extra drilling at the Nymbool Gold Prospect and the Ambrose Gully Gold
Prospect where bulk low-grade gold mineralisation has been discovered and low-grade sub-economic resources
have been outlined.
4.2.3 Smiths Creek Tin Mine
The Smiths Creek Tin Mine was discovered in 1901 and produced tin from both open cut and underground
workings between 1903 and 1909. When the mine closed in 1909, the underground operation was estimated to
have produced about 60 000 tonnes of ore at an average grade of about 4% tin per tonne. An additional 23 800
tonnes were won by open-cutting mineralisation estimated to have graded approximately 0.7% tin.
Short hole drilling (six inclined 50 m-holes) by XRL in 2009 was disappointing but interpreted deep targets
were not tested.
4.3 Yarrol Gold Prospect
In the Yarrol gold district of SE Queensland (25kms south east of Monto), small gold resources have been
defined and they may be of interest to owners of the nearby operating gold mine at Mt. Rawdon. Divestment of
these tenementsis planned.
At Central Ridge Prospect an in-situ (geological) Indicated resource of 273 000 tonnes grading 1.5 g/t gold was
estimated using a bottom cut-off grade of 0.5 g/t gold and a top cut of 20.0 g/t gold. With no top cut the grade
becomes 3.1 g/t gold.
At “Yarrol North” Prospect an Indicated Resource of 877 000 tonnes grading 1.5 g/t gold (cut-off grade of 0.5
g/t gold) was estimated. With a higher bottom cut-off (1.2 g/t gold) the resource becomes 431 000 tonnes
grading 2.1 g/t gold
4.4 Mount Steadman
Mount Steadman gold prospect is located south of the township of Mt Perry.
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Page 113 of 200
Recent exploration has focused on the Fitzroy Prospect, 1 km to the east of the old Mount Steadman Mine,
where approximately 1.2 million tonnes grading 0.9 g/t is quoted as an Indicated Resource (contained gold, 35
000 ounces).
4.5 Gooroolba
EPM 15426 (of approximately 325 square kilometres) is located some 30 km south of Mount Perry in Southeast Queensland.
The area is considered prospective for intrusive related gold-copper mineralisation (including “porphyry”
styles) but there are no resources.
4.6 Pyramid
The Drummond Basin region is important for economic gold deposits such as Pajingo, Yandan and Wirralie high-grade gold mineralisation of the low-sulphidation, epithermal style.
The tenement contains several prospects showing gold bearing epithermal style quartz veins and a low-grade
gold zone containing patchy higher-grade intersections has been discovered at Gettysberg in several older drill
campaigns.
Discussions with companies exploring for and mining gold on adjacent tenements have been initiated with a
view of arranging a farm-out Joint Venture. The main reason for farming out or divesting gold projects is that
the effort of the Xtreme Resources team will be focused 100% on tin in Mt. Garnet district.
18
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5.0 VALUATION OF XRL PROJECTS
5.1 Methods of valuation
The Mount Veteran Tin and is valued by referring to modified discounted-cash-flow-rate-of-return
(“DCFROR”) procedures (Appendix I), to obtain a net present value (“NPV”) for the mining project. This
involves designing a mine plan and making the necessary estimates and assumptions to mine and treat the
mineralisation.
All other prospects are treated as straightforward exploration using Expected Value methods (Appendix I).
Expected Value methods and the “Multiples of exploration expenditure method” is considered occasionally for
comparison but has not been reported. With Expected Value, a NPV target is assumed. For the mineral
properties of XRL, VWPL has assigned probabilities (the cumulative probability for the NPV, less the
discounted exploration expenditure) for discovering deposits for which NPVs or cash values have been
estimated. Methods are described in Appendix I.
5.2 Mount Veteran Valuation
VWPL stresses that a detailed mining and financial model has not been derived from classified resources under the
JORC Code: it is a likely scenario based on the outcomes of previous mining ventures and the current geological
information. The target tonnes of contained tin are considered probable but the exact distribution of tonnage and
tenor of mineralisation has to be established by evaluation drilling and trenching. The project is an advanced
exploration scenario.
The essential differences between the 2009 and 2010 Valuations are as follows:
1
Major changes of price and exchange rates. The following graphs show a strong increase in the tin price
since the 2009 Valuation. This is part of strong growth since circa 2006-2007 only marred by the “global
financial crisis in 2008 (see Figures 3 and 4).
Figure 3. Tin price from early 2009 to present
19
Page 115 of 200
Figure 4. Tin price change since 1998 – vertical lines represent one year
The long term tin price outlook estimated by polling leading resource analysis by Reuters is between US$7600
and US$18 000, with an average of US$14 600.
2
Exploration carried out in 2009 at the Dalcouth, Viking and Smiths Creek tin deposits.
3
Recognition of the extra costs and difficulties in obtaining ML grants and mining approvals.
4
The probable introduction of a higher Queensland State royalty depending on average quarterly
metal price.
5
Improvements and planned improvements to the Mount Veteran treatment plant.
This has resulted in modification of the financial model assumptions of 2009.
5.2.1 Assumptions
The following case studies (with sensitivities) were examined:
x
x
x
x
x
x
x
x
x
x
x
x
x
Mined grade – 0.5 to 0.7% Sn (recent exploration at the Dalcouth deposit apparently indicates that 0.7% Sn
head-grade is optimistic for this deposit as far as significant tonnes are concerned).
Metal prices observed: current tin prices are around ~US$17 000 spot and on 05th March 2010 was US$
17 179. A nominal US$15 000 for 15 months was used as a base case. Current exchange rates are
US$/A$, ~0.9. A nominal 0.8 was used within a range of 0.7 to 1.0.
Reserve - 1 000 000 tonnes ore mined in seven years; 150 000 tonnes per year.
Pre-start capital costs of $2.0 million to $4.0 million.
Exploration costs of $300 000 in the first year and $150 000 per annum.
Mine recovery of 95%.
Mining cost per tonne $3.25: opencut mining to 30 m.
Smelter returns 90%
Tin plant recovery of 70%.
Tin concentrate grade of 60%.
Treatment cost per tonne $18.
Rehabilitation of nil to $50 000 to $150 000.
Tax rate 30%.
While the mill and other facilities are on the existing ML 4349, the bulk of the resources are located on MLA
20547. The timing for granting and approval conditions of this MLA is uncertain and this has been considered in the
valuation provided.
The resultant after-tax NPVs from a variety of scenarios range from:
20
Page 116 of 200
$1.5 million to $7.5 million
preferred range of NPV value of $3 to $5 million
The Valuation takes into account a high level of risk for changes in tin prices and the grade of mineralisation treated.
Estimates have been rounded to the nearest $0.25 million. VWPL believes that in current economic conditions the
valuation provided is a fair and reasonable estimate.
The financial exposure to treatment plant upgrade and exploration is an acceptable risk. The valuation of the Mount
Veteran tin property provided by VWPL in all cases assumes that the current infrastructure is upgraded and
utilised. As such, only a low estimated value of this infrastructure after project completion and environmental
rehabilitation is considered. This value is not comparable to the current “going concern” and sale values
available for the project.
5.3 Yarrol, Mount Steadman, Gooroolba, Mount Garnet and Pyramid project valuations.
The value ranges estimated in 2009 have not been changed but in the absence of positive exploration programs
and XRL’s stated desire to divest or farm-out these projects we have adopted the low value in the range as the
preferred value.
5.4 Summary Valuation Table
Exploration Project
Exploration
risk to continue
in %
Target
NPV
$millions
Chance
given to
target
NPV in
%
Cumulative
probability
for
discovery
(preferred
case)
1
95
5
4
150
1
1
95
5
4
150
1
1
95
5
4
150
1
1
95
5
4
150
1
1
95
5
4
150
1
0.22
(1 in 5)
0.01
(1 in 90)
0.002
(1 in 450)
0.10
(1 in 10)
0.004
(1 in 250)
0.001
(1 in 1000)
0.10
(1 in 10)
0.004
(1 in 250)
0.001
(1 in 1000)
0.05
(1 in 20)
0.002
(1 in 450)
0.0006
(1 in 1800)
0.1
(1 in 15)
0.004
(1 in 300)
0.001
(1 in 1250)
Mount Veteran
40 to 80
Yarrol
20 to 70
Mount Steadman
20 to 70
Pyramid
20 to 70
Mount Garnet
30 to 70
Gooroolba
TOTALS
Value $ million
High
low
Preferr
ed
7.5
1.5
4.0
0.8
0.4
0.4
0.4
0.2
0.2
0.4
0.2
0.2
0.25
0.1
0.1
0.2
0.1
0.1
9.55
2.5
5.0
21
Page 117 of 200
Table 2. Valuation of Xtreme properties.
22
Page 118 of 200
3.0 COMPARISON WITH PREVIOUS VALUATIONS
3.1 Mount Veteran Tin Project - Valuation 2009 versus Valuation 2010
Valuation
High
low
Preferred
2009
2010
10.50
7.50
1.00
1.50
4.25
4.00
We believe that the better tin price is sustainable in the mid term and has a marked positive affect on the project.
Negative aspects are mainly:
x Questionable as to whether tin head grades of average 0.7% Sn for 150 000 tonnes per annum could be
sustained.
x Likely increased costs and delays in obtaining granted mining title and permitting and approvals for
operations.
The lower estimate is higher in 2010, influenced by tin price. For the preferred cases we have used discount
rates of not less than 20% because of the negative aspects.
3.1.1 MNX Market Capitalisation
The National Stock Exchange of Australia has recently shown a market capitalisation of between ~$14.6 million
and ~$19.5 million based on $0.30 to $0.4 per share but we think that the shares are too thinly traded for this to
be reliable information.
3.2 Historical valuations
In 1984, Terrence Willstead and Associates valued Mount Veteran Minerals Pty Limited at about $4
million which included $3 million (replacement value) for the plant and equipment (included
earthworks, dams and reservoirs) and $590 000 for the MLs (includes tin resources assumed as 100
000 tonnes grading 0.5% tin).
In August 2007, VWPL placed a preferred value on Mount Veteran of between 3.1 and 4.1 million
when the tin price was about $10 000 and the AUD$/US$ was 0.75. Since that time the tin price has
moved to higher than US$20 000, then back to US$11 350 (16 February 2008), closer to current and
15 month forward prices at the date of this Report.
VWPL valued some of the other XRL mineral properties in 1994, 2000 and 2004 at times when the
gold price was considerably less and when exploration investment was very poor. Direct comparison
is often meaningless. Exploration work has change the character of the properties.
On 01 April 2007 (updated on 03 August 2007), VWPL prepared an Independent Valuation
for the mineral properties of Garimperos Limited (properties now owned by XRL) in north
Queensland. The exploration status of the mineral properties has changed for commodity
prices and exploration/mining environment with severe downward pressure on these.
Consequently, our current valuation for the same properties is lower. Gold is trading very
high currently and this means that gold resources justify revaluation. However, in the case of
Mount Steadman and Yarrol the affect of a poor investment environment, higher costs and
the absence of sufficient tonnages of readily treatable mineralisation has offset this trend in
gold price.
4.0 SOURCES OF INFORMATION
Abundant technical information of XRL is mainly unpublished.
4.1 Reports of Mono Resources Limited and its Controlled Entities
23
Page 119 of 200
Stream Sediment Sampling Results – Summer Hill MLA 20547
Jacob Rebek – 3 December 2009
Brief Review of Drilling Results and Plan for New Drill Holes – Dalcouth Jacob Rebek – 3 Dec 09
NSX Announcement 29th April 2009 - progress report on Xtreme’sactivities.
Annual Report 2009 and Preliminary Financial Report for the period ended 30 June 2009
NSX Announcement 10 February 2010 –Results From Drilling, Dalcouth (MLA - 20547)
4.2 Other
Queensland Mines and Energy - Department of Employment, Economic Development and Innovation Streamlining Approvals Project Mining and Petroleum Tenure Approval Process November 2009
Reuters survey of base metal price forecasts. www.forbes.com
5.0 DECLARATION
5.1 Qualifications and Experience
This report has been prepared by Veronica Webster Pty Limited which has operated in Australia serving the
mining industry since 1980.
Mr. L W Davis who is a duly authorised representative and director of VWPL has prepared the opinion report,
which includes an assessment of fair market value of the mineral tenements of XRL. Mr Davis has had over 40
years experience in the minerals industry, is a registered Chartered Professional (Geology), and is affiliated with
the Aus. I.M.M., and the A.I.G. He specialises in mineral resource/reserve estimations, advanced project
assessment and exploration management.
Mr. Davis has had 40 years experience in the minerals industry, particularly exploration for precious metals and
base metals, mining geology, ore resource/reserve estimation and property evaluation. He held senior positions
with Electrolytic Zinc Co of Australasia Limited, Freeport Minerals Corporation of Australia, Tenneco Oil &
Minerals and Amad NL before joining Veronica Webster Pty Limited in 1985. Mr. Davis is a registered
Chartered Professional (Geology) and is affiliated with The Australasian Institute of Mining and Metallurgy and
the Australian Institute of Geoscientists.
His principle qualification is Bachelor of Science (Special Geology) Leics., UK. His professional affiliations
are as follows:Fellow The Australasian Institute of Mining & Metallurgy:103477
Chartered Professional Geology CPGeo
Fellow Australian Institute of Geoscientists
Member -Geological Society of Australia
Mr P N Scott of PS Associates Pty Limited assisted in the Valuation Report. Mr Scott has over 30 years
experience in the minerals industry, particularly mining for precious metals and base metals; has held senior
positions with Otter Gold Mines Group, Normandy Group, Aztec Mining and a number of overseas mining
companies. His responsibilities have frequently included the evaluation and subsequent development of open pit
and underground ore bodies.
Mr Scott holds an honours degree in mining engineering from the Royal School of Mines London (UK), is an
Associate of the Royal School of Mines (UK), is a Fellow of the Australian Institute of Mining and Metallurgy,
a member of the Institute of Materials (UK), and is a Chartered Engineer (UK).
Mr Scott holds first class mine manager certificates for both the Northern Territory and Western Australia for the
management of open pit and underground metalliferous mines.
5.2 Independence
24
Page 120 of 200
Veronica Webster Pty Limited L W Davis and P N Scott have no conflict of interest in preparing this report. The
report has been commissioned by DMR with payment to be made for services rendered solely on a standard
time-fee basis. The companies and consultants preparing this report have no association with MNX or XRL nor
have they any financial interest in or entitlement to MNX or XRL or any associates of MNX or XRL.
5.3 Limitations and requirements
The views expressed in this report are solely those of Veronica Webster Pty Limited, and L W Davis. When
conclusions and interpretations credited specifically to other parties are discussed within the report, then these
are not necessarily the views of Veronica Webster Pty Limited or L W Davis.
L Davis observes Section 947B of the Corporations Act 2001. In accordance with Corporations Regulation
7.6.01 (1) (u) and Corporations Amendment Regulations 2003 (No. 7) 2003 No. 202, the Valuation Report is
not financial product advice but is intended to provide expert opinion on matters relevant to the mineral
properties of XRL. L Davis and VWPL are not operating under an Australian financial services licence and the
advice in the Valuation is an opinion on matters other than financial products and does not include advice on a
financial product.
All references to mineral resources are consistent with the most recent Australasian Code (and Guidelines to the
Code) for Reporting of Identified Mineral Resources and Ore Reserves: Reports prepared by the Joint
Committee of The Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists and
the Minerals Council of Australia (JORC).
In preparing the Report, VWPL will observe Guidelines for Technical Assessment and/or
Valuation of Mineral and Petroleum Assets and Mineral and Petroleum Securities for
Independent Expert Reports (The Valmin Code), which is referred to by the Australian
Securities and Investment Commission (“ASIC”) and the Australian Securities Exchange
(“ASX”). As well, ASIC Practice Notes 43, ASIC Practice Note 55; former NCSC Release
149, will also be observed.
5.4 Consents
Veronica Webster Pty Limited has consented to the inclusion of the Valuation Report in the
Independent Expert’s Report by DMR for an Information Memorandum to XRL shareholders.
For and on behalf of
VERONICA WEBSTER PTY LIMITED
L W DAVIS
BSc (Special Geology), Leics. UK, FAusIMM, FAIG, CPGeo
25
Page 121 of 200
APPENDIX I
VALUATION PROCEDURES
1.0 Valuation Methodology
Projects, which contain indicated or measured resources from which mining reserves can be defined may then
be the subject of feasibility studies based on estimations for amounts, rates and the costs of production together
with the revenue defined from sales. The discounted cash-flow-rate-of-return ("DCFROR") method may then be
applied to express the value of the project in terms of present day money, often called the Net Present Value
("NPV") using a variety of interest rates. For selected cases the return on invested funds or internal rate of return
("IRR") expressed as a percentage is estimated.
DCFROR is obviously the more accurate when the assumptions for the financial models are known with
confidence; contracts for work and sales, etc. The more reliable the assessment of the resources/reserves, costs
of mining and treatment, capital costs of mining and treatment, recovery in the mining and treatment processes,
metal prices, exchange rates and all the associated operation issues, the more accurate the DCFROR method
becomes. But it is always subject to assumptions and uncertainties of the estimations of a current nature and also
for those in the future life of the project. The DCFROR technique cannot take into account abrupt and radical
changes to market conditions.
For long-life projects where operations are expected to continue to some time in the future with only rough
estimates for costs and sales and based on resources which may not be Indicated or Measured resources, a
modified DCFROR can be applied. The NPV derived from such models may be discounted to obtain an
Expected value or an Expected NPV (“ENPV”). This is a probabalistic approach and the probability factors are
judged by and are the responsibility of the valuer.
Valuation of exploration tenements, which have geological prospectiveness but no defined resources, is more
subjective and therefore contentious. Methods which can be applied include, when appropriate, expected value
probability, multiples of past relevant and future committed expenditure, joint venture terms and points rating
methods.
A brief description and commentary on some inherent advantages and disadvantages of subjective valuation
technique follows.
1.1 Expected Value of Discovery (probabilistic method)
In phased exploration, a programme of work is planned to increase the value of the property. At the completion
of the programme, the results are assessed and a decision is made whether or not to engage in a further
programme. This process continues, ideally until there arrives a point of withdrawal or commercial discovery.
At any stage, the probability of continuing or withdrawing may be forecast and also the probability of
discovering various sizes and styles of mineral deposits and their NPV. The probability factors are judged by
and are the responsibility of the valuer.
A simple example of the procedure is as follows. The probability factors for continuing each stage of work are
multiplied together, steps 1 to 5, and then multiplied by the value of the predicted discovery. In the example, the
probability for any discovery has been estimated to have a probability of 0.013 (step 5). This is about one
chance in 80. The value of the overall discovery is a notional NPV, which may be a product of several possible
discoveries (A, B and C, in the example). In that case each possible discovery must be considered to be a
percentage of the NPV.
Activity
Probability of
proceeding
Cumulative
probability
1 Early exploration
(committed expenditure)
100% or 1.0
1
2 Follow up activity
70% or 0.7
0.7
26
Page 122 of 200
Activity
Probability of
proceeding
Cumulative
probability
3 Drill testing
30% or 0.3
0.21
4 Evaluation drilling
20% or 0.2
0.04
5 Feasibility study
30% or 0.3
0.013
A Discovery NPV = $2.0
million
80% or 0.8
0.010
B Discovery NPV = $5.0
million
19% or 0.19
0.002
C Discovery NPV = $20
million
1% or 0.01
0.0001
The chance of discovery of a deposit with a NPV of $20 million has been estimated as one in 10,000
(probability 0.0001); the chance of a discovery of a deposit with a NPV of $5 million has been estimated as one
in 500 (probability 0.002); and the chance for a discovery of a deposit with a NPV of $2 million has been
estimated as one in a 100 (probability 0.01). The values of these individual chances are $2,000, $10,000 and
$20,000, respectively. When added the chance is $32,000. Exploration expenditures should be accounted for.
The method is extremely sensitive to the selected probability factors and a number of cases need to be
compared. It is a useful method when there is enough geological evidence to limit the potential size of the
discovery giving credibility to the relative probability for the value of a potential discovery. Other methods
cannot account directly for these aspects.
1.2 Multiples of Cost of Valid Work
The present value of previous work (past expenditure method) and committed work, when it is relevant to
enhancing the value of the Project and therefore warranting an objective future programme is often the first
considered method for exploration projects.
Expenditure that has been assessed as relevant generally is multiplied by a factor of between 0.5 and 3.0 (the
prospectivity enhancement multiplier or “PEM”) to value the property at a particular stage of development. This
range of PEM is common in Australia. (For higher- and lower-cost countries the factors would be different).
Factors of less than 0.5 may be selected, depending on the considered potential. In our opinion factors of above
2.0 should not be used, unless strong indications of potential for economic mineralisation have been identified.
This usually means that there are encouraging intersections and perhaps estimated resources.
It is common to include committed expenditure as part of that already incurred.
High levels of past expenditure are indicative usually of historical prospectiveness but at some point in time
further exploration will not be justifiable. Future discoveries in properties with modest expenditure levels will
be undervalued by the method. Often, when applying the method of " multiple cost of valid work" there is
potential bias towards higher valuations for older projects.
