For personal use only
28 July 2015
The Manager
Market Announcements Office
ASX Ltd
4th Floor, 20 Bridge Street
SYDNEY, NSW 2000
Dear Sir,
AUZEX SCHEME BOOKLET RELEASED
Explaurum Limited (“Explaurum”, “EXU” or the “Company”) is pleased to announce that the
Australian Securities and Investment Commission has registered the Scheme Booklet in relation to
a proposal to merge Auzex Exploration Limited and Explaurum by a scheme of arrangement
(“Scheme”). The Scheme Booklet attached sets out the information Auzex shareholders require to
evaluate the proposal, along with an associated Notice of Meeting.
The Merger is to be implemented through the Scheme pursuant to which Auzex will become a
wholly owned subsidiary of Explaurum and Auzex Shareholders (other than Explaurum and its
Related Bodies Corporate) will receive a total of 67,205,796 New EXU Shares as the Scheme
Consideration for their Auzex Shares.
Following completion of the Merger EXU will focus principally on development of the Tampia
Project, an advanced gold exploration project owned 90% by Auzex.
BDO Corporate Finance (QLD) Ltd, the Independent Expert engaged by the Auzex Board to
provide an opinion regarding the Merger, has concluded the Merger is fair and reasonable to
Auzex Shareholders.
The Directors of Auzex have unanimously recommended that all Auzex shareholders vote in
favour of the Scheme, in the absence of a Superior Proposal.
The Auzex shareholder meeting is on Monday 24 August 2015.
For more information contact:
Mark Calderwood
Technical Director
Explaurum Limited
+61 8 6380 1333
[email protected]
John Lawton
Managing Director
Auzex Exploration Limited
+61 7 3333 2722
[email protected]
Registered Office: Level 1, Suite 5, The Business Centre, 55 Salvado Road, Subiaco Western Australia 6008
Postal Address: PO Box 131, Subiaco Western Australia 6904
Contact Details: Telephone +61 8 6380 1333 Facsimile +61 8 9380 6761 Email: [email protected]
www.explaurum.com.au
1
For personal use only
SCHEME BOOKLET Merger with Explaurum Limited
www.auzex.com
ACN 153 608 596
SCHEME BOOKLET
Merger with
Explaurum Limited
In relation to a recommended proposal to merge
Auzex Exploration Limited and Explaurum Limited by
a scheme of arrangement
Your Directors unanimously recommend that you
vote in favour of the scheme of arrangement in the
absence of a Superior Proposal
This is an important document and requires your immediate attention. You should
read this document in its entirety. If you are in any doubt about how to deal with this
document, you should contact your broker, financial advisor or legal advisor immediately.
If you have any questions in relation to this Booklet you can call the Auzex Information
Line on (07) 3106 5044 (for Australian callers) or + 61 7 3106 5044 (for international
callers) on weekdays between 9.00 am and 5.00 pm (Brisbane time).
Auzex Legal Advisor
Independent Expert
EXU Legal Advisor
IMPORTANT INFORMATION
For personal use only
Purpose of this Booklet
This Booklet explains the terms of the Scheme, the manner in which
the Scheme will be considered and implemented (if the Scheme
Conditions are satisfied), and provides such information as is
prescribed or otherwise material for Auzex Shareholders when deciding
whether or not to vote in favour of the Scheme. This Booklet includes
the explanatory statement for the Scheme required by subsection
412(1) of the Corporations Act. You should read this Booklet in its
entirety before making a decision on whether or not to vote in favour
of the Scheme.
Status of this Booklet
This Booklet does not in any way constitute an offer of securities in
any place in which, or to any person to whom, it would be unlawful to
make such an offer. It is not a prospectus under the Corporations Act.
The distribution of this Booklet in certain jurisdictions may be restricted
by law. If this Booklet comes into your possession, you should inform
yourself about, and observe, any such restrictions. Any failure to
comply with these restrictions may constitute a violation of the laws of
such jurisdictions.