1.3 Points Rating System
In this method, points are awarded for various forms of geological prospectiveness, presence of mineralisation,
anomalism and structures. In addition factors are applied to account for the current financial, commodity and
stock market climate. Other methods do this indirectly. This method instils a regimen so that these parameters
and issues must be considered specifically and it is a useful method for comparative purposes.
1.4 Joint Venture Terms, Capitalisation of Earnings, Yardstick and Real Estate Approaches
27
Page 123 of 200
Joint Venture Terms
The minimum commitment by a joint venture partner establishes a minimum base value for the property. In
most joint ventures the incomer agrees to expend a certain sum over a specified time period to earn equity, for
example:
$2 million over a four year period to earn 60% interest
This arrangement can be used to value the property by time-discounting the money and suggesting the
probability for the deal to be completed, thus:
$2 million x 0.88 (time discount) x 0.4-0.8 (probability range) x 60%
= $0.42 - $0.84 million
The method does not place any upside potential on the asset. It often gives a good value estimate for situations
where the vendor is under some pressure to dispose of the asset.
Real Estate Methods
The simple face value of transactions that have taken place at similar properties and projects may be compared.
Clearly current transactions are more useful as they reflect the trends and mood of the time, while older
transactions require factoring for CPI, price changes, etc. The real estate approach is seldom simple to apply
because, apart from all projects being unique:
x Deals are affected onerously when either the vendor or purchaser has special reasons to sell or buy such
as financial pressures or needing the funds for a different project.
x The criteria of “knowledgeable and willing” parties may not apply.
x The value may not relate to the value of making the project successful and may not be a technical
valuation.
x The parties are not always completely independent of each other.
In short, the sum that some party might be willing to pay is not necessarily the true value.
Yardstick Values
This method assigns a value per unit of commodity, which has been estimated to be contained on the project.
This must vary greatly to account for the resource or reserve classification and the assumed costs for extraction
and treatment. The availability and ownership of useful plant and facilities will alter cases radically.
For gold operations a range of from $10 per ounce - for inferred underground resources - to $40 per ounce - for
open pit probable reserves - was recognised by some valuers (circa 1990s).
28
Page 124 of 200
APPENDIX F – JORC CODE TABLE 1 FOR PYRAMID PROJECT AND MT GARNET PROJECT
Page 125 of 200
JORC C
CODE TABLE 1 for Py
yramid Proje
ect
Section
n 1: Samplin
ng Techniqu
ues and Datta
Criteria
Sampling
g techniques
s
Drilling ttechniques
Drill sam
mple recovery
y
Explanatiion
Nature an
nd quality of sampling (e.g
g. cut
channels, random cchips, or sp
pecific
specialise
ed
indusstry
stan
ndard
measurem
ment tools a
appropriate to
o the
minerals under invesstigation, suc
ch as
down hole gamma son
ndes, or handheld
XRF instrruments, etc.)) These exam
mples
should no
ot be taken ass limiting the broad
b
meaning of
o sampling.
Include re
eference to m
measures tak
ken to
ensure sa
ampling repre
esentivity and
d the
any
appropriate
calibrattion
of
ment tools or ssystems used..
measurem
Aspects of
the
determination
n of
mineralisa
ation that are
re Material to
o the
Public Re
eport. In case
es where ‘ind
dustry
standard’ work has bee
en done this would
w
be relattively simple
e (e.g. ‘reverse
circulation
n drilling was used to obtaiin 1m
samples from
f
which 3
3kg was pulve
erised
to produc
ce a 30g charrge for fire as
ssay’).
In other cases
c
more ex
explanation ma
ay be
required, such as whe
ere there is coarse
gold that has
h inherent ssampling prob
blems.
Unusual commodities or mineralis
sation
types (e.g. submarin
ne nodules) may
warrant diisclosure of de
etailed informa
ation.
Drill type (e.g. core, rreverse circullation,
e hammer, rotary air blast,
open-hole
auger, Ba
angka, sonic,, etc.) and details
d
(e.g. core
e diameter, triple or stan
ndard
tube, de
epth of diam
mond tails, facesampling bit or other typ
ype, whether core
c
is
oriented and
a if so, by w
what method, etc.)
e
Method of
o recording a nd assessing
g core
and chip sample reco
overies and re
esults
assessed.
Measures
s taken to maximise sa
ample
recovery and ensurre represen
ntative
nature of the samples.
Logging
g
Whether a relationshiip exists bettween
sample re
ecovery and g
grade and wh
hether
sample bias may have
e occurred due
d
to
preferential loss/gain
n of fine/coarse
material.
hip samples have
Whether core and ch
been ge
eologically an
nd geotechn
nically
logged to
o a level of detail to su
upport
appropriate Mineral Re
esource estimation,
udies and mettallurgical stud
dies
mining stu
Comm
mentary
Samp
pling results
circulation drilling.
are
from
reverse
Detailed geologicaal logging of core and
mple represen
ntivity.
chips to ensure sam
All RC
C sample weree passed through a
th
cyclone and then thhrough a 7/8 to 1/8th
splitte
er. Bulk 1m saample was collected as
the 7//8th split, wheereas the 1/8th
h split was
collec
cted as a compposite sample
e over 2m.
Large
e composite saamples were passed
p
throug
gh an additionnal riffle splitte
er such
that analytical
a
sampple size was in the
order of 2.5kg to 3kkg.
Each sample wass pulverised, and then
analy
ysed using a multi-elementt ICPAES
techn
nique
(ME-IICP41).
Go
old
was
analy
ysed using ann ore-grade technique;
t
fire as
ssay with an A
AAS finish.
All RC
C holes were ddrilled using a standard
face sampling ham
mmer with bit
b size of
114m
mm (Four & haalf inch).
RC re
ecovery as we
well as degree of crosssamp
ple contaminat
ation were log
gged on a
metre
e basis. Oveerall recoverries were
excellent. With rare exceptiions, RC
samp
ples were almoost always dry
y.
All sa
ample obtaineed by the face
e-sampling
drilling was colleected via a cyclone
hed to the drilll rig with the laboratory
attach
assay
y sample beeing collected
d directly
benea
ath the cyclonne using a riffle
e splitter.
Samp
pling bias is not apparent. Overall
recov
veries were exxcellent.
Geolo
ogical loggingg was carried out by
well-trained/experieenced geolog
gists and
e
via a well-develope
ed logging
data entered
system designed to capture descriptive
d
ogy, coded geeology and qu
uantifiable
geolo
geolo
ogy. All logss were che
ecked for
consistency by thhe Principal Geologist.
G
Data captured thhrough Exce
el spread
sheetts and Exploorer 3 Relatio
onal Data
Base Managementt System.
Page 126 of 200
Sub-sampling
techniques and
sample preparation
Explanation
Whether logging is qualitative or
quantitative in nature. Core (or costean,
channel etc.) photography.
The total length and percentage of the
relevant intersections logged.
If core, whether cut or sawn and whether
quarter, half or all core taken.
If non-core, whether riffled, tube sampled,
rotary split, etc. and whether sampled wet
or dry.
For all sample types, the nature, quality
and appropriateness of the sample
preparation technique.
Quality control procedures adopted for all
sub-sampling
stages
to
maximise
representativity of samples.
Measures taken to ensure that the
sampling is representative of the in situ
material collected, including for instance
results for field duplicate/second-half
sampling.
Whether sample sizes are appropriate to
the grain size of the material being
sampled.
Quality of assay data
and laboratory tests
The nature, quality and appropriateness
of
the
assaying
and
laboratory
procedures used and whether the
technique is considered partial or total.
For geophysical tools, spectrometers,
handheld XRF instruments, etc. the
parameters used in determining the
analysis including instrument make and
model, reading times, calibration factors
applied and their derivation, etc.
Nature of quality control procedures
adopted
(e.g.
standards,
blanks,
duplicates, external laboratory checks)
and whether acceptable levels of
accuracy (i.e. lack of bias) and precision
Commentary
The logging of RC chips is both
qualitative and quantitative. Alteration,
weathering and mineralisation data
contain both qualitative and quantitative
fields.
The entire length of all drill holes has
been geologically logged.
Only reverse circulation holes drilled.
Samples were riffle split to obtain weights
suitable for analysis at ALS. With rare
exceptions, RC samples were almost
always dry.
The sample preparation was conducted
according to industry best practice.
QA/QC protocols were instigated such
that they conform to mineral industry
standards and are compliant with the
JORC code.
Terra Search’s input into the Quality
Assurance (QA) process with respect to
chemical analysis of mineral exploration
samples includes the addition of blanks,
standards and duplicates to each batch
so that checks can be done after they are
analysed. As part of the Quality Control
(QC) process, Terra Search checks the
resultant assay data against known or
previously
determined
assays
to
determine the quality of the analysed
batch of samples. An assessment is
made on the data and a report on the
quality of the data is compiled.
Comparison of assays of duplicates
shows reasonably good reproducibility of
results, apart from some scatter in the fire
assay results for Au, probably due to the
nugget effect.
The sample sizes are considered to be
appropriate to represent the style of the
mineralisation,
the
thickness
and
consistency of the intersections.
Assays
were conducted at ALS
Laboratories using an ICPAES multielement technique (method ICP-41). Gold
was analysed using an ore-grade
technique; fire assay with an AAS finish.
The fire assay technique is considered
total, while ICP-41 is partial.
No additional tools were used.
Certified geochemical standards and
blank samples were inserted into the
assay sample sequence. Laboratory
assay results for these quality control
samples are within 5% of accepted
Page1
Criteria
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Criteria
Verification of
sampling and
assaying
Explanation
have been established.
The verification of significant intersections
by either independent or alternative
company personnel.
The use of twinned holes.
Documentation of primary data, data
entry procedures, data verifications, data
storage
(physical
and
electronic)
protocols.
Commentary
values.
Significant intersections were verified by
Terra Search Pty Ltd, the independent
contractors who conducted drilling.
None.
Data is collected by qualified geologists
and experienced field assistants and
entered into excel spreadsheets.
Data is imported into Microsoft Access
tables from the Excel spreadsheets with
validation checks set on different fields.
Data is then checked thoroughly by the
Operations Geologist for errors. Accuracy
of drilling data is then validated when
imported into MapInfo.
Location of data
points
Accuracy and quality of surveys used to
locate drill holes (collar and down-hole
surveys), trenches, mine workings and
other locations used in Mineral Resource
estimation.
Specification of the grid system used.
Data spacing and
distribution
Quality and adequacy of topographic
control.
Data spacing for reporting of Exploration
Results.
Whether the data spacing and distribution
is sufficient to establish the degree of
geological
and
grade
continuity
appropriate for the Mineral Resource and
Ore Reserve estimation procedure(s) and
classifications applied.
Whether sample compositing has been
applied.
Orientation of data in
relation to geological
structure
Whether the orientation of sampling
achieves unbiased sampling of possible
structures and the extent to which this is
known, considering the deposit type.
If the relationship between drilling
orientation and the orientation of key
mineralised structures is considered to
have introduced a sampling bias, this
should be assessed and reported if
Down hole surveys were conducted on all
holes using a downhole digital camera
with surveys taken inside a non-magnetic
stainless steel drill rod.
Coordinate system is UTM Zone 55 and
datum is GDA94
No Digital Terrain Model available.
Drill holes were drilled at approximately
50 metre intervals. Where more than one
hole has been drilled on a section,
spacing between holes along the section
varies between 30 and 100m.
Further drilling is necessary to establish a
Mineral Resource.
Samples were composited over 2m.
Anomalous intersections were then reassayed over each metre of the
composite.
The majority of holes have been designed
to drill normal to interpreted mineralisation
trends. However, there has been
insufficient
drilling
and
geological
interpretation to determine if there is a
bias to sampling as a result of drilling
oblique to or downdip on mineralised
structures.
No orientation based sampling bias has
been identified in the data at this point.
Page2
Discuss any adjustment to assay data.
Data is stored on a server in the
Company’s head office, with regular
backups and archival copies of the
database made.
No adjustments are made to the data.
Data is imported into the database in its
original raw format.
Collar locations were recorded by Garmin
GPS with positional accuracy of
approximately ±5m.
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Criteria
Sample security
Audits or reviews
Explanation
material.
The measures taken to endure sample
security.
The results of any audits or reviews of
sampling techniques and data.
Commentary
Chain of custody was managed by Terra
Search Pty Ltd. Samples were transferred
by them to ALS.
To date there has not been an audit of
sampling techniques and data.
Section 2: Reporting of Exploration Results
Mineral tenement and
land tenure status
Exploration done by
other parties
Type, reference name/number, location
and ownership including agreements or
material issues with third parties such as
joint ventures, partnerships, overriding
royalties, native title interests, historical
sites, wilderness or national and
environmental settings.
The security of the tenure held at the time
of reporting along with any known
impediments to obtaining a license to
operate in the area.
Acknowledgement and appraisal of
exploration by other parties.
EPM12887 ‘Pyramid’ is 100% held by
MGT Mining Ltd.
EPM 12887 contains some areas which
are classified as environmentally sensitive
areas as these areas contain endangered
ecosystems, river improvement areas
and the catchment area for the Burdekin
Falls Dam.
MGT has an exploration agreement with
the Native Title claimants in the area, the
Jangga People. There are no known sites
of cultural heritage significance listed
within the EPM.
EPM12887 comes up for renewal on 4th
August 2015. MGT does not expect any
impediments to renewal and anticipates
that it will be granted.
The Pyramid Project is located near the
Sellheim River area, where numerous
small silver-lead-zinc deposits were
worked during the late 1880's, including
the Sunbeam, Sunset, Carrington and
Walhalla deposits.
Following the discovery of the Pajingo
epithermal gold deposit, systematic
regional exploration of the region was
conducted by Battle Mountain (Australia)
Inc. (Pajingo Gold Mine Pty Ltd) during
1986 to 1989. Exploration included
1:20,000 scale geological mapping,
followed up by stream sediment (BCL and
pan concentrate) surveys and drill testing,
which intersected gold mineralisation at
the Sellheim prospect.
Initial RC drilling by Dalrymple on several
Page3
Dalrymple Resources N.L. held EPM
7621 during 1990 to 1992 in joint venture
with Reynolds Australia Mining Ltd. after
evaluating the region. Terra Search Pty.
Ltd. were contracted by Dalrymple to
manage the exploration program. Initially
helicopter traversing was utilised to
examine Thematic Mapper™ anomalies
and a stream sediment sampling survey,
and BCL sampling, was undertaken,
locating the Sellheim South prospect.
Follow up geological mapping, trenching
and soil sampling was conducted.
ASX RELEASE
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Page 129 of 200
prospects met with some success. During
1993, detailed colour aerial photography
was flown at 1:5,000 scale by QASCO in
order to assist with geological mapping. In
an effort to resolve the complicated
structural picture of the area and identify
new
target
areas,
a
structural
interpretation was completed by ERA
Maptec.
Geology
Deposit type, geological setting and style
of mineralisation.
During 2006, Chalcophile Resources drilltested the Gettysberg prospect, with
positive results. A ground magnetic
survey conducted indicated there was
little to no magnetic contrast between
stratigraphic units within the tenement.
The Pyramid Project lies in the northeast
of the Devonian to Carboniferous
Drummond Basin and contains a northnortheast trending inlier
of Late
Ordovician Anakie Metamorphics. The
inlier of Anakie Metamorphics divides this
region from the main area of Drummond
Basin sedimentation to the west. A thick
wedge of the Late Carboniferous
Bulgonunna
Volcanics
forms
the
Bulgonunna Block to the east.
The Saint Anns Formation is the host to
epithermal gold mineralisation in the
Drummond Basin at the Pajingo, Yandan,
Wirralie and Twin Hills gold deposits, with
mineralisation related to hot spring
hydrothermal systems developed on the
margins of coeval rhyodacite volcanic
activity of the Silver Hills Volcanics.
Data aggregation
methods
A summary of all information material to
the understanding of the exploration
results including a tabulation of the
following information for all Material drill
holes:
x
Easting and northing of the drill hole
collar
x
Elevation or RL (Reduced Level –
elevation above sea level in metres)
of the drill hole collar
x
Dip and azimuth of the hole
x
Down hole length and interception
depth
x
Hole length
If the exclusion of this information is
justified on the basis that the information
is not Material and this exclusion does not
detract from the understanding of the
report, the Competent Person should
clearly explain why this is the case.
In
reporting
Exploration
Results,
weighting
averaging
techniques,
maximum
and/or
minimum
grade
See previously submitted drilling results.
Page4
Drill hole information
The most significant gold mineralisation
developed within the Pyramid Project
area is the epithermal style quartz veins
and the graphite-pyrite-sericite-chlorite
stylolitic veinlets and breccia matrix infill.
See drilling results previously submitted
to the ASX.
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Page 130 of 200
Relationship between
mineralisation widths
and intercept lengths
Diagrams
Balanced reporting
Other substantive
exploration data
Further work
truncations (e.g. cutting of high grades)
and cut-off grades are usually Material
and should be stated.
Where aggregate intercepts incorporate
short lengths of high grade results and
longer lengths of low grade results, the
procedure used for such aggregation
should be stated and some typical
examples of such aggregations be shown
in detail
The assumptions used for any reporting
of metal equivalent values should be
clearly stated.
The
relationships
are
particularly
important in the reporting of Exploration
Results.
If the geometry of the mineralisation with
respect to the drill hole angle is known, its
nature should be reported
If it is not known and only the down hole
lengths are reported, there should be a
clear statement to this effect (e.g. down
hole length, true width not known).
Appropriate maps and sections (with
scale) and tabulations of intercepts
should be included for any significant
discovery being reported. These should
include, but not be limited to a plan view
of drill hole collar locations and
appropriate sectional views.
Where comprehensive reporting of all
Exploration Results is not practicable,
representative reporting of both low and
high grades and/or widths should be
practised to avoid misleading reporting of
Exploration Results.
Other exploration data, if meaningful and
material, should be reported including
(but
not
limited
to):
geological
observations; geophysical survey results;
geochemical survey results; bulk samples
– size and method of treatment;
metallurgical test results; bulk density,
groundwater, geotechnical and rock
characteristics; potential deleterious or
contaminating substances.
The nature and scale of planned further
work (e.g. test for lateral extensions or
depth extensions or large-scale step-out
drilling).
Diagrams clearly highlighting the areas of
possible extensions, including the main
geological interpretations and future
drilling areas, provided this information is
not commercially sensitive.
See previously submitted drilling results.
No metal equivalents have been used in
reporting.
Downhole length, true width not known.
Maps are
reporting.
included
in
the
previous
Only significant intercepts reported.
Not applicable.
Further detailed drilling is planned for the
targets to establish continuity, thickness
and
grade
and
extensions
to
mineralisation.
Included with previous reporting to the
ASX.
Page5
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Page 131 of 200
JORC C
CODE TABLE 1 for Mt Garnet Pro
oject
Section
n 1: Samplin
ng Techniqu
ues and Datta
Criteria
Sampling
g techniques
s
Explanatiion
Nature an
nd quality of sampling (e.g
g. cut
channels, random cchips, or sp
pecific
specialise
ed
indusstry
stan
ndard
measurem
ment tools a
appropriate to
o the
minerals under invesstigation, suc
ch as
down hole gamma son
ndes, or handheld
XRF instrruments, etc.)) These exam
mples
should no
ot be taken ass limiting the broad
b
meaning of
o sampling.
Include re
eference to m
measures tak
ken to
ensure sa
ampling repre
esentivity and
d the
any
appropriate
calibrattion
of
ment tools or ssystems used..
measurem
Aspects of
the
determination
n of
mineralisa
ation that are
re Material to
o the
Public Re
eport. In case
es where ‘ind
dustry
standard’ work has bee
en done this would
w
be relattively simple
e (e.g. ‘reverse
circulation
n drilling was used to obtaiin 1m
samples from
f
which 3
3kg was pulve
erised
to produc
ce a 30g charrge for fire as
ssay’).
In other cases
c
more ex
explanation ma
ay be
required, such as whe
ere there is coarse
gold that has
h inherent ssampling prob
blems.
Unusual commodities or mineralis
sation
types (e.g. submarin
ne nodules) may
warrant diisclosure of de
etailed informa
ation.
Comm
mentary
Samp
pling results aare from diam
mond drill
core and
a reverse ci
circulation drilling.
Samp
ple representivvity was ensurred by the
follow
wing measuress:
- rev
verse circulatiion percussio
on drilling
was used
u
to obtainn bulk samples
s over 1m
interv
vals, from whicch 3-6kg were
e riffle-split
off forr analysis.
- all sample wass collected through a
th
mple being
cyclone with the 1//8 assay sam
th
th
collec
cted via a 1/88 – 7/8 rifffle splitter
moun
nted beneath tthe cyclone
- Ch
hips and coore were logged for
litholo
ogy, weatheering, alterattion and
minerralisation
Reverse circulationn drilling was
s used to
obtain
n bulk samplles over 1m intervals,
from which 3-6kg
kg were split off for
analy
ysis.