ASIC and ASX
A copy of this Booklet has been examined by ASIC pursuant to
subsection 411(2)(b) of the Corporations Act and registered by ASIC
under subsection 412(6) of the Corporations Act. Auzex has requested
ASIC to provide a statement, in accordance with subsection 411(17)
(b) of the Corporations Act, that ASIC has no objection to the Scheme.
If ASIC provides that statement, it will be produced to the Court on the
Second Court Date.
A copy of this Booklet has been lodged with ASX.
Neither ASIC, ASX nor any of their officers takes any responsibility for
the contents of this Booklet.
Court – Important Notice
The fact that under subsection 411(1) of the Corporations Act the
Court has ordered that a meeting be convened and has approved this
Booklet and explanatory statement required to accompany the notice
of meeting does not mean that the Court:
•
has formed any view as to the merits of the proposed Scheme or
as to how Auzex Shareholders should vote (on this matter Auzex
Shareholders must reach their own conclusion); or
•
has prepared, or is responsible for the content of, the Booklet and
explanatory statement.
An order under subsection 411(1) is not an endorsement of, or any
other expression of opinion on, the Scheme. The Court is not in any
other way responsible for the contents of this Booklet.
Disclosure to Auzex Shareholders eligible to participate in
Scheme
Based on the information available to Auzex as at the date of this
Booklet, Auzex Shareholders whose addresses are shown in the
Auzex Share Register on the Record Date for the Scheme as being
in the following jurisdictions will be entitled to have New EXU Shares
allotted and issued to them pursuant to the Scheme subject to the
qualifications, if any, set out below in respect of that jurisdiction:
•
Australia and its external territories;
•
New Zealand; and
•
any other person or jurisdiction in respect of which EXU
reasonably believes that it is not prohibited and not unduly
onerous or impractical to implement the Scheme and to issue
New EXU Shares to an Auzex Shareholder with a Registered
Address in such a jurisdiction.
Notice to Auzex Shareholders in New Zealand
This Booklet does not constitute a New Zealand product disclosure
statement, prospectus or investment statement and has not been
registered, filed with or approved by any New Zealand regulatory
authority under or in connection with the Securities Act 1978 (NZ) or
the Financial Markets Conduct Act 2013 (NZ). The disclosure materials
are being distributed in New Zealand only to persons to whom
securities may be offered in New Zealand pursuant to the Securities
Act (Overseas Companies) Exemption Notice 2013 (or any replacement
of that notice). The offer of New EXU Shares will comply with the laws
of Australia applicable to the offer of New EXU Shares.
The taxation treatment of Australian securities is not the same as for
New Zealand securities. The offer of New EXU Shares may involve
a currency exchange risk as they will be quoted on the ASX in
Australian dollars. If you are uncertain about whether this investment
is appropriate for you, you should seek the advice of an appropriately
qualified financial adviser.
Auzex Shareholders in jurisdictions outside Australia and
New Zealand
This Booklet is subject to Australian disclosure requirements. Financial
information in this Booklet has been prepared in accordance with
Australian Accounting Standards and is presented in an abbreviated
form and does not contain all of the disclosures that are usually
provided in a financial report prepared in accordance with the
Corporations Act. Australian disclosure requirements and Australian
Accounting Standards may be different from those applicable in other
jurisdictions.
Scheme Shareholders in jurisdictions outside Australia and its external
territories, and New Zealand are Ineligible Overseas Shareholders
under the Scheme and should refer to section 4.11 of this Booklet.
EXU is not obliged to issue New EXU Shares to any Ineligible Overseas
Shareholder unless EXU is satisfied that it is lawful and not unduly
onerous or impracticable.
Auzex Shareholders should consult their tax adviser as to the
applicable tax consequences of the Scheme.