Each 1m sample w
was analysed at the Mt
Veterran office ussing a FXL laboratory
portable X-Ray Fluorescence (XRF)
mach
hine. Anomaloous samples were
w
sent
to ALS for further aanalysis.
Samp
ples sent to A
ALS were rifffle split at
the la
aboratory to obbtain a sample
e between
2.5 and 3.2kg in weight and
a
then
pulverised. Each sample was analysed
for Sn
n using an oree-grade fused disc XRF
techn
nique (XRF15bb).
In the
e case of RC ddrilling at Smiths Creek
3m co
ompositing of samples was applied.
Diamond drill coree was halved, crushed
and pulverised
p
to produce a charge
c
for
standard XRF aassays at Australian
A
Laborratory Servicees (ALS) using an oregrade
e fused d isc XRF technique
(XRF15b).
Drilling ttechniques
Drill type (e.g. core, rreverse circullation,
e hammer, rotary air blast,
open-hole
auger, Ba
angka, sonic,, etc.) and details
d
(e.g. core
e diameter, triple or stan
ndard
tube, de
epth of diam
mond tails, facesampling bit or other typ
ype, whether core
c
is
oriented and
a if so, by w
what method, etc.)
e
Reverse circulationn drilling was conducted
c
ussion rig
with a reverse circculation percu
with face-samplingg bits produc
cing 125mm diameter hholes. Shallow
wer holes
130m
(<75m
m) were drillled with a rig with
600cffm/300psi air capacity while deeper
holes were drilleed using a rig with
750cffm/350psi air capacity. An
n auxiliary
comp
pressor of
900cfm/350psi and
boostter of 1000psii capacity was
s used for
most deep holess and some
e of the
Page 132 of 200
Drill sample recovery
Explanation
Commentary
shallower holes.
Method of recording and assessing core
and chip sample recoveries and results
assessed.
Measures taken to maximise sample
recovery and ensure representative
nature of the samples.
Logging
Whether a relationship exists between
sample recovery and grade and whether
sample bias may have occurred due to
preferential loss/gain of fine/coarse
material.
Whether core and chip samples have
been geologically and geotechnically
logged to a level of detail to support
appropriate Mineral Resource estimation,
mining studies and metallurgical studies
Whether logging is qualitative or
quantitative in nature. Core (or costean,
channel etc.) photography.
Sub-sampling
techniques and
sample preparation
The total length and percentage of the
relevant intersections logged.
If core, whether cut or sawn and whether
quarter, half or all core taken.
If non-core, whether riffled, tube sampled,
rotary split, etc. and whether sampled wet
or dry.
For all sample types, the nature, quality
and appropriateness of the sample
preparation technique.
Quality control procedures adopted for all
sub-sampling
stages
to
maximise
representativity of samples.
Measures taken to ensure that the
sampling is representative of the in situ
material collected, including for instance
results for field duplicate/second-half
Diamond core was drilled with a diameter
of HQ and a standard tube. The core was
oriented using an ACE Orientation tool.
Weights of all samples collected from the
cyclone are recorded over 1m intervals.
Final recoveries remain to be calculated
and assessed.
All sample obtained by the face-sampling
drilling was collected via a cyclone
attached to the drill rig with the laboratory
assay sample being collected directly
beneath the cyclone using a 1/8th-7/8th
riffle splitter.
Sample recoveries have yet to be
calculated in order to assess whether or
not any sampling bias has occurred.
Geological logging has been carried out
on all holes. The holes have been logged
for lithology, weathering, alteration and
mineralisation, to allow correlation
between
holes
where
possible.
Geotechnical and structural logging was
carried out on the core holes.
The logging of RC chips is both
qualitative and quantitative. Alteration,
weathering and mineralisation data
contain both qualitative and quantitative
fields. Photographs of reference chip
trays have yet to be taken.
The entire length of all drill holes has
been geologically logged.
Core is sawn in half and sampled in 1m
intervals or to geological boundaries
Samples were riffle split to obtain weights
suitable for analysis at ALS. All holes
were dry above an approximate vertical
depth of 25m. Below 25m vertical, minor
to occasionally strong water flows were
encountered in some prospects; however
the drilling contractor was largely able to
ensure a dry sample for sampling
purposes. Less than 1% of all samples
were affected by water.
The sample preparation was conducted
according to industry best practice.
Quality control procedures involved use of
certified
reference
materials
and
limestone blanks inserted at regular
intervals into the assay sample sequence.
Quality control samples are included at a
nominal 1 sample per 15-20 assay
samples. Sampling was controlled by
senior geologists in the field utilising best
practice.
Duplicate samples have been collected
for the RC results and correlate well with
initial results. Drill core is not considered
suitable for field duplicate or second half
Page1
Criteria
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Page 133 of 200
Criteria
Explanation
sampling.
Whether sample sizes are appropriate to
the grain size of the material being
sampled.
Quality of assay data
and laboratory tests
The nature, quality and appropriateness
of
the
assaying
and
laboratory
procedures used and whether the
technique is considered partial or total.
For geophysical tools, spectrometers,
handheld XRF instruments, etc. the
parameters used in determining the
analysis including instrument make and
model, reading times, calibration factors
applied and their derivation, etc.
Nature of quality control procedures
adopted
(e.g.
standards,
blanks,
duplicates, external laboratory checks)
and whether acceptable levels of
accuracy (i.e. lack of bias) and precision
have been established.
Verification of
sampling and
assaying
The verification of significant intersections
by either independent or alternative
company personnel.
The use of twinned holes.
Documentation of primary data, data
entry procedures, data verifications, data
storage
(physical
and
electronic)
protocols.
Commentary
sampling.
The sample sizes are considered to be
appropriate to represent the style of the
mineralisation,
the
thickness
and
consistency of the intersections.
Assays
were conducted at ALS
Laboratories using a fused disc XRF
technique (method XRF-15b), which is
the current industry standard for oregrade tin. Fused disc XRF is considered a
total technique, as it extracts and
measures the whole of the element
contained within the sample.
No geophysical tools were used.
For RC drilling an FXL laboratory XRF
machine was used on site to identify
anomalous intervals, and the samples
from those were then sent for more
precise analysis at ALS.
Certified geochemical standards and
blank samples were inserted into the
assay sample sequence at a nominal rate
of one QC sample per 15-20 assay
samples. Laboratory assay results for
these quality control samples are within
5% of accepted values.
Check assaying by a second laboratory
was conducted and results correlate well
with initial assays. Sample data was
compiled and digitally captured by the
Company’s Geologist. The compiled
digital data is verified and validated by the
Company’s Operations Geologist.
A twinned hole was drilled at Dalcouth
and has yet to be analysed in detail.
Data is collected by qualified geologists
and experienced field assistants and
entered
into
excel
spreadsheets.
Spreadsheets are then checked by onsite and head office geologists for
potential errors.
Data is imported into Microsoft Access
tables from the Excel spreadsheets with
validation checks set on different fields.
Data is then checked thoroughly by the
Operations Geologist for errors. Accuracy
of drilling data is then validated when
imported into MapInfo.
Location of data
points
Accuracy and quality of surveys used to
locate drill holes (collar and down-hole
surveys), trenches, mine workings and
other locations used in Mineral Resource
estimation.
Down hole surveys were conducted on all
holes using a GlobalTech Pathfinder
Page2
Discuss any adjustment to assay data.
Data is stored on a server in the
Company’s head office, with regular
backups and archival copies of the
database made.
No adjustments are made to the data.
Data is imported into the database in its
original raw format.
Drill collar coordinates were recorded
using DGPS survey equipment (+ 0.2m
accuracy)
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Page 134 of 200
Criteria
Explanation
Specification of the grid system used.
Quality and adequacy of topographic
control.
Data spacing and
distribution
Data spacing for reporting of Exploration
Results.
Whether the data spacing and distribution
is sufficient to establish the degree of
geological
and
grade
continuity
appropriate for the Mineral Resource and
Ore Reserve estimation procedure(s) and
classifications applied.
Whether sample compositing has been
applied.
Orientation of data in
relation to geological
structure
Sample security
Audits or reviews
Whether the orientation of sampling
achieves unbiased sampling of possible
structures and the extent to which this is
known, considering the deposit type.
If the relationship between drilling
orientation and the orientation of key
mineralised structures is considered to
have introduced a sampling bias, this
should be assessed and reported if
material.
The measures taken to endure sample
security.
The results of any audits or reviews of
sampling techniques and data.
Commentary
downhole camera with surveys taken
inside a non-magnetic stainless steel drill
rod.
Coordinate system is UTM Zone 55 and
datum is GDA94
The Digital Terrain Model of the Summer
Hills mining lease was derived by
photogrammetry obtained by consultant
surveyors with contours provided at 2m
intervals.
Drill holes were drilled at nominal 10 - 20
metre intervals dependant on the
prospect. Where more than one hole has
been drilled on a section, spacing
between holes along the section varies
between 5 and 25m depending on
topography.
Some of the drill density has been
sufficient to estimate a mineral resource
e.g. at Dalcouth, but at other prospects
further drilling is necessary to define a
resource.
Sample compositing has been applied in
the case of Smiths Creek 2012 drilling.
3m composite samples were taken for RC
drilling.
The majority of holes have been designed
to drill normal to interpreted mineralisation
trends. However, there has been
insufficient
drilling
and
geological
interpretation to determine if there is a
bias to sampling as a result of drilling
oblique to or downdip on mineralised
structures.
No orientation based sampling bias has
been identified in the data at this point.
Chain of custody is managed by MGT
from the drill site to Atherton. Samples
are then handed to Followmont, a local
transport company, who transport them to
the ALS laboratory in Townsville where
sample preparation takes place.
To date there has not been an audit of
sampling techniques and data.
Mineral tenement and
land tenure status
Type, reference name/number, location
and ownership including agreements or
material issues with third parties such as
joint ventures, partnerships, overriding
royalties, native title interests, historical
sites, wilderness or national and
environmental settings.
The Mining Leases: ML20547 and
ML4349 are located approximately 100
kms SW of Cairns in Northern
Queensland near to the township of Mt
Garnet. The MLs are 100% owned by
MGT Mining, which is a subsidiary of
MGT Resources Ltd with 89.48%
ownership. MGT has an ILUA Agreement
with the Native Title claimants in the area,
the Bar Barrum People. There are no
Page3
Section 2: Reporting of Exploration Results
ASX RELEASE
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Page 135 of 200
Exploration done by
other parties
Acknowledgement and appraisal
exploration by other parties.
Geology
Deposit type, geological setting and style
of mineralisation.
Drill hole information
Data aggregation
methods
of
A summary of all information material to
the understanding of the exploration
results including a tabulation of the
following information for all Material drill
holes:
x
Easting and northing of the drill hole
collar
x
Elevation or RL (Reduced Level –
elevation above sea level in metres)
of the drill hole collar
x
Dip and azimuth of the hole
x
Down hole length and interception
depth
x
Hole length
If the exclusion of this information is
justified on the basis that the information
is not Material and this exclusion does not
detract from the understanding of the
report, the Competent Person should
clearly explain why this is the case.
In
reporting
Exploration
Results,
weighting
averaging
techniques,
The ML is located in an area of North
Queensland which, historically, has been
mined for hardrock and alluvial tin
deposits.
See drilling results previously submitted
to the ASX.
See drilling results previously submitted
to the ASX.
Page4
The security of the tenure held at the time
of reporting along with any known
impediments to obtaining a license to
operate in the area.
known
sites
of
cultural
heritage
significance listed within the MLs. There
are
artefact
scatters
and
one
scarred/carved tree within EPM16948.
ML20547 and ML4349 are held for
periods of, respectively, 21 years and 14
years, and both are in good standing.
EPM16948 has recently been renewed
for a period of five years and is in good
standing.
The Mt Garnet-Irvinebank area is one of
the major tin-producing districts in
Australia. Hard rock tin ore was obtained
from open cuts and underground
workings within ML20547, starting in the
1880s. In addition alluvial tin was also
mined on a large scale; the valleys in and
around ML20547 have been extensively
mined by using mechanised equipment,
but this mining stopped in 1989.
Throughout
the
1960s
Noranda
completed underground exploration at
Summer Hill, including the drilling of six
diamond holes. Tin Australia NL
conducted surface exploration, including
rock chip sampling in the 1990s.This data
has not been used in current calculations
of grade and width.
Tin mineralisation within the Summer Hills
Mining Lease is hosted in metasediments
of
the
Hodgkinson
Formation.
Mineralisation is hosted in fracture
networks, quartz veins and zones of
chlorite alteration that, in some locations,
occurs in proximity to rhyolite porphyry
dykes. Tin mineralisation, which occurs
as cassiterite (SnO2), also occurs
disseminated through chlorite rich zones.
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Relationship between
mineralisation widths
and intercept lengths
Diagrams
Balanced reporting
Other substantive
exploration data
Further work
maximum
and/or
minimum
grade
truncations (e.g. cutting of high grades)
and cut-off grades are usually Material
and should be stated.
Where aggregate intercepts incorporate
short lengths of high grade results and
longer lengths of low grade results, the
procedure used for such aggregation
should be stated and some typical
examples of such aggregations be shown
in detail
The assumptions used for any reporting
of metal equivalent values should be
clearly stated.
The
relationships
are
particularly
important in the reporting of Exploration
Results.
If the geometry of the mineralisation with
respect to the drill hole angle is known, its
nature should be reported
If it is not known and only the down hole
lengths are reported, there should be a
clear statement to this effect (e.g. down
hole length, true width not known).
Appropriate maps and sections (with
scale) and tabulations of intercepts
should be included for any significant
discovery being reported. These should
include, but not be limited to a plan view
of drill hole collar locations and
appropriate sectional views.
Where comprehensive reporting of all
Exploration Results is not practicable,
representative reporting of both low and
high grades and/or widths should be
practised to avoid misleading reporting of
Exploration Results.
Other exploration data, if meaningful and
material, should be reported including
(but
not
limited
to):
geological
observations; geophysical survey results;
geochemical survey results; bulk samples
– size and method of treatment;
metallurgical test results; bulk density,
groundwater, geotechnical and rock
characteristics; potential deleterious or
contaminating substances.
The nature and scale of planned further
work (e.g. test for lateral extensions or
depth extensions or large-scale step-out
drilling).
Diagrams clearly highlighting the areas of
possible extensions, including the main
geological interpretations and future
drilling areas, provided this information is
not commercially sensitive.
See drilling results previously submitted
to the ASX.
No metal equivalents have been used in
reporting.
Due to uncertainty on the exact geometry
of
mineralisation,
the
relationship
between true width of mineralisation and
the length of downhole intercepts is
unclear.
Maps are included in the previous ASX
reporting.
All sample results containing significant
tin intersections are included in the
previous reporting.
Preliminary metallurgical test work has
been completed at Dalcouth.
Further detailed drilling is planned for the
targets to establish continuity, thickness
and grade.
Included with previous reporting.
Database Integrity
Measures taken to ensure that data has
not been corrupted by, for example,
transcription or keying errors, between its
No audit has currently been conducted of
drilling data (MGT) for the Summer Hills
Mining Lease (excluding Dalcouth
Page5
Section 3: Estimation and Reporting of Mineral Resources – Dalcouth and Extended 2011
Resource
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initial collection and its use for Mineral
Resource estimation purposes.
Prospect). Historical data has only been
partially verified.
Data validation procedures used
All data captured and stored in
customised
access
database
and
validated and updated by Resource and
Exploration Geology (REG) 2011.
Data integrity validated with Surpac
Software for EOH depth and sample
overlaps.
Site visits
Comment on any site visits undertaken by
the Competent Person and the outcome
of those visits.
Manual check by reviewing cross sections
with the historic drafted sections and
plans.
REG visited the Mt Garnet site in
December 2010 as part of the preparation
of the 2011 resources estimate.
Two styles of mineralisation
observed in the field.
were
Mineralisation at Dalcouth appears to
consist of fine quartz-limonite-cassiterite
stock work veining hosted in deeply
weathered quartz lithic greywacke with
red-purple alteration after chlorite and
coarse muscovite. Mineralisation extends
over 100m in strike length and remains
open to the northwest and north and
possibly down dip.
The Extended deposit consists of a
northwest trending zone of quartzcassiterite veining in chlorite-muscovite
altered sediments. The deposit extends
for 60m in strike length, approximately
10m in width and is open at depth. Thin,
small scale historic underground workings
exist and extend to unknown, but
probably shallow depth.
Confidence in (or conversely, the
uncertainty
of)
the
geological
interpretation of the mineral deposit.
Nature of the data used and of any
assumptions made.
-
The
effect,
if
any,
of
alternative
Drilling data for Dalcouth and
Extended
One schematic cross section for
each deposit
A schematic plan for the
Dalcouth deposit
Mineralised domains were based solely
on assay intercepts.
Not investigated.
Page6
Geological
Interpretation
Veronica Webster Pty Ltd (VWPL) visited
site in 2014 as part of a review.
For the 2011 Dalcouth and Extended
resource estimation the geology and
controls on mineralisation were not well
understood. MGT has been working on a
development
of
a
comprehensive
geological model for Dalcouth based on
infill drilling and geological mapping
recently completed.
Data provided for the 2011 resource
estimation includes:
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interpretation on Mineral Resource
Estimation.
The use of geology in guiding and
controlling Mineral Resource Estimation.
The factors affecting continuity both of
grade and geology.
Dimensions
The extent and variability of the Mineral
Resource expressed as length (along
strike or otherwise), plan width, and depth
below surface to the upper and lower
limits of the Mineral Resource.
Limited geological information was
available.
Both the Dalcouth and Extended deposits
contain some appreciable tin grades from
individual drill holes however continuity of
mineralisation grade and thickness is
typically erratic for nuggety, thin stock
work veined deposits.
The block model extents for each deposit
are:
Dalcouth:
8055670N and 8055820N
304050E and 304160E
690 and770m RL
Extended:
8055900N and 8055980N
306840E and 306910E
710 and 790m RL
Estimation and
modelling techniques
The nature and appropriateness of the
estimation technique(s) applied and key
assumptions, including treatment of
extreme grade values, domaining,
interpolation parameters and maximum
distance of extrapolation from data points.
If a computer assisted estimation method
was chosen include a description of
computer software and parameters used.
Both the Dalcouth and Extended Mineral
Resources have been derived from an
ordinary kriged block model created with
Surpactm software.
Wire
framed
solid
models
of
mineralisation domains were created from
nominally spaced southwest-northeast
cross sections centred on drill holes as
much as possible.
Mineralised Sn domains are delineated
using a 0.1% Sn cutoff and a minimum
mining width of 3m where possibly, with
some allowance made for geological
continuity. Solid models have been
‘snapped’ to drill holes where possible to
accurately capture and model data and
eliminate
sectional
projection
inaccuracies.
Not investigated.
Block sizes were set at 5m by 5m by 5m
with sub-celling to 2.5m in the x, y and z
directions. Drill hole was approximately
Page7
The availability of check estimates,
previous estimates and/or min production
records and whether the Mineral
Resource estimate takes appropriate
account of such data.
The
assumptions
made
regarding
recovery of by-products.
Estimation of deleterious elements or
other non-grade variables of economic
significance (e.g. sulphur for acid mine
drainage characterisation).
In the case of block model interpolation,
the block size in relation to the average
sample spacing and the search
No
geological
interpretation
was
completed at the time of estimation.
Controls on mineralisation were poorly
understood and continuity of mineralised
domains uncertain.
No check estimates were available when
the resource estimate was prepared.
MGT have conducted check sampling at
a later date which correlated well with the
initial sampling.
Sn only investigated at this time.
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10 by 10 or less.
Any assumptions behind modelling of
selective mining units.
Any assumptions about correlation
between variables.
Description of how the geological
interpretation was used to control the
resource estimates.
Discussion of basis for using or not using
grade cutting or capping.
Moisture
Cut-off parameters
Mining factors or
assumptions
Metallurgical factors
or assumptions
The process of validation, the checking
process used, the comparison of model
data to drill hole data, and use of
reconciliation data if available.
Whether the tonnages are estimated on a
dry basis or with natural moisture, and the
method of determination of the moisture
content.
The basis of the adopted cut-off grade(s)
or quality parameters applied.
Assumptions made regarding possible
mining
methods,
minimum
mining
dimensions and internal (or, if applicable,
external) mining dilution. It is always
necessary as part of the process of
determining reasonable prospects for
eventual economic extraction to consider
potential mining methods, but the
assumptions made regarding mining
methods and parameters when estimating
Mineral Resources may not always be
rigorous. Where this is the case, this
should be reported with an explanation of
the basis of the mining assumptions
made.
The basis for assumptions or predictions
regarding metallurgical amenability. It is
always necessary as part of the process
of determining reasonable prospects for
eventual economic extraction to consider
potential metallurgical methods, but the
Downhole semi-variograms for the
Dalcouth deposit typically displayed a
high nugget effect and a short range of
5m to the first structure and a longer
range of 20m to sill. Moderate anisotropy
is evident and is reflected in the search
ellipse.
No selective mining units modelled.
Only one variable to estimate.
Limited geological information was
available.
The Dalcouth 1m composited data has a
strongly positively skewed distribution
with several outlying high grade samples.
The coefficient of variation (1.68) and
variance (0.29) are high for the sample
population suggesting it is necessary to
top cut the data. A top cut on the 97.5th
percentile of 1.7% Sn was applied to the
Dalcouth composites for variogram
analysis and resource estimation.
Similarly the Extended 1m composited
data is even more strongly positively
skewed with a coefficient of variation of
3.31 and a variance of 2.9. A top cut on
the 97.5th percentile of 3.4% was applied
to the Extended composites for varigram
analysis and resource estimation.
Data was not validated by the Competent
Person. No internal audit of data was
completed for the purpose of the 2011
resource estimate.
Not specified.
0.1% cut-off was considered appropriate.
Mining will require careful grade control
sampling and geological control to ensure
head grades are maintained in the
typically nuggety style of mineralisation.
Blast hole sampling is recommended for
grade control.
Not investigated.
Page8
employed.
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Bulk density
Classification
Not investigated.
Bulk density was assumed. A specific
gravity of 2.6 was assigned to both
mineralised and unmineralised blocks
based on the average density for a 1 to 1
mix of quartz sandstone to shale
(AUSIMM Field Geologists Manual).
The bulk density for bulk material must
have been measured by methods that
adequately account for void spaces
(vugs, porosity, etc), moisture and
differences between rock and alteration
zones within the deposit.
Not measured.
Discuss assumptions for bulk density
estimates used in the evaluation process
of the different materials.
The assumption was made that the
specific gravity of a 1 to 1 mix of quartz
sandstone to shale would be appropriate
for the deposit.
The resource was classified as an
Inferred Resource due to:
The basis for the classification of the
Mineral
Resources
into
varying
confidence categories.
-
Whether appropriate account has been
taken of all relevant factors (ie relative
confidence in tonnage/grade estimations,
reliability of input data, confidence in
continuity of geology and metal values,
Uncertainty in drillhole locations
No surveyed topographic
surface available
No QAQC programmes or
reports
Limited geological information
No bulk density data
Grade variability
Unknown extent of historic
workings
The classification can be improved
with increasing confidence in the
data location and quality and the
understanding of the geology.
Appropriate account of these factors has
been taken.
Page9
Environmental
factors or
assumptions
assumptions
regarding
metallurgical
treatment processes and parameters
made when reporting Mineral Resources
may not always be rigorous. Where this is
the case, this should be reported with an
explanation of the basis of the
metallurgical assumptions made.
Assumptions made regarding possible
waste and process residue disposal
options. It is always necessary as part of
the process of determining reasonable
prospects
for
eventual
economic
extraction to consider the potential
environmental impacts of the mining and
processing operation. While at this stage
the
determination
of
potential
environmental impacts, particularly for a
greenfields project, may not always be
well advanced, the status of early
consideration
of
these
potential
environmental
impacts
should
be
reported. Where these aspects have not
been considered this should be reported
with an explanation of the environmental
assumptions made.
Whether assumed or determined. If
assumed, the basis for the assumptions.
If determined, the method used, whether
wet or dry, the frequency of the
measurements, the nature, size and
representativeness of the samples.
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quality, quantity and distribution of the
data).
Audits or reviews
Discussion of relative
accuracy/confidence
Whether the result appropriately reflects
the Competent Person’s view of the
deposit.
The results of any audits or reviews of
Mineral Resource Estimates.
Whether appropriate account has been
taken of all relevant factors (ie relative
confidence in tonnage/grade estimations,
reliability of input data, confidence in
continuity of geology and metal values,
quality, quantity and distribution of the
data).
The statement should specify whether it
relates to global or local estimates, and, if
local, state the relevant tonnages, which
should be relevant to technical and
economic evaluation. Documentation
should include assumptions made and
the procedures used.
These statements of relative accuracy
and confidence of the estimate should be
compared with production data, where
available.
The results appropriately reflect the
Competent Person’s view of the deposit.
A review of MGT’s mineral resources was
conducted in August 2014 by Veronica
Webster Pty Ltd who considered the 2011
Resource Estimate by REG reasonable.
The estimate is accurate to the level of
accuracy required to report the Mineral
Resource as Inferred.
Drilling at the Dalcouth-Extended lode
has defined the mineralisation along and
across strike but to a limited depth of
generally less than 30 m below surface.
Resources have been estimated using a
lower cut-off grade of 0.1% tin, low
enough to infer global extent of highgrade mineralisation within this specified
zone; (the Dalcouth –Extended lode is a
small part of a multiple lode system).
REG estimated 110 Inferred Ktonnes
(111.9 Ktonnes).
None.
Page10
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Section F
New Constitution - Modification
Page 143 of 200
Constitution
of
MGT Resources Limited
ACN 131 715 645
Doc ID 226177183/v1
Page 144 of 200
Contents
Clause
Number
Heading
1.
1.1
1.2
1.3
1.4
1.5
1.6
1
1
2
2
3
3
1.7
Preliminary
Definitions
Corporations Act and Listing Rules definitions
Interpretation
Replaceable rules not to apply
Constitution subject to the Act
Listing Rules and ASTC Business Rules only to have effect if Company
is listed
Constitution subject to Listing Rules if Company is listed
2.
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
Share Capital
Allotment and issue of Shares under control of Directors
Company may issue preference Shares
Redeemable preference Shares
Rights of holders of preference Shares
Interest on share capital
Brokerage or commission
Joint Holders
Recognition of trusts or other interests
4
4
4
4
4
5
5
5
5
3.
3.1
3.2
3.3
3.4
3.5
3.6
Certificates
Certificated holdings
Issue of certificates
Entitlement of Member to certificate
Certificate for joint holders
Cancellation of certificate on transfer
Replacement of certificates
6
6
6
6
6
6
6
4.
4.1
4.2
4.3
4.4
CHESS
Participation in CHESS
Compliance with ASTC Business Rules
Registers
No interference with proper ASTC transfer
7
7
7
7
7
5.
5.1
5.2
5.3
5.4
5.5
5.6
Lien
Lien
Extent of lien
Exemption from lien
Sale under lien
Proceeds of sale of Shares sold under lien
Transfer on sale under lien
7
7
8
8
8
8
8
6.
Calls
9
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3
3
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6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
Directors may make calls
Notice of calls
Difference in terms of issue as to calls
Fixed payments deemed calls
Interest on sums not paid
Payment of calls
Proof of calls
Prepayment of calls
9
9
9
9
9
9
10
10
7.
7.1
7.2
7.3
7.4
7.5
7.6
7.7
Forfeiture of Shares
Forfeiture upon non-payment of calls
Evidence of forfeiture
Effect of forfeiture
Sale of forfeited Share
Proceeds of sale
Redemption of forfeited Shares
Surrender of Shares
10
10
10
10
11
11
11
12
8.
8.1
8.2
8.3
8.4
8.5
8.6
8.7
Transfer of Shares
Transfer document
Registration procedure
Registration of transfer
Restrictions on transfer
Notice of refusal to register
Transfer not complete until name entered in the Register
More than 3 persons registered
12
12
12
12
12
13
13
13
9.
9.1
9.2
9.3
Transmission of Shares
Death of a Member
Transmission on death or bankruptcy
Election as to registration on transmission
13
13
13
14
10.
10.1
10.2
10.3
Alteration of capital
Company's power to alter capital
Reduction of capital
Power to buy Shares
14
14
14
14
11.
11.1
11.2
11.3
Variation or cancellation of rights
Variation or cancellation of rights of class of Shares
No consent or sanction required for redemption
No variation by issue of further Shares ranking equally
14
14
15
15
12.
Restricted Securities
15
13.
13.1
13.2
13.3
13.4
13.5
13.6
Proportional takeover bids
15
Definitions
15
Prohibition on registration of transfer unless takeover scheme approved15
Approving resolution
16
Entitlement to vote on approving resolution
16
Bidder and associates not entitled to vote
16
Approving resolution passed
16
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13.7
13.8
13.9
13.10
13.11
General meeting provisions to apply
Meeting to be held before approving resolution deadline
Notice as to whether approving resolution is passed
Approving resolution deemed to have been passed
Effect of this clause
14.
14.1
14.2
14.3
14.4
14.5
14.6
14.7
14.8
14.9
14.10
14.11
14.12
14.13
14.14
Unmarketable parcels
17
Definitions
17
Notice to Unmarketable Parcel Holder
17
Revocation or withdrawal of notice
17
Sale of Unmarketable Parcels
18
Company may not sell below Authorised Price
18
Company to pay all costs
18
Title of purchaser of Unmarketable Parcel
18
Remedy of Unmarketable Parcel Holder
18
Evidence of sale in accordance with this clause
18
Receipt of proceeds of sale
19
Company to deal with proceeds of sale
19
Overriding effect of this clause
19
Clause ceases to have effect following announcement of takeover bid or
takeover announcement
19
Clause may be invoked only once in any 12 Month period
19
15.
15.1
15.2
15.3
15.4
15.5
15.6
General meetings
Annual general meetings
General meetings
Members may requisition meeting
Notice of general meeting
Contents of notice of general meeting
Omission to give notice
20
20
20
20
20
20
21
16.
16.1
16.2
16.3
16.4
16.5
16.6
16.7
16.8
16.9
Proceedings at general meeting
Member deemed to be present
Attorney of Member
Representative of body corporate
Quorum for general meeting
No quorum
Chairman of general meeting
Powers of chairman
Adjournment of general meeting
Notice of adjourned meeting
21
21
21
21
21
22
22
22
22
22
17.
17.1
17.2
17.3
17.4
17.5
17.6
17.7
17.8
Voting
Resolution determined by majority
Casting vote of chairman
Method of voting
Demand for poll
Conduct of poll
Votes
Voting if call unpaid on Shares
Voting by joint holders
22
22
23
23
23
23
23
24
24
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16
16
16
17
17
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17.9
17.10
17.11
17.12
Voting by transmittee
Voting by Member of unsound mind
Voting exclusions
Ruling on entitlements and votes
24
24
24
25
18.
18.1
18.2
18.3
18.4
18.5
Proxies
Instrument appointing proxy
Deposit of proxy with company
Presence of Member
Validity of vote given in accordance with proxy
Form of proxy
25
25
25
25
25
26
19.
19.1
19.2
19.3
19.4
19.5
19.6
19.7
Directors
Number of Directors
No Share qualification
Election of Directors by company
Directors may fill casual vacancies or appoint additional Directors
Eligibility for election as a Director
Alternate Director
Auditor cannot be Director
26
26
26
26
26
26
27
27
20.
20.1
20.2
20.3
20.4
20.5
Directors' tenure of office
Directors' tenure of office
Retirement by rotation
Retiring Director eligible for re-election
Removal of Director by the Company
Vacation of office
28
28
28
28
28
28
21.
21.1
21.2
21.3
21.4
Directors' remuneration
Remuneration for non-executive directors
Additional remuneration for extra services
Remuneration to be in accordance with Listing Rules
Expenses of Directors
29
29
29
29
29
22.
22.1
22.4
22.5
22.6
Directors' contracts
30
Directors not disqualified from holding office or contracting with
Company
30
Director can act in professional capacity
30
Director not to vote on contract in which it has a material personal interest
30
Directors to declare interest
30
Directors to declare potential conflicts
31
Secretary to record declarations of Directors
31
23.
23.1
23.2
23.3
23.4
23.5
24.
Powers of Directors
Powers of Directors
Powers to borrow or raise money
Directors may vote Shares in other corporations
Agent or attorney
Sub-delegation of powers
Executive Directors
22.2
22.3
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31
31
31
31
31
32
32
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24.1
24.2
24.3
Managing Director
Directors may confer powers on Executive Directors
Remuneration of Executive Directors
32
32
32
25.
25.1
25.2
25.3
25.4
25.5
25.6
25.7
25.8
25.9
25.10
25.11
25.12
25.13
25.14
25.15
Proceedings of Directors
Board meetings
Director to be regarded as present at meeting
Place of meeting
Convening of Directors meeting
Notice of meeting
Directors may act notwithstanding vacancy
Quorum for Board meetings
Meeting competent to exercise all powers
Chairman of Board meetings
Documents tabled at meeting
Questions to be decided by majority
Resolution in writing
Resolution passed deemed to be determination of Board
Committee powers and meetings
Validity of acts of Directors
32
32
33
33
33
33
33
33
33
33
34
34
34
34
34
34
26.
Secretary
35
27.
27.1
27.2
27.3
27.4
Minutes and registers to be kept
Minutes
Minutes to be signed by chairman
Registers
Branch registers
35
35
35
35
35
28.
28.1
28.2
28.3
28.4
The Seal
Use of common seal
Duplicate seals
Share seal
Affixing the Share seal
36
36
36
36
36
29.
Negotiable instruments
36
30.
30.1
30.2
30.3
Reserves
Reserves
Carry forward of profits
Revaluation of assets
37
37
37
37
31.
31.1
31.2
31.3
31.4
31.5
31.6
31.7
Dividends
Power to determine and declare dividends vested in Directors
Apportionment of dividends
Dividends only payable out of profits
Dividend payable by distribution of assets
Dividends may be payable in foreign currency
No interest payable on dividends
Directors may retain certain dividends
37
37
37
37
37
38
38
38
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31.8
31.9
31.10
31.11
31.12
Directors may deduct from dividends money payable to Company
Payment of dividends
Unclaimed dividends
Dividend Reinvestment Plan
Amendment of Dividend Reinvestment Plan
38
38
39
39
39
32.
32.1
32.2
Capitalisation of profits
Capitalisation of profits
Directors' powers in relation to capitalisation of profits
39
39
39
33.
33.1
33.2
40
40
33.3
Financial statements
Financial records
Financial, Directors' and auditor's reports to be laid before annual
general meeting
Financial statements and reports
34.
34.1
34.2
34.3
34.4
Audit
Auditors
Financial statements to be audited
Approval of financial statements
Register to be audited
40
40
40
40
41
35.
Inspection of records
41
36.
36.1
36.2
36.3
36.4
36.5
36.6
36.7
36.8
36.9
36.10
Notices
Service of notices by Company
Posting notices to overseas Members
Notices to joint holders
Notice deemed to be served
Service by post
Notices to Members whose whereabouts unknown
Notices binding on transferees
Notice to deceased or bankrupt Members
Signing of notices
Counting of days
41
41
41
41
41
42
42
42
42
42
42
37.
37.1
37.2
37.3
Winding up
43
Distribution of surplus assets
43
Fee or commission paid to liquidator to be approved in general meeting43
Distribution in specie
43
38.
38.1
38.2
Indemnity and insurance
Indemnity
Insurance
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40
43
43
44
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Corporations Act 2001
A Company Limited by Shares
Constitution
of
MGT RESOURCES LIMITED
ACN 131 715 645
1.
Preliminary
1.1
Definitions
In this Constitution, unless the context otherwise requires:
"ASX" means Australian Stock Exchange Limited;
"Board" means the Directors acting as a Board of Directors;
"Business Plan" means the plan for the proposed conduct of the Company's business during
each financial year, including the budget for the relevant financial year.
Formatted: Font: Not Bold
"CHESS" means the Clearing House Electronic Sub-register System established and
operated by ASTC;
"CHESS approved securities" means securities approved by ASTC in accordance with the
ASTC Business Rules;
"Company" means Mono Resources Limited;
"Constitution" means the constitution of the Company for the time being in force;
"Directors" means the directors of the Company from time to time;
"Equity Securities" has the same meaning given to that term in the Listing Rules;
Formatted: Font: Not Bold
"Financial Year" has the meaning given to the term "financial year" in the Act;
"Act" means the Corporations Act 2001;
"Listing Rules" means the Listing Rules of the ASX and/or the NSX as the case may be, and
any other rules of the ASX and/or the NSX as the case may be which apply while the
Company is admitted to the Official List, each rule as amended or replaced from time to time,
except to the extent of any express written waiver by the ASX and/or NSX as the case may
be;
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"Member" means a person who is entered in the Register as the holder of Shares in the
capital of the Company;
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"Month" means calendar month;
“NSX” means the National Stock Exchange of Australia Ltd;
"Office" means the registered office for the time being of the Company;
"Official List" has the same meaning given to the term "official list" in the Listing Rules;
"Register" means the registers and/or subregisters of Members to be kept pursuant to the Act
and the Listing Rules;
"Related Body Corporate" has the same meaning given to the term "related body
corporate" in the Act;
"Reorganisation Event" means any one of the following:
(a)
a pro rata bonus issue of shares (not including an issue for cash or other
consideration);
(b)
a subdivision or consolidation of shares; or
(c)
any other reorganisation of share capital;
"Resolution" means a resolution other than a Special Resolution;
"Restricted Securities" has the same meaning given to it in the Listing Rules;
"ASTC" means ASX Settlement and Transfer Corporation Pty Limited as approved as the
Securities Clearing House under the Act;
"ASTC Business Rules" means the business rules of ASTC from time to time;
"Seal" means the common seal of the Company (if any) or, where appropriate, the duplicate
seal or the official seal;
"Secretary" means a person appointed as secretary of the Company and also includes any
person appointed to perform the duties of secretary on a temporary basis and any duly
appointed assistant secretary;
Formatted: Font: Not Bold, (Intl)
Times New Roman
Formatted: Font: (Default) Times
New Roman, English (U.S.)
Formatted: Font: (Default) Times
New Roman, English (U.S.)
Formatted: Body Text, Justified,
Numbered + Level: 1 + Numbering
Style: a, b, c, … + Start at: 1 +
Alignment: Left + Aligned at: 0.18 cm
+ Indent at: 1.93 cm, Adjust space
between Latin and Asian text, Adjust
space between Asian text and
numbers, Tab stops: 1.93 cm, Left
Formatted: Font: (Default) Times
New Roman, English (U.S.)
Formatted: Body Text, Justified,
Numbered + Level: 1 + Numbering
Style: a, b, c, … + Start at: 1 +
Alignment: Left + Aligned at: 0.18 cm
+ Indent at: 1.93 cm, Tab stops:
1.93 cm, Left
Formatted: Font: Not Bold, Not
Expanded by / Condensed by
"Shares" means shares in the capital of the Company; and
"Special Resolution" has the same meaning given to the term "special resolution" in the Act.
1.2
Corporations Act and Listing Rules definitions
In this Constitution, unless the context otherwise requires, an expression defined in, or given
a meaning for the purposes of, the Act or the Listing Rules, has the same definition or
meaning in this Constitution to the extent it relates to the same matter for which it is defined
or given a meaning in the Act or the Listing Rules.
1.3
Interpretation
In this Constitution, unless the context otherwise requires:
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(a)(d)
a reference to:
(i)
the singular includes the plural and vice versa;
(ii)
a gender includes every gender;
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(iii)
the Act, any section, regulation or schedule of the Act or any other legislation is a
reference to that law as amended, consolidated, supplemented or replaced;
(iv)
"in writing" or "written" includes printing, lithography, photography and other
means of representing or reproducing words in a visible form;
(v)
"paid up" or "paid" includes credited as paid up or paid;
(vi)
"dividend" includes bonus;
(vii)
any person includes a reference to any individual, company, body corporate,
association, partnership, firm, joint venture, trust or government agency;
(viii)
the word "including" or "includes" means "including but not limited to" or
"including without limitation"; and
(b)(e)
headings are for convenience only and must be ignored in interpreting this
Constitution.
1.4
Replaceable rules not to apply
To the maximum extent permitted by the Act, the provisions of the Act that apply as
replaceable rules do not apply to the Company.
1.5
Constitution subject to the Act
This Constitution is subject to the Act and where there is any inconsistency between a clause
of this Constitution and the Act, the Act prevails to the extent of the inconsistency.
1.6
Listing Rules and ASTC Business Rules only to have effect if Company is
listed
In this Constitution, a reference to the Listing Rules or ASTC Business Rules is to have effect
only if at the relevant time the Company is admitted to the Official List and is otherwise to be
disregarded.
1.7
Constitution subject to Listing Rules if Company is listed
If the Company is admitted to the Official List, the following clauses apply:
(a)
Despite anything contained in this Constitution, if the Listing Rules prohibit an act
being done, the act must not be done.
(b)
Nothing contained in this Constitution prevents an act being done that the Listing
Rules requires to be done.
(c)
If the Listing Rules require an act to be done or not to be done, authority is given
for that act to be done or not to be done (as the case may be).
(d)
If the Listing Rules require this Constitution to contain a provision and it does not
contain that provision, is deemed to contain that provision.
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(e)
If the Listing Rules require this Constitution not to contain a provision and it
contains that provision, this Constitution is deemed not to contain that provision.
(f)
If any provision of this Constitution is or becomes inconsistent with the Listing
Rules, this Constitution is deemed not to contain that provision to the extent of the
inconsistency.
2.
Share Capital
2.1
Allotment and issue of Shares under control of Directors
The allotment and issue of Shares is under the control of the Directors. Subject to the Act
and the Listing Rules and clause 39, the Directors:
(a)
may allot, issue or otherwise dispose of Shares to any persons, on any terms and
conditions, at that issue price and at those times as the Directors think fit;
(b)
have full power to give any person a call or option over any Shares during any time
and for any consideration as the Directors think fit; and
(c)
may issue Shares with any preferential, deferred or special rights, privileges or
conditions or with any restrictions (whether in regard to dividend, voting, return of
Share capital or otherwise) as the Directors determine.