This Booklet and the Scheme do not, either individually or in
combination, constitute an offer to sell to Auzex Shareholders or a
solicitation of an offer to purchase from Auzex Shareholders any
For personal use only
IMPORTANT INFORMATION
securities in Auzex or EXU in any jurisdiction where such an offer or
solicitation would be illegal. Scheme Shareholders who reside outside
of Australia but who do not constitute Ineligible Overseas Shareholders
should note that this Booklet has been prepared (in accordance with
the requirements in Australia) for the sole purpose of allowing you
to consider the Scheme. It must not be distributed, reproduced or
disclosed (in whole or part) to other persons or used for any purpose
other than consideration of the Scheme. This Booklet has not been
filed with or considered or approved by any regulatory body in any
country other than Australia. Auzex Shareholders should consult
with their professional advisers as to whether any other formalities
or consents are required to permit them to receive New EXU Shares
pursuant to the Scheme.
The distribution of this Booklet outside of Australia may be restricted
by law and persons who come into possession of it should seek advice
on and observe any such restrictions. Any failure to comply with such
restrictions may contravene applicable securities laws. Auzex and
EXU disclaim all liabilities to such persons. Auzex Shareholders who
are nominees, trustees or custodians may forward the Booklet to all
beneficial shareholders resident in Australia or New Zealand but they
may not send the Booklet into any other country and are advised to
seek independent advice as to how they should proceed.
No action has been taken to register or qualify this Booklet or any
aspect of the Scheme in any jurisdiction outside of Australia.
Notice to Auzex Shareholders resident in the United States
The New EXU Shares to be issued in connection with the Scheme have
not been registered under the United States Securities Act of 1933, as
amended (the US Securities Act) or any United States state securities
laws and will not be issued to Shareholders in the United States.
Auzex Shareholders in the United States will be Ineligible Overseas
Shareholders under the Scheme and should refer to section 4.11 of
this Booklet for further information.
No account of personal circumstances
This Booklet does not take into account the investment objectives,
financial situation or particular needs of any Auzex Shareholder or any
other person. This Booklet should not be relied upon as the sole basis
for any investment decision in relation to Auzex Shares, EXU Shares or
any other securities. Independent financial and taxation advice should
be sought before making any investment decision in relation to Auzex
Shares, EXU Shares or any other securities.
Forward Looking Statements
Certain statements in this Booklet relate to the future, including
forward looking statements relating to Auzex’s and EXU’s financial
position and strategy. These forward looking statements involve
known and unknown risks, uncertainties, assumptions and other
important factors that could cause the actual results, performance
or achievements of Auzex or EXU to be materially different from
future results, performance or achievements expressed or implied
by such statements. Such risks, uncertainties, assumptions and
other important factors include, among other things, the risks and
considerations described in section 8 of this Booklet. Actual events
or results may differ materially from the events or results expressed
or implied in any forward looking statement and deviations are both
normal and to be expected.
Other than as required by law, neither Auzex, EXU and their officers
nor any other person gives any representation, assurance or guarantee
that the occurrence of the events expressed or implied in any forward
looking statement in this Booklet will actually occur. You are cautioned
to not place undue reliance on those statements.
Subject to any continuing obligations under applicable law or the
Listing Rules, Auzex and EXU expressly disclaim any obligation to give
any updates or revisions to any forward looking statements to reflect
any change in expectations after the date of this Booklet or any change
in events, conditions or circumstances on which any such statement
is based.
The forward looking statements in this Booklet reflect views held only
immediately before the date of this Booklet.
Privacy and personal information
Auzex and EXU and their respective share registries may collect
personal information for the purpose of implementing, and
administering the shareholdings arising from, the Scheme.
Shareholders who are individuals, and individuals appointed as proxies,
corporate representatives or attorneys in respect of whom personal
information is collected may access their personal information by
calling the Auzex Information Line.
EXU Consolidation
At a general meeting of EXU Shareholders held on 26 June 2015, the
EXU Shareholders approved the Consolidation of EXU Shares and EXU
Options.
This Booklet contains various references to EXU Shares and EXU
Options. Unless stated otherwise, all references to EXU Shares and
EXU Options in this Booklet are on a post-Consolidation basis.