2.2
Company may issue preference Shares
The Company may not issue any preference Shares unless the rights and restrictions attaching
to those preference Shares are set out in this Constitution or in a Special Resolution.
2.3
Redeemable preference Shares
The Company may issue preference Shares which are, or at the option of the Company are to
be, liable to be redeemed. The terms upon which and the manner in which any redemption is
to be effected must, if permitted by law, be specified in the conditions of issue of the
preference Shares.
2.4
Rights of holders of preference Shares
All preference Shares issued by the Company confer on the holders of those preference
Shares:
(a)
the same rights as holders of ordinary Shares to receive notices, reports and
accounts and to attend general meetings of the Company; and
(b)
the right to vote in each of the following circumstances and in no others:
(i)
during a period during which a dividend (or part of a dividend) for the
Share is in arrears;
(ii)
on a proposal to reduce the Company's Share capital;
(iii)
on a Resolution to approve the terms of a buy-back agreement;
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2.5
(iv)
on a proposal that affects rights attached to the Share;
(v)
on a proposal to wind up the Company;
(vi)
on a proposal for the disposal of the whole of the Company's property,
business and undertaking; and
(vii)
during the winding up of the Company.
Interest on share capital
The Company is authorised to pay interest on share capital in the circumstances and on the
conditions provided for in the Act.
2.6
Brokerage or commission
Subject to the provisions and restrictions contained in the Act and the Listing Rules, the
Company may pay brokerage or commission to any person in consideration of the person
subscribing or agreeing to subscribe (whether absolutely or conditionally) for any Shares in
the Company or for procuring or agreeing to procure subscriptions (whether absolutely or
conditionally) for any Shares in the Company. Any brokerage or commission may be paid or
satisfied in cash, Shares, debentures or debenture stock of the Company or otherwise.
2.7
Joint Holders
Where 2 or more persons are registered as the holders of any Share, they are deemed to hold
the Share as joint tenants with benefits of survivorship, subject to the following provisions:
(a)
the joint holders are jointly and severally liable for all payments (including calls
and instalments) which are to be made for the Share;
(b)
on the death of any joint holder, the survivor or survivors are the only person or
persons recognised by the Company as having any title to the Share, but the
Directors may require evidence of death;
(c)
any 1 joint holder may give a valid receipt for any dividend, bonus or return of
capital payable to the joint holders; and
(d)
delivery of a notice or a certificate for a Share to any joint holder is sufficient
delivery to all the joint holders.
2.8
Recognition of trusts or other interests
Subject to the provisions of the Act, the Company is entitled to treat the registered holder of
any Shares as the absolute owner of those Shares and, accordingly, the Company is not bound
to recognise (whether or not it has notice):
(a)
a person as holding a Share upon any trust; or
(b)
any equitable, contingent, future or partial interest in any Share or unit of a Share.
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3.
Certificates
3.1
Certificated holdings
The provisions of this clause 3 apply only to the extent that the Company is required by the
Act, the Listing Rules or the ASTC Business Rules to issue certificates for Shares or other
marketable securities of the Company, and then only for those Shares or other marketable
securities for which certificates are required to be issued.
3.2
Issue of certificates
Subject to this Constitution, where the Company is required by the Act, the Listing Rules or
the ASTC Business Rules to issue certificates for Shares or other marketable securities of the
Company, the certificates must be issued under the Seal and in accordance with the Act, the
Listing Rules and ASTC Business Rules and must include all information required by the
Act, the Listing Rules and ASTC Business Rules.
3.3
Entitlement of Member to certificate
Subject to this Constitution, every Member is entitled free of charge to 1 certificate for each
class of Shares or other marketable securities registered in its name or to several certificates
each for a reasonable proportion of those Shares or marketable securities.
3.4
Certificate for joint holders
Where Shares or other marketable securities are registered in the names of 2 or more persons,
only 1 certificate is required to be issued for each class of those Shares or marketable
securities.
3.5
Cancellation of certificate on transfer
(a)
Subject to this Constitution, on every application to register the transfer of any
Shares or other marketable securities or to register any person as a Member in
respect of any Shares or other marketable securities which may have been
transmitted to that person by operation of law, the certificate for those Shares or
other marketable securities must be delivered up to the Company for cancellation
and a new certificate in similar form specifying the Shares or other marketable
securities transferred or transmitted must be delivered to the transferee or
transmittee within 5 business days after the day of lodgement with the Company of
the registrable transfer or transmission notice.
(b)
If registration is required for some only of the Shares or other marketable securities
specified on the certificate delivered up to the Company, a new certificate
specifying the Shares or other marketable securities remaining untransferred or
untransmitted must be delivered to the transferor.
3.6
Replacement of certificates
(a)
The Company must issue a replacement certificate:
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(i)
if the certificate is worn out or defaced, upon production of the certificate to the
Company to be replaced and cancelled; or
(ii)
if the certificate is lost or destroyed, upon the Company being furnished with:
(A)
evidence that the certificate has been lost or destroyed, and has not been
disposed of or pledged, as is required by the Act;
(B)
an undertaking to return the certificate, if found, as required by the Act;
and
(C)
if the Directors consider it necessary, a bond or indemnity as the Act
authorises the Directors to require.
(b)
All replacement certificates must be issued within 5 business days after the
Company receives the original certificate or evidence of loss or destruction.
4.
CHESS
4.1
Participation in CHESS
(a)
The Board may at any time resolve that the Company will participate in CHESS.
(b)
This clause 4 will apply if the Company is granted participation in CHESS.
4.2
Compliance with ASTC Business Rules
The Company must comply with the ASTC Business Rules if any of its securities are CHESS
approved securities. In particular the Company must comply with the requirements of the
ASTC Business Rules and Listing Rules regarding the maintenance of registers, the issuing
of holding statements and transfers in relation to its CHESS approved securities.
4.3
Registers
If the Company's securities are CHESS approved securities, in addition to the CHESS
subregister, it must provide for an issuer sponsored subregister, or a certificated subregister,
or both (at least if the Company has Restricted Securities on issue).
4.4
No interference with proper ASTC transfer
The Company must not in any way prevent, delay or interfere with the generation or
registration of a proper ASTC transfer or the registration of a paper-based transfer in
registrable form (which satisfies the requirements of clause 8), except as permitted by clause
8.4, the Listing Rules or ASTC Business Rules.
5.
Lien
5.1
Lien
(a)
The Company has a first and paramount lien on every Share for:
(i)
unpaid calls and instalments on those Shares;
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(ii)
if the Shares were acquired under an employee incentive scheme, any amount
owing to the Company for acquiring those Shares; and
(iii)
any amount the Company is required by law to pay (and has paid) in respect of the
Share of a Member or deceased Member.
(b)
A lien extends to reasonable interest at any rates the Directors may determine, and
expenses incurred because the amount is not paid.
5.2
Extent of lien
The Company's lien (if any) on a Share extends to all dividends, bonuses and other monies
payable for the Share including the proceeds of sale of the Share, and the Company may
deduct or set-off against any dividends, bonuses or other monies, any monies due and payable
to the Company.
5.3
Exemption from lien
The Directors may at any time declare any Share to be wholly or in part exempt from the
provisions of clauses 5.1 and 5.2.
5.4
Sale under lien
The Company may sell any Shares on which the Company has a lien in any manner the
Directors think fit provided that no sale may be made:
(a)
unless a sum in respect of which the lien exists is presently payable; and
(b)
until the expiration of 30 days after a notice in writing, stating and demanding
payment of the amount which is presently payable, has been given to the registered
holder of the Shares or the person entitled to the Shares because of the death or
bankruptcy of the registered holder.
5.5
Proceeds of sale of Shares sold under lien
The net proceeds of the sale of Shares sold under lien (after payment of all costs and
expenses incurred in selling the Shares) will be received by the Company and applied in
payment of that part of the amount for which the lien exists and which is presently payable
and any interest on that amount, and the balance (if any) is to be paid to the person registered
as the holder of the Shares immediately before the Shares were sold.
5.6
Transfer on sale under lien
(a)
The Company may do all things necessary to give effect to a sale of Shares on
which the Company has a lien, including authorising a Director or any other person
to:
(i)
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(ii)
do all acts and things as are necessary or desirable under the Act, the
Listing Rules or ASTC Business Rules to effect a transfer of the Shares
sold in favour of the purchaser of the Shares.
(b)
The purchaser is to be registered as the holder of the Shares transferred, and is not
bound to see to the application of the purchase money, nor will the purchaser's title
to the Shares be affected by any irregularity or invalidity in connection with the
sale.
6.
Calls
6.1
Directors may make calls
The Directors may make calls as they think fit on the Members for all monies unpaid on the
Shares held by the Members that are not monies made payable at fixed times by the
conditions of allotment. A call will be deemed to have been made when the Resolution of the
Directors authorising that call was passed and may be made payable by instalments. The
Directors may revoke or postpone a call.
6.2
Notice of calls
The Company must give written notice of a call at least 30 business days before the call is
due. The notice must specify the time and place for payment and any other information
required by the Listing Rules. The non-receipt of any notice by, or the accidental omission to
give notice of any call to, any Member will not invalidate the call.
6.3
Difference in terms of issue as to calls
The Directors may, on the issue of Shares, differentiate between the holders as to the amount
of calls to be paid and the time for payment of those calls.
6.4
Fixed payments deemed calls
Any sum which, by the terms of issue of a Share, becomes payable on allotment or at any
fixed date, will for the purposes of this Constitution be deemed to be a call duly made and
payable on the date on which the sum is payable. In case of non-payment, all the relevant
provisions of this Constitution as to payment of interest and expenses, forfeiture or otherwise
will apply as if the sum had become payable by virtue of a call duly made and notified.
6.5
Interest on sums not paid
If a sum called in respect of a Share is not paid on or before the date for payment, then that
sum will bear interest from the date for payment to the time of actual payment at any rates as
the Directors may determine. The Directors may waive payment of interest, either in whole
or in part.
6.6
Payment of calls
Each Member must pay the amount of every call made on it at the times and places appointed
by the Directors.
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6.7
Proof of calls
In any proceeding for the recovery of monies due for any call, it is sufficient and conclusive
evidence of the debt if it is proved that:
(a)
the name of the Member sued is entered in the Register as the holder or 1 of the
holders of the Shares in respect of which the call was made;
(b)
the Resolution making the call was recorded in the minute book; and
(c)
notice of the call was given to the Member sued in accordance with this
Constitution.
6.8
Prepayment of calls
The Directors may, if they think fit, receive from any Member willing to advance it, all or
any part of the amount unpaid upon the Shares held by it beyond the sums actually called up.
The Directors may then either:
(a)
if the Member so requests, make a call on the Member for the amount advanced,
pro rata in respect of all Shares held by that Member on which monies remain
unpaid or on any other basis as agreed between that Member and the Directors; or
(b)
authorise payment by the Company of interest on the whole or any part of the
amount so received until the amount becomes due or is repaid at the rate agreed
between the Member paying the sum in advance and the Directors. The Directors
may at any time authorise repayment of the whole or any part of the amount paid in
advance upon giving to the Member 1 Month's notice of the date for repayment.
7.
Forfeiture of Shares
7.1
Forfeiture upon non-payment of calls
Unless the Directors otherwise determine, any Share upon which a call is unpaid at the
expiration of 14 days after the day for its payment will be absolutely forfeited without any
Resolution of the Directors or other proceeding. Subject to the Act and the Listing Rules, the
Directors may then proceed to cancel or sell the forfeited Shares.
7.2
Evidence of forfeiture
A statement in writing declaring that the person making the statement is a Director or
Secretary of the Company and that a Share in the Company has been forfeited on a date
stated in the statement, is conclusive evidence of the facts stated in the statement as against
all persons claiming to be entitled to the Share.
7.3
Effect of forfeiture
Upon forfeiture of a Share:
(a)
the person whose Share is forfeited will cease to be a Member in respect of the
forfeited Share;
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(b)
that person will lose all entitlements to dividends declared in respect of the
forfeited Share and not actually paid; and
(c)
that person remains liable to pay to the Company all money which, at the date of
forfeiture, was payable by it to the Company in respect of the forfeited Share
together with interest on that amount from the date of forfeiture until payment at
the rate determined by the Directors. The Directors are under no obligation to
enforce payment.
7.4
Sale of forfeited Share
(a)
If the Directors determine to sell any forfeited Shares, the Company may dispose
of any forfeited Shares on any terms and in any manner as the Directors determine,
and in accordance with any applicable requirements of the Act and the Listing
Rules.
(b)
The Company may do all things necessary to give effect to the sale of the forfeited
Shares, including authorising a Director or any other person to:
(i)
execute a transfer of the Shares sold in favour of the purchaser of the Shares; and
(ii)
do all acts and things as are necessary or desirable under the Act, the Listing Rules
or ASTC Business Rules, to effect a transfer and to enable the forfeited Shares to
be disposed of.
(c)
The transferee of the forfeited Shares is not bound to see to the application of any
money paid as consideration. The title of the transferee to the Shares is not
affected by any irregularity or invalidity in connection with the forfeiture, sale or
disposal of the Shares.
7.5
Proceeds of sale
The proceeds of sale of any forfeited Shares received by the Company must be applied in
payment of:
(a)
first, the expenses of the sale;
(b)
second, any expenses necessarily incurred in connection with the forfeiture,
including any interest accrued;
(c)
third, the calls then due and unpaid; and
(d)
the balance (if any) must be paid to the Member whose Shares have been sold
within 5 business days of receipt by the Company of the proceeds of sale.
7.6
Redemption of forfeited Shares
A Share belonging to a person which has been forfeited may be redeemed at any time up to,
but not including, the day on which the Share is intended to be sold, by payment to the
Company of all calls due on the Share and any other costs and expenses which may be
permitted by the Act and the Listing Rules, and on payment the person is entitled to the Share
as if the forfeiture had not occurred.
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7.7
Surrender of Shares
The Directors may accept the surrender of any Share which they are entitled to forfeit on any
terms they think fit and any Share so surrendered may be disposed of in the same manner as a
forfeited Share.
8.
Transfer of Shares
8.1
Transfer document
Subject to this Constitution, the Act, the Listing Rules and ASTC Business Rules a Member
may transfer all or any Shares by a transfer document duly stamped (if necessary) and
delivered to the Company. The transfer document must be in writing in the usual or common
form or in any other form as the Directors may from time to time prescribe or, in particular
circumstances, agree to accept and must signed by or on behalf of the transferor or as
otherwise permitted by the Act.
8.2
Registration procedure
Subject to this Constitution, the Act, the Listing Rules and ASTC Business Rules every
transfer document must be delivered to the Company accompanied by the certificate for the
Shares to be transferred and any other evidence the Directors may require to prove the title of
the transferor or its right to transfer the Shares. All transfer documents that are registered
must be retained by the Company but any transfer document which the Directors refuse to
register must (except in the case of fraud or suspected fraud) be returned on demand to the
person who deposited that document.
8.3
Registration of transfer
Subject to clause 8.4, the Company must register each registrable paper-based transfer of
Shares which complies with clauses 8.1 and 8.2, the Act and the Listing Rules and must do so
without charge.
8.4
Restrictions on transfer
Except as otherwise provided for in the Listing Rules and ASTC Business Rules, the
Directors may in their absolute discretion ask ASTC to apply a holding lock to prevent a
proper ASTC transfer, or refuse to register a paper-based transfer, of a Share where:
(a)
the Company has a lien on the Shares the subject of the transfer;
(b)
the Company is served with a court order that restricts a Member's capacity to
transfer the Shares;
(c)
registration of the transfer may break an Australian law and the ASX and/or NSX
has agreed in writing to the application of a holding lock (which must not breach a
ASTC Business Rule) or that the Company may refuse to register a transfer;
(d)
during the escrow period of Restricted Securities;
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(e)
if the transfer is paper-based, either a law related to stamp duty prohibits the
Company from registering it or the Company is otherwise allowed to refuse to
register it under the Listing Rules; or
(f)
the transfer does not comply with the terms of any employee incentive scheme of
the Company.
8.5
Notice of refusal to register
(a)
If the Company refuses to register a paper-based transfer under clause 8.4, it must
tell the lodging party in writing of the refusal and the reason for it, within 5
business days after the date on which the transfer was lodged.
(b)
If the Company asks ASTC to apply a holding lock under clause 8.4, it must tell
the holder of the Shares in writing of the holding lock and reason for it, within 5
business days after the date in which it asked for the holding lock.
8.6
Transfer not complete until name entered in the Register
Subject to the ASTC Business Rules, the transferor of a Share remains the holder of the Share
until the name of the transferee is entered in the Register in respect of that Share.
8.7
More than 3 persons registered
If more than 3 persons are noted in the Register as holders of securities of the Company, or a
request is made to register more than 3 persons then (except in the case of executors or
trustees or administrators of a deceased Member), the first 3 persons named in the Register or
the request (as the case may be) are deemed to be the holders of those securities and no other
persons will be regarded by the Company as a holder of those securities for any purpose
whatsoever.
9.
Transmission of Shares
9.1
Death of a Member
In the event of the death of a Member:
(a)
where the Member was a joint holder of any Shares, the surviving joint holder (or
holders) is (or are) the only person (or persons) recognised by the Company as
having any title to or interest in those Shares; and
(b)
the legal personal representatives of the Member (not being 1 of 2 or more joint
holders) are the only persons recognised by the Company as having any title to or
interest in the Shares registered in its name.
9.2
Transmission on death or bankruptcy
Any person becoming entitled to a Share as a consequence of the death or bankruptcy of a
Member or otherwise by operation of law may, upon production of any evidence of its
entitlement which the Directors may require, elect either to be registered itself as holder of
the Share or to have some person nominated by it registered as the transferee of that Share.
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9.3
Election as to registration on transmission
If the person becoming entitled to a Share elects to be registered itself, it must deliver or send
to the Company a notice in writing signed by it stating that it so elects. If the person
becoming entitled to a Share elects to have another person registered, it must effect a transfer
of the Share in favour of that person. All the limitations, restrictions and provisions of this
Constitution relating to the right to transfer, the form of transfer and the registration of
transfers of Shares will be applicable to any notices or transfers.
10.
Alteration of capital
10.1
Company's power to alter capital
Subject to clause 39, Tthe Company may, by Resolution passed at a general meeting:
(a)
consolidate all or any of its Shares into Shares of a larger amount;
(b)
subdivide its Shares or any of them into Shares of a smaller amount, but so that in
the subdivision the proportion between the amount paid and the amount (if any)
unpaid on each subdivided Share is the same as it was for the Share from which the
subdivided Share is derived; or
(c)
cancel Shares which have been forfeited, subject to the requirements of the Listing
Rules.
10.2
Reduction of capital
Subject to the Act, and the Listing Rules and clause 39, the Company may reduce its capital in
any manner.
10.3
Power to buy Shares
The Company may, in accordance with the Act and the Listing Rules, buy its own Shares on
any terms and conditions determined by the Directors.
11.
Variation or cancellation of rights
11.1
Variation or cancellation of rights of class of Shares
Subject to the Act, and the Listing Rules and clause 39, all or any of the rights and privileges
attached to any class of Shares (unless otherwise provided by the terms of issue of the
Shares of that class) may be varied or cancelled with the consent in writing of the holders
of at least 75% of the Shares issued in that class or with the sanction of a Special Resolution
passed at a meeting of holders of the Shares of that class. In relation to any meeting to
approve that Resolution:
(a)
the necessary quorum is the holders present personally or by proxy attorney or
representative and entitled to vote in respect of at least 5% of the issued Shares of
the class; and
(b)
the provisions contained in this Constitution relating to notice of meetings, the
appointment of a chairman and of proxies, attorneys and representatives, the
depositing and form and validity of proxies and the conduct of general meetings
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11.2
No consent or sanction required for redemption
A consent or sanction referred to in clause 11.1 is not required for the redemption of any
Shares or any other variation of rights attaching to any Shares where that redemption or
variation is in accordance with the terms of issue of those Shares.
11.3
No variation by issue of further Shares ranking equally
The rights conferred upon the holders of the Shares of any class is not, unless otherwise
expressly provided by the terms of issue of the Shares of that class, be deemed to be varied
by the creation or issue of further Shares ranking equally in respect of those rights.
12.
Restricted Securities
The Company must comply in all respects with the requirements of the Listing Rules relating
to Restricted Securities. Notwithstanding any other provisions of this Constitution:
(a)
Restricted Securities cannot be disposed of (as the term "disposed" is defined in the
Listing Rules) during the escrow period for those Restricted Securities, except as
permitted by the Listing Rules or the ASX and/or NSX;
(b)
the Company must refuse to acknowledge a disposal (including registering a
transfer) of Restricted Securities during the escrow period for any Restricted
Securities except as permitted by the Listing Rules or the ASX and/or NSX; and
(c)
during a breach of the Listing Rules relating to Restricted Securities, or a breach of
a restriction agreement, the holder of the Restricted Securities is not entitled to any
dividend or distribution, or voting rights, in respect of the Restricted Securities.
13.
Proportional takeover bids
13.1
Definitions
In this clause:
"approving resolution" has the same meaning as in section 648D(1) of the Act;
"approving resolution deadline" has the meaning specified in section 648D(2) of the Act;
"associate" has the meaning specified in section 9 of the Act;
"proportional takeover bid" has the meaning specified in section 9 of the Act;
13.2
Prohibition on registration of transfer unless takeover scheme approved
Where an offer has been made under a proportional takeover bid in respect of Shares
included in a class of Shares in the Company the registration of a transfer giving effect to a
contract resulting from the acceptance of an offer made under the proportional takeover bid is
prohibited unless and until an approving resolution to approve the proportional takeover bid
is passed in accordance with the provisions of this Constitution.
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13.3
Approving resolution
An approving resolution is to be voted on at a meeting, convened and conducted by the
Company of the persons entitled to vote on the approving resolution under section
648D(1)(b) of the Act.
13.4
Entitlement to vote on approving resolution
A person (other than the bidder or an associate of the bidder) who, as at the end of the day on
which the first offer under the proportional takeover bid was made, held Shares included in
that class is entitled to vote on an approving resolution and, for the purposes of so voting, is
entitled to 1 vote for each of those Shares.
13.5
Bidder and associates not entitled to vote
The bidder or an associate of the bidder is not entitled to vote on an approving resolution.
13.6
Approving resolution passed
An approving resolution is taken to have been passed if the proportion that the number of
votes in favour of the resolution bears to the total number of votes on the Resolution is
greater than 50%, and otherwise is taken to have been rejected.
13.7
General meeting provisions to apply
The provisions of this Constitution that apply to a general meeting of the Company apply,
with any modifications as the circumstances require, to a meeting that is convened pursuant
to this clause and apply as if that meeting was a general meeting of the Company.
13.8
Meeting to be held before approving resolution deadline
Where takeover offers have been made under a proportional takeover bid, then the Directors
of the Company must ensure that a Resolution to approve the proportional takeover bid is
voted on in accordance with this clause before the approving resolution deadline in relation to
the proportional takeover bid.
13.9
Notice as to whether approving resolution is passed
Where an approving resolution to approve a proportional takeover bid is voted on, in
accordance with this clause, before the approving resolution deadline in relation to the
proportional takeover bid, the Company must, on or before the approving resolution deadline:
(a)
give to the bidder; and
(b)
serve on the ASX and/or NSX,
a notice in writing stating that an approving resolution to approve the proportional takeover
bid has been voted on and that the approving resolution has been passed, or has been
rejected, as the case requires.
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13.10
Approving resolution deemed to have been passed
Where, as at the end of the day before the approving resolution deadline in relation to a
proportional takeover bid under which offers have been made, no Resolution to approve the
proportional takeover bid has been voted on in accordance with this clause, an approving
resolution to approve the proportional takeover bid is, for the purposes of this clause, be
deemed to have been passed in accordance with this clause.
13.11
Effect of this clause
This clause ceases to have effect on the third anniversary of the date of its adoption or of its
most recent renewal.
14.
Unmarketable parcels
14.1
Definitions
In this clause:
"Authorised Price" means the price per Share equal to the average of the last sale price of the
Shares of the Company quoted on the ASX and/or NSX for each of the 10 trading days
immediately preceding the date of any offer to purchase Unmarketable Parcels accepted by
the Company pursuant to this clause;
"Effective Date" means the date immediately following the expiry of the period referred to in
the notice given by the Company to Unmarketable Parcel Holders in accordance with this
clause;
"Marketable Parcel" means a number of Shares equal to a marketable parcel as defined in the
Listing Rules, calculated on the day before the Company gives notice under clause 14.2;
"Unmarketable Parcel" means a number of Shares which is less than a Marketable Parcel; and
"Unmarketable Parcel Holder" means a Member holding less than a Marketable Parcel.
14.2
Notice to Unmarketable Parcel Holder
The Company may give written notice to an Unmarketable Parcel Holder advising of the
Company's intention to sell its Unmarketable Parcel under this clause, unless the
Unmarketable Parcel Holder, within 6 weeks from the date the notice is sent by the
Company, gives written notice to the Company that it wishes to retain its Shares in which
case the provisions of this clause will not apply to the Shares held by that Unmarketable
Parcel Holder.
14.3
Revocation or withdrawal of notice
If an Unmarketable Parcel Holder has given written notice to the Company that it wishes its
Shares to be exempted from this clause, it may at any time prior to the Effective Date revoke
or withdraw that notice and the provisions of this clause will then apply to the Shares held by
that Unmarketable Parcel Holder.
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14.4
Sale of Unmarketable Parcels
Subject to clause 14.2, on and from the Effective Date, the Company may sell or otherwise
dispose of the Shares held by each Unmarketable Parcel Holder on any terms and in that
manner and at those times that the Directors determine. For the purpose of selling or
disposing of those Shares, each Unmarketable Parcel Holder irrevocably:
(a)
appoints the Company as its agent to sell all the Shares held by it at a price not less
than the Authorised Price;
(b)
appoints the Company and each Director and Secretary from time to time jointly
and severally as its attorney in its name and on its behalf to effect a transfer
document for its Shares and to otherwise act to effect a transfer of its Shares;
(c)
appoints the Company as its agent to deal with the proceeds of sale of those Shares
in accordance with this clause.
14.5
Company may not sell below Authorised Price
The Company may only sell the Shares of an Unmarketable Parcel Holder if the Company
has received offers for all the Shares constituting Unmarketable Parcels at the same price,
which may not be less than the Authorised Price.
14.6
Company to pay all costs
The Company will pay all costs and expenses of the sale and disposal of Unmarketable
Parcels under this clause.
14.7
Title of purchaser of Unmarketable Parcel
Once the name of the purchaser of the Shares sold or disposed of in accordance with this
clause is entered in the Register for those Shares, the title of the purchaser to those Shares is
not affected by any irregularity or invalidity in connection with the sale or disposal of those
Shares and the validity of the sale may not be impeached by any person.
14.8
Remedy of Unmarketable Parcel Holder
The remedy of any Unmarketable Parcel Holder who is aggrieved by the sale or disposal of
its Shares under this clause is limited to a right of action in damages against the Company to
the exclusion of any other right, remedy or relief against any other person.
14.9
Evidence of sale in accordance with this clause
A statement in writing declaring that the person making the statement is a Director or
Secretary of the Company and that the Shares of an Unmarketable Parcel Holder have been
dealt with in accordance with this clause, is conclusive evidence of the facts stated in the
statement as against all persons claiming to be entitled to those Shares.
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14.10
Receipt of proceeds of sale
The receipt by the Company of the proceeds of sale of the Shares of an Unmarketable Parcel
Holder is a good discharge to the purchaser of all liability in respect of the purchase of those
Shares and the purchaser will not be bound to see to the application of the money paid as
consideration.
14.11
Company to deal with proceeds of sale
The Company will receive the proceeds of sale of the Shares of each Unmarketable Parcel
Holder and will deal with those proceeds as follows:
(a)
the proceeds must be paid into a separate bank account opened and maintained by
the Company for that purpose;
(b)
the proceeds must be held in trust for the Unmarketable Parcel Holder;
(c)
the Company must, immediately following a receipt of the proceeds, notify the
Unmarketable Parcel Holder in writing that the proceeds of the sale of those Shares
have been received by the Company and are being held by the Company pending
receipt of the certificate for the Shares sold or disposed of and seeking instructions
from the Unmarketable Parcel Holder as to how the proceeds are to be dealt with;
(d)
the Company must deal with the sale proceeds as instructed by the Unmarketable
Parcel Holder on whose behalf they are held if the Member provides to the
Company the certificate for those Shares or, if that certificate has been lost or
destroyed, a statement and undertaking in accordance with the Act is provided to
the Company; and
(e)
if the whereabouts of the Unmarketable Parcel Holder are unknown or no
instructions are received from the Unmarketable Parcel Holder within 2 years of
the proceeds being received by the Company, the Company may deal with those
proceeds according to the applicable laws dealing with unclaimed monies.
14.12
Overriding effect of this clause
Subject to clause 14.13 and 14.4, the provisions of this clause 14 have effect despite any
other provision of this Constitution.
14.13
Clause ceases to have effect following announcement of takeover bid or
takeover announcement
This clause 14 ceases to have effect following the announcement of a takeover bid or
takeover announcement but, despite clause 14.14, the procedures set out in this clause may be
started again after the close of the bids made under the takeover bid or takeover
announcement.
14.14
Clause may be invoked only once in any 12 Month period
The provisions of this clause may be invoked only once in any 12 Month period.
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15.
General meetings
15.1
Annual general meetings
Annual general meetings of the Company are to be held in accordance with the Act and the
Listing Rules. The business of an annual general meeting is:
(a)
to receive and consider the profit and loss account and balance sheet and the
reports of the Directors and of the auditors and the statement of the Directors;
(b)
to elect Directors;
(c)
to appoint the auditor;
(d)
to fix the remuneration of the auditors; and
(e)
to transact any other business which may be properly brought before the meeting.
15.2
General meetings
The Directors may convene a general meeting of the Company whenever they think fit.
15.3
Members may requisition meeting
Members may requisition the holding of a general meeting in accordance with the Act and
the Directors must convene a general meeting as soon as practicable after receiving that
requisition.
15.4
Notice of general meeting
Notice of every annual general meeting, general meeting or meeting of any class of Members
must be given in the manner provided by this Constitution and the Act to the Members and
those persons who are otherwise entitled under this Constitution to receive notices.
15.5
Contents of notice of general meeting
Every notice convening a general meeting must include or be accompanied by all information
required by the Act and the Listing Rules and must at least:
(a)
set out the place, the day and time for the meeting (and, if the meeting is to be held
in 2 or more places, the technology that will be used to facilitate this);
(b)
state the general nature of the business to be transacted at the meeting and any
Special Resolution to be proposed;
(c)
include a statement that:
(i)
a Member entitled to attend and vote is entitled to appoint a proxy;
(ii)
a proxy need not be a Member; and
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(iii)
a Member who is entitled to cast 2 or more votes may appoint 2 proxies
and must specify the proportion or number of votes each proxy is
appointed to exercise;
(d)
be accompanied by an instrument of proxy in the form described in this
Constitution or in any other form as the Directors may from time to time prescribe
or accept; and
(e)
if required by the Listing Rules, include a voting exclusion statement.
15.6
Omission to give notice
Except as prescribed by the Act, the accidental omission to give notice of a meeting to any
Member or the non-receipt of notice of a meeting by any Member does not invalidate any of
the proceedings at that meeting.
16.
Proceedings at general meeting
16.1
Member deemed to be present
A Member may attend a general meeting at which it is entitled to be present, and is deemed
to be present, in any of the following ways:
(a)
in person;
(b)
by attorney;
(c)
by proxy;
(d)
in the case of a Member that is a body corporate, by a representative appointed by
section 250D of the Act.
16.2
Attorney of Member
Any Member may appoint an attorney to act on its behalf at all meetings of the Company or
all meetings of the Company during a specified period. Before the first meeting at which the
attorney acts on the Member's behalf, a power of attorney must be deposited at the Office or
at any place specified in the notice convening that meeting.
16.3
Representative of body corporate
Any Member that is a body corporate may, in accordance with the Act, by Resolution of its
Directors authorise any person to act as its representative at any meeting. That representative
is then entitled to exercise the same powers as the body corporate appointing the
representative could have exercised as a Member, if it were a natural person.
16.4
Quorum for general meeting
No business may be transacted at any general meeting unless a quorum is present at the
commencement of the business. A quorum is 3 Members present in person or by attorney or
proxy.
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16.5
No quorum
If a quorum is not present within 30 minutes after the time appointed for the meeting, any
meeting convened on a requisition of Members is dissolved but any other meeting stands
adjourned to the same day in the next week at the same time and place or to any other day,
time and place as the Directors may appoint by notice to the Members. If at the adjourned
meeting a quorum is not present within 30 minutes after the time appointed for the adjourned
meeting, then those Members who are present in person are deemed to be a quorum and may
transact the business for which the meeting was called.
16.6
Chairman of general meeting
The chairman of the Directors, or, in the chairman's absence, the deputy chairman (if any)
will be entitled to take the chair at every general meeting. If there is no chairman or if at any
meeting the chairman is not present within 30 minutes after the time appointed for holding
the meeting or if the chairman is unwilling to act, the Directors present may choose a
chairman. If the Directors do not choose a chairman, the Members present must choose 1 of
the Directors to be chairman, and if no Director is present or willing to take the chair, the
Members must choose 1 of the Members to be chairman.
16.7
Powers of chairman
The chairman is responsible for the general conduct of the general meeting. At any general
meeting, a declaration by the chairman that a Resolution or Special Resolution has been
carried or carried by a particular majority or not carried and an entry to that effect in the
minutes of proceedings of the Company is conclusive evidence of the fact without proof of
the number or proportion of votes recorded in favour of or against that Resolution or Special
Resolution.
16.8
Adjournment of general meeting
The chairman of a general meeting may adjourn the meeting from time to time and from
place to place, but no business will be transacted at any adjourned meeting other than the
business left unfinished at the meeting from which the adjournment took place.
16.9
Notice of adjourned meeting
If any general meeting is adjourned for more than 1 month, a notice of the adjournment must
be given to Members of the Company in the same manner as notice was or ought to have
been given of the original meeting.
17.
Voting
17.1
Resolution determined by majority
At a general meeting all Resolutions submitted to the meeting will be decided by a simple
majority of votes except where a greater majority is required by this Constitution, the Act or
the Listing Rules.
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17.2
Casting vote of chairman
In the case of an equality of votes, the chairman will have a casting vote in addition to the
vote or votes to which the Chairman may be entitled as a Member, unless the chairman is not
entitled for some other reason to cast a vote on the Resolution or if the chairman casts a vote
and the Act, the Listing Rules or this Constitution require that no account be taken of the
vote, in which case the Resolution is not passed.
17.3
Method of voting
Every Resolution submitted to the meeting, in the first instance, will be determined by a show
of hands unless a poll is demanded in accordance with clause 17.4 or the Act either before or
on the declaration of the result of the vote on a show of hands.
17.4
Demand for poll
A poll may be demanded on any Resolution by:
(a)
the chairman;
(b)
at least 5 Members present in person or by attorney or proxy or by representative;
or
(c)
any 1 or more Members holding Shares conferring not less than 5% of the total
voting rights of all Members having the right to vote on the Resolution.
17.5
Conduct of poll
The chairman will decide in each case the manner in which a poll is taken, but in all cases it
must ascertain the number of votes attaching to Shares held or represented by persons voting
in favour of a Resolution or Special Resolution and the number of votes attaching to Shares
held or represented by persons voting against the Resolution. Any dispute as to the
admission or rejection of a vote will be determined by the chairman and that determination
made in good faith will be final and conclusive.
17.6
Votes
Subject to this Constitution, the Listing Rules and the rights or restrictions on voting which
may attach to or be imposed on any class of Shares:
(a)
on a show of hands every Member (including each holder of preference Shares
who has a right to vote) present in person or by proxy or attorney or representative
will have 1 vote; and
(b)
on a poll every Member (including each holder of preference Shares who has a
right to vote) present in person or by proxy, attorney or representative will have 1
vote for each fully paid Share held by that Member and a fraction of a vote for each
partly paid Share, equivalent to the proportion which the amount paid (not
credited) is of the total amounts paid and payable (excluding amounts credited) for
that Share, ignoring any amounts paid in advance of a call.
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17.7
Voting if call unpaid on Shares
A Member will not be entitled to vote at any general meeting in respect of Shares held by the
Member for which calls or other monies are due and payable to the Company at the time of
the meeting. Subject to any restrictions affecting the right of any Member or class of
Members to attend any meeting, a Member holding any Shares upon which no calls or other
monies are due and payable to the Company is entitled to receive notices and to attend any
general meeting and to vote and be reckoned in a quorum despite that monies are then due
and payable to the Company by that Member in respect of other Shares held by that Member.
Upon a poll, a Member will only be entitled to vote in respect of Shares held by the Member
upon which no calls or other monies are due and payable to the Company at the time of the
meeting.
17.8
Voting by joint holders
Where there are joint holders of any Share, any joint holder may vote at any meeting either
personally or by proxy or attorney or representative in respect of the Shares as if they were
solely entitled to those Shares, but if more than 1 joint holder is present at any meeting
(whether personally, by proxy or by attorney or by representative) and tenders a vote, only
the vote of the joint holder whose name appears first on the register will be counted. Several
legal personal representatives of a deceased Member will for the purpose of this clause be
deemed to be joint holders of the Shares registered in the name of that Member.
17.9
Voting by transmittee
A person entitled to transmission of a Share under clause 8 who, at least 48 hours before the
time notified for a general meeting (or an adjourned meeting), satisfies the Board of its right
to that Share, may vote at that general meeting in respect of that Share as if the person were
registered as the holder of the Share.
17.10
Voting by Member of unsound mind
If a Member is of unsound mind or is a person whose person or estate is liable to be dealt
with in any way under a law relating to mental health, that Member's committee or trustee or
other person who properly has the management of the Member's estate may, if that person
has at least 48 hours before the time notified for a general meeting (or an adjourned meeting)
satisfied the Board of its relationship to the Member or the Member's estate, exercise the
rights of the Member in respect of the general meeting as if the committee, trustee or other
person were the Member.
17.11
Voting exclusions
If:
(a)
in accordance with the requirements of the Listing Rules; or
(b)
to ensure that a Resolution on which the Act requires that particular persons do not
cast a vote so that the Resolution has a specified effect under the Act;
the notice of a general meeting includes any voting exclusion statement specifying that, in
relation to particular business to be considered at that general meeting, votes cast by
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particular persons (whether specified by name or description of particular classes of persons)
are to be disregarded by the Company, the Company must take no account, in determining
the votes cast on a Resolution relating to that business (whether a Special Resolution or an
ordinary Resolution) or for any other purpose, of any vote cast or purported to be cast by or
on behalf of any of those persons (whether on a show of hands or on a poll) in relation to that
Resolution except to the extent permitted by the Listing Rules.
17.12
Ruling on entitlements and votes
An objection may be raised with the chairman of a general meeting as to the qualification of a
purported voter or the admission or rejection of a vote by any person present and entitled (or
claiming to be entitled) to vote but that objection may be made only at the general meeting or
adjourned meeting at which the purported voter wishes to vote or the vote objected to is given
or tendered and, in relation to that objection:
(a)
the decision of the chairman is final and conclusive; and
(b)
a vote not disallowed as a result is valid and effective for all purposes.
18.
Proxies
18.1
Instrument appointing proxy
The instrument appointing a proxy must be in writing and signed by the appointor or the
appointor's attorney duly authorised in writing, or, if the appointor is a body corporate, by its
corporate representative or at least 2 of its officers.
18.2
Deposit of proxy with company
The instrument appointing a proxy and the original power of attorney (if any) under which it
is signed or a certified copy of the power of attorney must be received by the Company at
least 48 hours before the meeting by delivery to the Company's office, by facsimile received
at the Company's office or at any other place, fax number or electronic address specified for
the purpose in the notice of meeting or otherwise by any other means permissible under
section 250B of the Act.
18.3
Presence of Member
If a Member is present either in person or by its corporate representative, and a person
appointed by that Member as proxy is also present at that meeting, that person may not
exercise the rights conferred by the instrument of proxy while the Member is present.
18.4
Validity of vote given in accordance with proxy
Unless the Company has received written notice of the matter before the start or resumption
of the meeting at which a proxy votes, a vote cast by the proxy will be valid even if, before
the proxy or attorney voted:
(a)
the Member dies;
(b)
the Member is mentally incapacitated;
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(c)
the Member revokes the proxy's appointment;
(d)
the Member revokes the authority under which the proxy was appointed by a third
party; or
(e)
the Member transfers the Share for which the proxy was given.
18.5
Form of proxy
(a)
Every instrument of proxy must specify the Member's name and address, the
Company's name, the proxy's name or the name of the office held by the proxy and
the meetings at which the proxy may be used, and must otherwise comply with the
provisions of section 250A of the Act.
(b)
The instrument of proxy may be worded so that a proxy is directed to vote either
for or against each of the resolutions to be proposed. Any instrument of proxy
deposited in accordance with this Constitution in which the name of the appointee
is not filled will be deemed to be given in favour of the chairman of the meeting to
which it relates. The instrument of proxy may specify the proportion or number of
votes that the proxy may exercise.
19.
Directors
19.1
Number of Directors
The number of the Directors must not be less than 3, nor, until otherwise determined by the
Company in general meeting, more than 10.
19.2
No Share qualification
A Director need not be the holder of any Shares in the Company.
19.3
Election of Directors by company
The election of Directors must be by Resolution of the Company in general meeting.
19.4
Directors may fill casual vacancies or appoint additional Directors
Notwithstanding clause 19.3, the Directors have power at any time and from time to time to
appoint any other person as a Director either to fill a casual vacancy or as an addition to the
Board but so that the total number of Directors must not at any time exceed the maximum
number for the time being fixed by or under this Constitution. Any Director appointed under
this clause after the Company is Listed must retire from office at, and will be eligible for reelection at the next annual general meeting following their appointment, but that Director will
not be taken into account in determining the number of Directors who are to retire by
rotation.
19.5
Eligibility for election as a Director
Except in the case of a Director retiring from the Board under this Constitution or a person
recommended for appointment by the Board, a person is only eligible to be appointed as a
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Director by Resolution of the Company in general meeting, where the Company receives at
its Office at least 30 business days before the relevant general meeting both:
(a)
a nomination of the person by a Member; and
(b)
a consent to that nomination signed by the person nominated for election as a
Director.
19.6
Alternate Director
Subject to the provisions of the Act and the Listing Rules, each Director may from time to
time by written notice to the Company appoint any person (whether or not a Member) to act
as an alternate Director in their place during any period they think fit. The following
provisions apply to any alternate Director:
(a)
that Director may be removed or suspended from office by written notice to the
Company from the Director who appointed it;
(b)
that Director is entitled to receive notice of meetings of the Board, to attend
meetings (if the Director who appointed it is not present) and to be counted
towards a quorum at meetings;
(c)
that Director is entitled to vote at meetings it attends on all Resolutions on which
its appointor could vote had that appointor attended and, where that Director is a
Director in its own right, it has a separate vote on behalf of the Director it is
representing in addition to its own vote;
(d)
that Director may exercise any powers that the appointor may exercise in its own
right where the appointor is unavailable for any reason except the power to appoint
an alternate Director. The action of an alternate Director will be conclusive
evidence as against third parties of the unavailability of the appointor;
(e)
that Director automatically vacates office if the Director who appointed it is
removed or otherwise ceases to hold office for any reason;
(f)
that Director, whilst acting as a Director, is responsible to the Company for its own
acts and defaults and is not deemed to be the agent of the Director by whom it was
appointed;
(g)
that Director is not entitled to receive any remuneration from the Company but is
entitled to reimbursement for reasonable travelling and other expenses incurred by
it in attending meetings of the Board or otherwise on the Company's business;
(h)
that Director is not to be taken into account in determining the number of Directors
for the purposes of this Constitution; and
(i)
that Director may act as an alternate for more than 1 Director.
19.7
Auditor cannot be Director
No auditor of the Company or partner or employee or employer of an auditor can be
appointed as a Director or an alternate Director of the Company.
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20.
Directors' tenure of office
20.1
Directors' tenure of office
Each Director, subject to the Act, the Listing Rules and this Constitution must not hold office
(without re-election) past the third annual general meeting following its appointment or
election or 3 years, whichever is longer, after which they must retire from office. This clause
does not apply to the managing director, but if there is more than 1 managing director, only 1
is entitled not to be subject to this clause.
20.2
Retirement by rotation
Unless otherwise determined by a Resolution of the Company, while the Company is Listed,
one third of the Directors for the time being, or if their number is not a multiple of 3, then the
whole number nearest one third, must retire from office at each annual general meeting. The
Directors to retire will be those who have been longest in office since their last election, but
as between persons who became Directors on the same day, those to retire will, unless they
otherwise agree among themselves, be determined by drawing lots. A retiring Director may
act as a Director throughout the meeting at which it retires and at any adjournment. This
clause does not apply to the managing director, but if there is more than 1 managing director,
only the managing director who was first appointed is entitled not to be subject to re-election.
20.3
Retiring Director eligible for re-election
A Director who retires or whose office is vacated under this Constitution will be eligible for
election or re-election to the Board. If another person is not elected by the Company to fill
the vacated office, the retiring Director will, if offering itself for re-election and not being
disqualified under the Act or this Constitution from holding office as a Director, be deemed
to have been re-elected as a Director unless at that general meeting:
(a)
it is expressly resolved not to fill the vacated office or to reduce the number of
Directors; or
(b)
a Resolution for the re-election of that Director is put and lost.
20.4
Removal of Director by the Company
The Company may by Resolution remove any Director at any time.
20.5
Vacation of office
(a)
The office of a Director will be automatically vacated if:
(i)
the Director becomes an insolvent under administration;
(ii)
the Director becomes of unsound mind or a person whose person or estate is liable
to be dealt with in any way under the laws relating to mental health;
(iii)
the Director's office is vacated or the Director is prohibited from being a Director
in accordance with any of the provisions of the Listing Rules, the Act or any order
made under the Act;
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(iv)
the Director resigns its office by notice in writing to the Company;
(v)
the Director, either by itself or by its alternate Director, fails to attend Board
meetings for a continuous period of 3 Months without leave of absence from the
Board; or
(vi)
the Director is an executive director upon termination of its employment or
services agreement with the Company.
(b)
A Director whose office is vacated under paragraphs (a), (b) or (c) will not be
eligible for re-election until the disability (or disabilities) referred to is (or are)
removed.
21.
Directors' remuneration
21.1
Remuneration for non-executive directors
Subject to clause 21.3 and the Listing Rules, the Directors will be paid remuneration for
services rendered as Directors (but excluding any remuneration payable to any Director under
any executive service contract with the Company or a Related Body Corporate) as the
Company in general meeting may from time to time determine, which may be divided among
the Directors in any proportions and in any manner as they may from time to time determine.
The remuneration of a Director will be deemed to accrue from day to day.
21.2
Additional remuneration for extra services
If any Director performs extra services or makes any special exertions, whether in going or
residing abroad or otherwise for any of the purposes of the Company, that Director may be
paid an additional sum for those services and exertions. This payment may be either in
addition to or in place of any remuneration determined under the preceding clause.
21.3
Remuneration to be in accordance with Listing Rules
The remuneration payable to Directors must comply with the Listing Rules and in particular:
(a)
fees payable to non-executive directors must be by way of a fixed sum, and not by
way of a commission on or a percentage of profits or operating revenue;
(b)
the remuneration payable to executive directors must not include a commission on
or percentage of operating revenue; and
(c)
the total fees payable to Directors must not be increased without the prior approval
of Members in general meeting.
21.4
Expenses of Directors
In addition to any remuneration, the Directors must also be paid all travelling and other
expenses incurred by them in attending and returning from meetings of the Directors, any
committee of the Directors or any general meetings of the Company or otherwise in
connection with the business of the Company.
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22.
Directors' contracts
22.1
Directors not disqualified from holding office or contracting with Company
Except as otherwise provided in the Act or the Listing Rules:
(a)
no Director will be disqualified by virtue of its office from holding any office or
place of profit (other than as auditor) with the Company or with any company
promoted by the Company or with any corporation in which the Company is a
Member or which is a Member of the Company or in which the Company is
otherwise interested;
(b)
no Director will be disqualified by virtue of its office from contracting with the
Company (whether as vendor, purchaser or otherwise);
(c)
no contract referred to in this clause 22 or any contract or arrangement entered into
by or on behalf of the Company in which any Director is in any way interested can
be avoided and no Director will be liable to account to the Company for any profit
arising from that contract or arrangement or from any office referred to in this
clause 22.1 by reason only of that Director holding that office or of the Director's
fiduciary relationship with the Company.
22.2
Director can act in professional capacity
Subject to the Act and the Listing Rules, a Director or a Director's firm may act in a
professional capacity (other than as auditor) for the Company and that Director or that
Director's firm is entitled to remuneration for professional services as if the relevant Director
was not a Director.
22.3
Director not to vote on contract in which it has a material personal interest
Subject to the Act and the Listing Rules, neither a Director nor its alternate may vote at any
meeting of the Board about any contract or arrangement in which the Director has, whether
directly or indirectly, a material personal interest, nor be present while the relevant matter is
considered at the meeting. However, that Director may execute or otherwise act in respect of
that contract or arrangement.
22.4
Directors to declare interest
(a)
Any Director who has a material personal interest in a matter that relates to the
affairs of the Company must give the other Directors notice of the interest, unless
the interest is of a type referred to in section 191(2)(a) of the Act, or all of the
conditions referred to in section 191(2)(c) of the Act are satisfied.
(b)
The Director must declare the nature and extent of the Director's interest and the
relation of the interest to the affairs of the Company at the meeting of the Directors
as soon as possible after the Director becomes aware of their interest in the matter.
(c)
A Director who has an interest in a matter may give a standing notice to the other
Director's of the nature and extent of that Director's interest in the matter in
accordance with section 192 of the Act.
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22.5
Directors to declare potential conflicts
Any Director who holds any office or possesses any property the holding or possession of
which might (whether directly or indirectly) create duties or interests in conflict with its
duties or interests as a Director of the Company must declare the fact of its holding that office
or possessing that property and the nature and extent of any conflict at the first meeting of the
Directors held after it becomes a Director or (if it is already a Director) at the first meeting of
the Directors held after the relevant facts come to its knowledge.
22.6
Secretary to record declarations of Directors
The Secretary must record in the minutes of the meeting any declarations made or notices
given by a Director under this Constitution.
23.
Powers of Directors
23.1
Powers of Directors
Subject to the Act and to any provision of this Constitution, the Directors will manage, or
cause the management of, the business of the Company and the Directors may pay, or cause
to be paid, all expenses incurred in promoting and forming the Company and may exercise,
or cause to be exercised, all powers of the Company that are not, by the Act or by this
Constitution, required to be exercised by the Company in general meeting.
23.2
Powers to borrow or raise money
Without limiting the generality of the previous clause and subject to clause 39, the Directors
may from time to time at their discretion borrow or raise any sum or sums of money or
obtain other financial accommodation for the purposes of the Company and may grant
security for the repayment of that sum or sums or the payment, performance or fulfilment of
any debts, liabilities, contracts or obligations incurred or undertaken by the Company in any
manner and upon any terms and conditions as they think fit and in particular by the issue or
re-issue of bonds, perpetual or redeemable debentures or any mortgage, charge or other
security on the undertaking or the whole or any part of the property of the Company
(both present and future) including its uncalled or unpaid capital for the time being.
23.3
Directors may vote Shares in other corporations
Subject to the Act and the Listing Rules, the Directors may exercise the voting power
conferred by the Shares in any corporation held by the Company in any manner they think fit,
including in circumstances where a Director may be interested in the exercise, such as an
exercise in favour of any Resolution appointing a Director as an officer of a corporation or
voting or providing for the payment of remuneration to officers of the other corporation.
23.4
Agent or attorney
The Directors may at any time appoint any person or persons to be an agent or attorney of the
Company for any purposes and with any powers, authorities and discretions (not exceeding
those vested in or exercisable by the Directors under this Constitution) and for any period and
subject to any conditions as the Directors think fit. Any appointment may be made in favour
of any company or the members, directors, nominees or managers of any company or firm or
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in favour of any fluctuating body of persons (whether nominated by the Directors or
otherwise) and any document appointing an agent or power of attorney may contain
provisions for the protection or convenience of the agent or attorney and of persons dealing
with the agent or attorney as the Directors may think fit.
23.5
Sub-delegation of powers
Any agent or attorney appointed by the Directors may be authorised by the Directors to subdelegate all or any of the powers, authorities and discretions for the time being vested in
them.
24.
Executive Directors
24.1
Managing Director
The Directors may at any time appoint 1 or more members of the Board to the office of
managing director or to any other executive office for any period and on any terms they think
fit and, subject to the terms of any agreement entered into in any particular case, may revoke
any appointment. Any appointment is automatically determined if the person ceases to be a
Director.
24.2
Directors may confer powers on Executive Directors
The Directors may confer upon a managing director or other executive director any of the
powers exercisable by the Directors upon those terms and conditions and with any
restrictions as they think fit. Any powers so conferred may be concurrent with or to the
exclusion of their own powers. The Directors may at any time revoke, withdraw, alter or
vary all or any of those powers.
24.3
Remuneration of Executive Directors
Subject to the Listing Rules and the terms of any agreement entered into with any executive
director, the Board may fix the remuneration of each executive director which may comprise
salary or commission on or participation in profits of the Company.
25.
Proceedings of Directors
25.1
Board meetings
The Directors may meet either:
(a)
in person;
(b)
by telephone;
(c)
by audiovisual linkup; or
(d)
by any other instantaneous communications medium for conferring;
for dispatch of business, and adjourn and otherwise regulate their meetings as they think fit.
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25.2
Director to be regarded as present at meeting
A Director is regarded as present at a meeting where the meeting is conducted by telephone,
audiovisual linkup or other instantaneous communications medium for conferring, if the
Director is able to hear, and to be heard by, all others attending the meeting.
25.3
Place of meeting
A meeting conducted by telephone, audiovisual linkup or other instantaneous
communications medium for conferring, will be deemed to be held at the place agreed upon
by the Directors attending that meeting, provided that at least 1 of the Directors present at the
meeting was at that place for the duration of the meeting. Meetings may be held outside
Australia.
25.4
Convening of Directors meeting
A Director may at any time and the Secretary upon the request of a Director must convene a
meeting of Directors.
25.5
Notice of meeting
Notice of every meeting of Directors must be given to each Director then in Australia, but
failure to give or receive that notice will not invalidate any meeting.
25.6
Directors may act notwithstanding vacancy
The Directors may act notwithstanding any vacancy on the Board, but if and so long as their
number is below the number required for a quorum, they must not act except in the case of
emergency or for the purpose of filling up vacancies or summoning a general meeting.
25.7
Quorum for Board meetings
At a meeting of Directors, the number of Directors necessary to constitute a quorum is that
number as is determined by the Directors and, unless otherwise determined, is 2.
25.8
Meeting competent to exercise all powers
A meeting of the Directors at which a quorum is present will be competent to exercise all or
any of the powers and discretions vested in or exercisable by the Directors generally.
25.9
Chairman of Board meetings
The Directors may elect a chairman and deputy chairman of their meetings and determine the
periods for which they are to hold office. If no chairman or deputy chairman is elected or if
at any meeting neither the chairman nor the deputy chairman is present at the time appointed
for the meeting, the Directors present at the meeting may choose 1 of the Directors present to
be chairman of the meeting.
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25.10
Documents tabled at meeting
An original document, or a photocopy or facsimile copy of that document, which is in the
possession of, or has been seen by, all Directors attending the Directors' meeting prior to, or
at the time of, that meeting, will be deemed to be a document tabled at that meeting.
25.11
Questions to be decided by majority
Questions arising at any meeting of the Board will be decided by a majority of votes of
Directors present and voting. Subject to the Listing Rules, in the case of an equality of votes,
the chairman of the meeting will have a second or casting vote, but the chairman will not
have a second or casting vote where there are only 2 Directors present who are competent to
vote on the question at issue.
25.12
Resolution in writing
A Resolution in writing of which notice has been given to all Directors for the time being
entitled to receive notice of a meeting of the Directors and which is signed by a majority of
Directors for the time being entitled to attend and vote at meetings of the Directors will be as
valid and effectual as if it had been passed at a meeting of the Directors duly convened and
held. That Resolution may consist of several documents in like form each signed by 1 or
more of the Directors wherever they may be situated. For the purposes of this clause, the
signature of an alternate Director will be as effective as, and may be substituted for, the
signature of its appointor. The effective date of that Resolution is the date upon which the
document or any of the counterpart documents was last signed.
25.13
Resolution passed deemed to be determination of Board
Any Resolution properly passed at a duly convened meeting of the Directors at which a
quorum is present will be deemed to be a determination by all the Directors or the Board for
the purposes of this Constitution.
25.14
Committee powers and meetings
The Directors may delegate any of their powers to a committee of Directors or to a sole
Director as they think fit and may revoke that delegation. Any committee can exercise the
powers delegated to it in accordance with any directions that may from time to time be
imposed upon it by the Board. The meetings and proceedings of any committee consisting of
2 or more Directors will be governed by the provisions of this Constitution regulating the
meetings and proceedings of the Directors so far as they are applicable and are not
superseded by any direction made by the Board under this clause.
25.15
Validity of acts of Directors
All acts done by any meeting of the Directors or by a committee of the Directors or by any
person acting as a Director will be valid even it is discovered afterwards that there was some
defect in the appointment or election of that Director or person acting as a Director or that
any Director was disqualified or had vacated office or was otherwise not entitled to vote or
act.
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26.
Secretary
A Secretary or Secretaries of the Company must be appointed by the Directors in accordance
with the Act. At least 1 Secretary must be ordinarily resident in Australia. The Directors
may also appoint acting and assistant Secretaries. Those appointments may be for any term,
at any remuneration and upon any conditions as the Directors think fit and any person so
appointed may be removed by the Directors.
27.
Minutes and registers to be kept
27.1
Minutes
The Directors must cause to be entered in minute books of the Company within 1 Month of
the relevant meeting, minutes containing details of:
(a)
the names of the Directors present at each meeting of the Directors and of any
committee of Directors;
(b)
all declarations made or notices given by any Director (either generally or
specifically) of its interest in any contract or proposed contract or of its holding of
any office or property whereby any conflict of duty or interest may arise; and
(c)
all Resolutions and proceedings of general meetings of the Company, meetings of
the Directors and meetings of any committee of the Directors.
27.2
Minutes to be signed by chairman
Any minutes of any general meetings of the Company, meetings of the Directors or meetings
of any committee of the Directors must be signed by the chairman of the meeting or by the
chairman of the next succeeding meeting and once signed will constitute prima facie
evidence of the matters stated in the minutes.
27.3
Registers
In accordance with the provisions of the Act and the Listing Rules, the Directors must cause
the Company to keep:
(a)
a register of the holders of any debentures issued by the Company;
(b)
a register of charges; and
(c)
any other registers or subregisters required by the Listing Rules or ASTC Business
Rules.
27.4
Branch registers
The Company may cause a branch register of Members to be kept at any place outside
Australia. Subject to the Act, the Directors may make any provisions or arrangements they
think fit for the keeping of any branch register, the transfer of Shares to, on or from any
branch register and to ensure compliance with the requirements of any local law.
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28.
The Seal
28.1
Use of common seal
If the Company has a seal:
(a)
the Directors must provide for the safe custody of the Seal;
(b)
the Seal must be used only with the authority of the Directors or a committee of the
Directors with authority from the Directors to authorise the use of the Seal;
(c)
every document to which the Seal is affixed must be signed by a Director and
countersigned by another Director, a Secretary, an assistant Secretary or another
person appointed by the Directors to countersign that document or a class of
documents which includes that document.
28.2
Duplicate seals
The Company may have for use in place of its common seal, 1 or more duplicate seals, each
of which is a copy of the Seal with the words "duplicate seal" on it.
28.3
Share seal
The Company may also have a duplicate common seal which is a copy of the Seal with the
words "share seal" on it. The share seal must only be used in sealing certificates for Shares
and other securities of the Company and must be used and affixed in like manner to the Seal.
28.4
Affixing the Share seal
The Board may determine:
(a)
the manner (which may be by a mechanical or other automatic means) in which the
share seal is to be affixed and that affixing attested; and
(b)
that the affixing of the share seal need not occur in the presence of any person;
(c)
that no signatures of any persons are required for the affixing of the share seal; and
(d)
that, if signatures are required for the affixing of the share seal, those signatures
may be affixed by any mechanical or other automatic means.
29.
Negotiable instruments
All cheques, bills of exchange, promissory notes and other negotiable instruments may be
signed, drawn, accepted, made or endorsed (as the case may be) for and on behalf of the
Company by any persons and in any manner as the Directors may determine.
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30.
Reserves
30.1
Reserves
Before declaring any dividends, the Directors may set aside out of the profits of the Company
any sums they think proper as reserves to be applied to meet contingencies, to equalise
dividends, to pay special dividends, to repair, improve or maintain any property of the
Company or for any other purpose the Directors in their absolute discretion consider to be in
the interests of the Company. Pending that application, the reserves may, at the discretion of
the Directors, be used in the business of the Company or be invested in any investments the
Directors think fit (including the purchase of Shares of the Company). The Directors may
deal with and vary these investments and dispose of all or any part for the benefit of the
Company and may divide the reserves into special reserves as they think fit.
30.2
Carry forward of profits
The Directors may carry forward any profits they consider ought not to be distributed as
dividends without transferring those profits to a reserve.
30.3
Revaluation of assets
Subject to the Act, the Directors may revalue any assets of the Company.
31.
Dividends
31.1
Power to determine and declare dividends vested in Directors
The power to determine that a dividend is payable and to declare dividends (including interim
dividends) is vested in the Directors who may fix the amount and the timing for payment and
the method of payment of any dividend in accordance with this Constitution, the Act and the
Listing Rules.
31.1A
Determination of dividends
The Company must not pay a dividend, unless:
(a)
the Company's assets exceed its liabilities immediately before the dividend is
declared and the excess is sufficient for the payment of the dividend; and
(b)
the payment of the dividend is fair and reasonable to the Company's Members as
a whole; and
(c)
the payment of the dividend does not materially prejudice the Company's ability
to pay its creditors.
The Company does not incur a debt merely by fixing the amount or time for payment of
a dividend. A debt arises only when the time fixed for payment arrives. The decision to
pay a dividend may be revoked by the Board at any time before then. A resolution of the
Board as to the amount of the dividend is conclusive.
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31.2
31.4
31.5
Apportionment of dividends
(a)
Subject to this Constitution, the Act, the Listing Rules and the rights of Members
entitled to Shares with preferential, special or qualified rights as to dividend,
dividends are to be apportioned and paid among the Members in proportion to
the amounts paid up (not credited) on the Shares held by them.
(b)
Any amount paid on a Share in advance of a call will be ignored when
calculating the relevant proportion.
(c)
If an amount was paid on a Share during the period to which a dividend relates,
the Board may resolve that only the proportion of that amount which is the same
as the proportion which the period from the date of payment to the end of the
period to which the dividend relates bears to the total period to which the
dividend relates, counts as part of the amount for the time being paid on the
Share.
(d)
An amount credited on a partly paid Share without payment in money or money's
worth being made to the Company is not taken into account as a part of the
amount for the time being paid on a Share.
Dividend payable by distribution of assets
(a)
The Directors when declaring a dividend may resolve that the dividend be paid
wholly or partly by the distribution of specific assets including bonus Shares or
other securities of the Company or any other corporation.
(b)
If the Board resolves that the dividend will be paid by the distribution of assets,
the Board may:
(i)
fix the value of any asset distributed;
(ii)
make cash payments to Members on the basis of the value fixed so as to
adjust the rights of Members between themselves; and
(iii)
vest an asset in a trustee(s).
Dividends may be payable in foreign currency
Dividends will be declared in Australian currency, but the Directors may, if they think
fit, determine that any dividend payable to some or all the Members will be paid in a
currency or currencies other than Australian currency and for that purpose the Directors
may at the time of declaration of the dividend stipulate a date on which they will
determine the rate or rates at which the dividend will be converted into the other
currency or currencies. Payment in another currency or currencies of the amount of any
dividend converted pursuant to this clause will be deemed as between the Company and
all Members to be an adequate and proper payment of the amount of the dividend.
31.6
No interest payable on dividends
Interest is not payable by the Company in respect of any dividend.
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31.7
Directors may retain certain dividends
The Directors may retain the dividends payable on any Shares:
31.8
(a)
in respect of which any person is entitled to become a Member as a consequence
of death, bankruptcy or other operation of law until that person or a nominated
transferee becomes a Member in respect of the Shares; and
(b)
on which the Company has a lien, to satisfy the liabilities in respect of which the
lien exists.
Directors may deduct from dividends money payable to Company
The Directors may deduct from any dividend payable to a Member all sums of money
(if any) presently payable by the Member to the Company on account of calls or
otherwise.
31.9
Payment of dividends
(a)
(b)
Any dividend, interest or other monies payable in respect of any Shares may be
paid by cheque sent through the post to:
(i)
the registered address of the Member or person entitled or, in the case of
joint holders, to the registered address of that holder whose name appears
first on the Register in respect of the joint holding; or
(ii)
to that person at that address as the holder or joint holders may in writing
direct.
Every cheque will be made payable to the order of the person to whom it is sent
and is at its risk.
31.10 Unclaimed dividends
Except as otherwise provided by the Act, all dividends unclaimed for 1 year after having
been declared may be invested or otherwise made use of by the Directors for the benefit
of the Company until claimed.
31.11 Dividend Reinvestment Plan
The Directors may implement and in their discretion maintain, on terms and conditions
determined by the Directors from time to time, a dividend reinvestment plan (the
Dividend Reinvestment Plan) for cash dividends paid by the Company in relation to
Shares in the capital of the Company to be reinvested by way of subscription for Shares
to be issued and allotted by the Company. Participation in the Dividend Reinvestment
Plan will be available to those Members who wish to participate in the Dividend
Reinvestment Plan and are eligible to do so under the terms and conditions of the
Dividend Reinvestment Plan.
31.12 Amendment of Dividend Reinvestment Plan
The Directors may vary, amend or suspend any terms or conditions of the Dividend
Reinvestment Plan as and when they think fit in their discretion.
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32.
Capitalisation of profits
32.1
Capitalisation of profits
The Directors may resolve to capitalise any sum for the time being standing to the credit of
any of the Company's reserve accounts, profit and loss account, arising from a revaluation or
sale of assets or otherwise available for distribution to Members. The sum capitalised will be
applied for the benefit of Members (in the proportions to which those Members would have
been entitled in a distribution of that sum by way of dividend) in one or both of the following
ways:
(a)
in or towards paying up any amounts for the time being unpaid on any Shares held
by those Members; or
(b)
in paying up in full or in part any unissued Shares or debentures of the Company to
be allotted and distributed credited as fully paid to those Members.
32.2
Directors' powers in relation to capitalisation of profits
In giving effect to any Resolution for capitalisation under clause 32.1, the Directors may:
(a)
appoint any person to make an agreement on behalf of the Members entitled to
benefit from the Resolution where that agreement is required under the Act or is
otherwise considered by the Directors to be desirable;
(b)
issue fractional certificates or make cash payments where Shares or debentures
become issuable in fractions; and
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(c)
otherwise make provisions for adjusting differences and settling any difficulty
arising pursuant to the Resolution including a determination that fractions will be
disregarded or that a fractional entitlement be increased to the next whole number.
33.
Financial statements
33.1
Financial records
The Directors must cause financial and other records to be kept to correctly record and
explain the transactions and financial position of the Company, to enable true and fair profit
and loss accounts and balance sheets to be prepared and to permit preparation of any other
documents required by the Act, the Listing Rules or this Constitution. The records must be
kept:
(a)
in a manner which will to enable them to be conveniently and properly audited;
(b)
for 7 years after the completion of the transactions or operations to which they
relate; and
(c)
at the Office or at any other place as the Directors think fit and at all times be open
to inspection by the Directors.
33.2
Financial, Directors' and auditor's reports to be laid before annual general
meeting
At each annual general meeting, the Directors must lay before the Company a financial
report, a Directors' report and an auditors report for the last Financial Year of the Company
that ended before that annual general meeting which comply with all applicable provisions of
the Act and the Listing Rules.
33.3
Financial statements and reports
The Company must cause copies of the Company's financial statements and other reports to
be lodged with the ASIC, ASX and/or NSX (if applicable) and sent to holders of its securities
as required by the Act and the Listing Rules.
34.
Audit
34.1
Auditors
Auditors of the Company are appointed and removed and their remuneration, rights and
duties are regulated by the Act.
34.2
Financial statements to be audited
The financial statements of the Company for each Financial Year must be audited by the
auditors in accordance with the Act.
34.3
Approval of financial statements
The financial statements of the Company when approved by a general meeting will be
conclusive except as regards any error identified within 3 Months after the date of approval.
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If any error is identified within this period, the financial statements must then be corrected
and are then conclusive.
34.4
Register to be audited
The Register, including any subregisters kept pursuant to the Listing Rules or ASTC Business
Rules, and any branch register of Members of the Company must be audited at least once
every 12 Months or whenever the ASX and/or NSX otherwise ask.
35.
Inspection of records
Subject to the Act, the Directors may determine whether, to what extent, at what times and
places and under what conditions the accounting and other records of the Company or any of
them will be open to the inspection of the Members. No Member (who is not a Director) will
have any right to inspect any account, book or document of the Company or receive any
information concerning the business, trading or customers of the Company or any trade secret
or secret process of the Company except as provided by the Act or as authorised by the
Directors or a Resolution of the Company in general meeting.
36.
Notices
36.1
Service of notices by Company
A notice may be given by the Company to any Member either personally, by facsimile or
electronically to the relevant facsimile number or electronic address of the Member as shown
on the Register or provided by the Member, by sending it by post addressed to the Member at
its address as shown in the Register or otherwise by any method (including by advertisement)
as the Directors may determine.
36.2
Posting notices to overseas Members
In the case of a Member whose registered address is outside Australia, a notice sent by post
will be sent by airmail.
36.3
Notices to joint holders
A notice may be given by the Company to the joint holders of a Share by giving the notice to
the joint holder whose name appears first in the Register and that notice will be sufficient
notice to all the joint holders.
36.4
Notice deemed to be served
(a)
Any notice by advertisement will be deemed to have been served on the day of
publication of the newspaper containing the advertisement.
(b)
Any notice sent by post will be deemed to have been served on the day following
the day on which the notice is posted unless sent by airmail to an address outside
the country in which it was posted, in which case it will be deemed to have been
served on the fifth day following the day on which it is posted.
(c)
A notice sent by facsimile or other electronic means will be deemed to have been
served on the same day that it is sent.
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36.5
Service by post
In proving service by post, it will be sufficient to prove that the notice was properly
addressed and posted with the required postage. A certificate in writing signed by any
manager, Secretary or other officer of the Company that the notice was so addressed and
posted is conclusive evidence of proper service by post.
36.6
Notices to Members whose whereabouts unknown
Where:
(a)
the Company has bona fide reason to believe that a Member is not known at the
address shown for that Member in the Register;
(b)
the Company has subsequently made an enquiry at that address as to the
whereabouts of the Member; and
(c)
the enquiry either elicits no response or a response indicating that the Member's
present whereabouts are unknown;
all future notices will be deemed to be given to the Member if the notice is exhibited in the
Office for a period (not including weekends and public holidays) of 48 hours and will be
deemed to be duly served at the commencement of that period. This clause will apply unless
and until the Member informs the Company that the Member has resumed residence at the
Member's address shown in the Register or notifies the Company of a new address to which
the Company may send the Member notices (which new address is deemed to be the
Member's registered place of address).
36.7
Notices binding on transferees
Every person who by operation of law, transfer or otherwise becomes entitled to any Share
will be bound by every notice in respect of the Share which, prior to its name and address
being entered on the Register, is duly given to the person from whom it derives its title to the
Share.
36.8
Notice to deceased or bankrupt Members
Any notice or document given to a Member will be deemed to have been duly given in
respect of any Shares held solely or jointly by the Member despite that the Member is
deceased or bankrupt and whether or not the Company has notice of its decease or
bankruptcy until some other person is registered in its stead as the holder or joint holder.
36.9
Signing of notices
The signature to any notice to be given by the Company may be written or printed.
36.10
Counting of days
Where a given number of days' notice or notice extending over any other period is required to
be given, the day on which notice is deemed to be given will not be counted in the number of
days or other period.
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37.
Winding up
37.1
Distribution of surplus assets
If in a winding up, there remains any assets available for distribution to Members, then
subject to the rights of the holders of Shares issued upon special terms and conditions, this
Constitution, the Act and the Listing Rules, those assets will be distributed amongst the
Members in returning capital paid up on their Shares and distributing any surplus in
proportion to the amount paid up (not credited) on Shares held by them.
37.2
Fee or commission paid to liquidator to be approved in general meeting
No fee or commission will be paid by the Company to any Director or liquidator upon any
sale or realisation of the Company's undertaking or assets or any part thereof except with the
approval of the Company in general meeting, that meeting to be convened by notice
specifying the fee or commission proposed to be paid.
37.3
Distribution in specie
If the Company is wound up (whether voluntarily or otherwise), the liquidator may, with the
sanction of a Special Resolution, divide among the contributories in specie or kind any part of
the assets of the Company and may, subject to obtaining the same sanction, vest any part of
the assets of the Company in trustees upon those trusts for the benefit of the contributories or
any of them as the liquidator thinks fit. For the purposes of this clause, the liquidator may set
values as it considers fair and reasonable on any property to be divided and determine how
the division is to be carried out.
38.
Indemnity and insurance
38.1
Indemnity
To the extent permitted by law:
(a)
(b)
the Company must indemnify each Director and other officer of the Company
against any liability (other than legal costs) incurred in acting as a Director or
officer of the Company other than:
(i)
a liability owed to the Company or a Related Body Corporate;
(ii)
a liability for a pecuniary penalty order under section 1317G or a
compensation order under section 1317H of the Act; or
(iii)
a liability that did not arise out of conduct in good faith;
the Company must indemnify each Director and other officer of the Company for
costs and expenses incurred by a Director or officer of the Company in defending
an action for a liability incurred in acting as a Director or officer of the Company
except for legal costs incurred:
(i)
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in defending or resisting any proceedings, whether civil or criminal, in
which the Director or officer is found to have a liability for which they
could not be indemnified under subclause (a) above;
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(ii)
in defending or resisting criminal proceedings in which the Director or
officer is found guilty;
(iii)
in defending or resisting proceedings brought by the Australian
Securities and Investments Commission or by a liquidator for a court
order if the grounds for making the order are found by the court to have
been established, except for costs incurred in responding to actions taken
by the Australian Securities and Investments Commission or a liquidator
as part of an investigation before commencing proceedings for the court
order; or
(iv)
(c)
38.2
in connection with proceedings for relief to the Director or other officer
under the Act in which the relief is denied by the court; and
the Company may make a payment, or agree to make a payment, whether by way
of advance, loan or otherwise, for any legal costs incurred by a Director or officer,
on the condition that the Director or officer must repay the amount paid by the
Company to the extent that the Company is ultimately found not liable to
indemnify the Director or officer for those legal costs.
Insurance
To the extent permitted by law the Company may pay, or agree to pay, a premium in respect
of a contract insuring a person who is or has been a Director or other officer of the Company
or of a subsidiary of the Company other than a liability arising out of:
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(a)
conduct involving wilful breach of duty in relation to the Company; or
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(b)
a contravention of section 182 or 183 of the Act.
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39.
Matters to be approved by majority of Board
Subject to the Act, Listing Rules and notwithstanding the provisions of this Constitution, the
following matters must be approved by a resolution of the Board passed by a majority of at
least three out of five Directors:
(a)
(Acquisitions) Acquire securities in other entities.
(b)
(Equity Securities) Issue or allot or grant any right to subscribe for any Equity
Security.
(c)
(Borrowing) Borrow or accept financial accommodation of $500,000 or more,
except in accordance with the Business Plan,
(d)
(Encumbrances) Mortgage, charge, pledge or encumber an asset or undertaking,
except in accordance with the Business Plan.
(e)
(Guarantee) Give or enter into a guarantee, letter of comfort or performance bond,
except in accordance with the Business Plan.
(f)
(Business Plan and budgets) Adopt or vary a Business Plan or any other operating,
capital or cash budget or business financial plan.
(g)
(Acquisitions and Disposals) Acquire or dispose of any company or business (other
than the Business), except in accordance with the Business Plan.
(h)
(Assets) Acquire or dispose of an asset or assets (either tangible or intangible)
having a value of $500,000 or more, except in accordance with the Business Plan.
(i)
(Capital expenditure) Incur capital expenditure of more than $500,000 in a
financial year, except in accordance with the Business Plan.
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(j)
(k)
(l)
(m)
(n)
(o)
(p)
(Related Party Transactions) Enter into, materially vary or terminate an agreement
or arrangement with:
(i)
a Director or an associate of a Director; or
(ii)
a shareholder of the Company or an affiliate of a shareholder of the
Company.
(Financial assistance) Make a loan or provide financial assistance to a Director or
an associate of a Director or vary the terms of a loan or financial assistance
previously provided to a Director or an associate of a Director.
(Reorganisation Event) Undertake or undergo a Reorganisation Event.
(Finance and operating leases) Enter into a finance or operating lease costing more
than $500,000 per annum, except in accordance with the Business Plan.
(Loans) Make a loan or provide credit or other financial accommodation to a
person, except in the ordinary course of business.
(Employee share plan) Adopt or alter the terms of an employee share plan,
employee share option scheme or employee share purchase scheme or any other
arrangement giving employees of the Company the right or entitlement to acquire
Equity Securities and issue shares or grant options under such plans or schemes.
(Dividends) Set or change the dividend or distribution policy of the Company, or
declare, make or pay a dividend or other distribution.
For the avoidance of doubt, this clause 39 will prevail over any other provision in this
Constitution dealing with the matters set out above
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Lodge your vote:
 Online:
www.investorvote.com.au
MGT Resources Limited
*M000001Q02*
ABN 38 131 715 645
 By Mail:
Computershare Investor Services Pty Limited
GPO Box 242 Melbourne
Victoria 3001 Australia
T 000001 000 MGS
MR SAM SAMPLE
FLAT 123
123 SAMPLE STREET
THE SAMPLE HILL
SAMPLE ESTATE
SAMPLEVILLE VIC 3030
Alternatively you can fax your form to
(within Australia) 1800 783 447
(outside Australia) +61 3 9473 2555
For Intermediary Online subscribers only
(custodians) www.intermediaryonline.com
For all enquiries call:
(within Australia) 1300 850 505
(outside Australia) +61 3 9415 4000
Proxy Form

Vote online
• Go to www.investorvote.com.au or scan the QR Code with your mobile device.
• Follow the instructions on the secure website to vote.
Your access information that you will need to vote:
Control Number: 999999
SRN/HIN: I9999999999
PIN: 99999
PLEASE NOTE: For security reasons it is important that you keep your SRN/HIN confidential.
 For your vote to be effective it must be received by 11:00am (AEDT) on Saturday, 14 February 2015
How to Vote on Items of Business
Signing Instructions for Postal Forms
All your securities will be voted in accordance with your directions.
Individual: Where the holding is in one name, the securityholder
must sign.
Joint Holding: Where the holding is in more than one name, all of
the securityholders should sign.
Power of Attorney: If you have not already lodged the Power of
Attorney with the registry, please attach a certified photocopy of the
Power of Attorney to this form when you return it.
Companies: Where the company has a Sole Director who is also
the Sole Company Secretary, this form must be signed by that
person. If the company (pursuant to section 204A of the Corporations
Act 2001) does not have a Company Secretary, a Sole Director can
also sign alone. Otherwise this form must be signed by a Director
jointly with either another Director or a Company Secretary. Please
sign in the appropriate place to indicate the office held. Delete titles
as applicable.
Appointment of Proxy
Voting 100% of your holding: Direct your proxy how to vote by
marking one of the boxes opposite each item of business. If you do
not mark a box your proxy may vote or abstain as they choose (to
the extent permitted by law). If you mark more than one box on an
item your vote will be invalid on that item.
Voting a portion of your holding: Indicate a portion of your
voting rights by inserting the percentage or number of securities
you wish to vote in the For, Against or Abstain box or boxes. The
sum of the votes cast must not exceed your voting entitlement or
100%.
Appointing a second proxy: You are entitled to appoint up to two
proxies to attend the meeting and vote on a poll. If you appoint two
proxies you must specify the percentage of votes or number of
securities for each proxy, otherwise each proxy may exercise half of
the votes. When appointing a second proxy write both names and
the percentage of votes or number of securities for each in Step 1
overleaf.
A proxy need not be a securityholder of the Company.
Attending the Meeting
Bring this form to assist registration. If a representative of a corporate
securityholder or proxy is to attend the meeting you will need to
provide the appropriate “Certificate of Appointment of Corporate
Representative” prior to admission. A form of the certificate may be
obtained from Computershare or online at www.investorcentre.com
under the help tab, "Printable Forms".
Comments & Questions: If you have any comments or questions
for the company, please write them on a separate sheet of paper and
return with this form.
GO ONLINE TO VOTE,
or turn over to complete the form
Samples/000001/000002/i

MR SAM SAMPLE
FLAT 123
123 SAMPLE STREET
THE SAMPLE HILL
SAMPLE ESTATE
SAMPLEVILLE VIC 3030
Change of address. If incorrect,
mark this box and make the
correction in the space to the left.
Securityholders sponsored by a
broker (reference number
commences with ’X’) should advise
your broker of any changes.
Proxy Form

I 9999999999
Please mark
I ND
to indicate your directions
Appoint a Proxy to Vote on Your Behalf
STEP 1
XX
I/We being a member/s of MGT Resources Limited hereby appoint
 PLEASE NOTE: Leave this box blank if
the Chairman
OR
of the Meeting
you have selected the Chairman of the
Meeting. Do not insert your own name(s).
or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy
to act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, and
to the extent permitted by law, as the proxy sees fit) at the General Meeting of MGT Resources Limited to be held at Suite 2.05B, 68 York
Street, Sydney NSW 2000 on Monday, 16 February 2015 at 11:00am and at any adjournment or postponement of that meeting.
STEP 2
Items of Business
PLEASE NOTE: If you mark the Abstain box for an item, you are directing your proxy not to vote on your
behalf on a show of hands or a poll and your votes will not be counted in computing the required majority.
Resolution 1
Approval of issue of Subscription Shares to Auskong International Mining Investment
Co., Limited (Investor)
Resolution 2
Approval of issue of Convertible Notes to the Investor
Resolution 3
Approval of issue of Options to the Investor
Special Resolution 4
Approval of amendment to Company's constitution
The Chairman of the Meeting intends to vote undirected proxies in favour of each item of business. In exceptional circumstances, the Chairman of the Meeting may
change his/her voting intention on any resolution, in which case an ASX announcement will be made.
SIGN
Signature of Securityholder(s)
Individual or Securityholder 1
Sole Director and Sole Company Secretary
This section must be completed.
Securityholder 2
Director
Director/Company Secretary
Contact
Daytime
Telephone
Contact
Name
MG S
Securityholder 3
194641A
/
Date
/