Interpretation
Capitalised terms and certain abbreviations used in this Booklet are
defined in section 12.
Unless otherwise stated, all times and dates referred to in this Booklet
are times and dates in Brisbane, Australia. All times and dates are
indicative only. All references to currency is in Australian dollars unless
otherwise indicated.
Date of this Booklet
This Booklet is dated 23 July 2015.
Further information
If Shareholders have any queries, they should call the Auzex
Information Line on (07) 3106 5044 (within Australia) or
+61 7 3106 5044 (from outside Australia).
Note that calls to the information line may be recorded.
SCHEME
SCHEME BOOKLET
BOOKLET
|| Merger
Merger with
with Explaurum
Explaurum Limited
Limited •
•
1
LETTER FROM THE CHAIRMAN OF AUZEX
For personal use only
23 July 2015
Dear Auzex Shareholder
It is with great pleasure that I present to you the opportunity to participate in the creation in an exciting new ASX-listed gold
exploration and development company through the merger of Auzex Exploration Limited (Auzex) and Explaurum Limited (EXU).
We have worked cooperatively with EXU in the development and implementation of this proposal for shareholder
consideration. Our experience with EXU to date gives us every confidence that this is, and will be, a productive and value
generating relationship. John Lawton and I look forward to the opportunity of working with Mark Calderwell and Patrick
Flint on the new Board.
On 30 April 2015 EXU announced a recommended proposal under which Auzex and EXU will merge to combine their
respective businesses through a merger of Auzex and EXU (Merger).
The Merger is to be implemented through a scheme of arrangement pursuant to which Auzex will become a wholly
owned subsidiary of EXU and Auzex Shareholders (other than EXU and its Related Bodies Corporate) will receive New
EXU Shares as the Scheme Consideration for their Auzex Shares (Scheme). The number of New EXU Shares to be
received by Scheme Shareholders is the number of Auzex Shares they hold multiplied by the Share Scheme Ratio of four
(4) New EXU Shares for each Auzex Share.
Following completion of the Merger EXU will focus principally on development of the Tampia Project, an advanced gold
exploration project owned 90% by Auzex.
BDO Corporate Finance (QLD) Ltd, the Independent Expert engaged by the Auzex Board to provide an opinion regarding
the Merger, has concluded the Merger is fair and reasonable to Auzex Shareholders and, on that basis, in the absence
of any other information or a superior offer, the Merger is in the best interests of Auzex Shareholders as at 23 July 2015,
being the date of the Independent Expert’s Report. A copy of the Independent Expert’s Report is attached as Annexure A.
The Directors of Auzex unanimously recommend that you vote in favour of the Scheme, in the absence of a
Superior Proposal, as we believe the Merger will deliver significant value to Auzex Shareholders. Each Auzex
Director intends to vote the Auzex Shares he holds or controls in favour of the Scheme.
The reasons for the unanimous recommendation of the Auzex Board are set out in this Booklet. In summary, all Auzex Directors
believe the Merger will provide Auzex Shareholders with a number of benefits, as after the Merger the Merged Group will:
(a)
(b)
(c)
(d)
be listed on the Australian Securities Exchange (ASX), providing Auzex Shareholders with liquidity for their shareholding;
have a strengthened entrepreneurial management team;
be in a position to advance the Tampia project through feasibility; and
be a platform on which to build a significant Australian gold and mineral company that can attract new capital
and new management.
This Booklet sets out the full details of the Scheme to Merge Auzex and EXU and the steps associated with its implementation.
If you have any questions about the Scheme please contact the Auzex Information Line on (07) 3106 5044 (for Australian
callers) or +61 7 3106 5044 (for international callers) on weekdays between 9.00 am and 5.00 pm (Brisbane time).
On behalf of the Auzex Board, thank you for your support of Auzex. Your vote is important and I look forward to seeing
you at the Scheme Meeting at 10.00 am on Monday 24 August 2015.
Yours sincerely
Chris Baker Chairman
2
• SCHEME BOOKLET | Merger with Explaurum Limited
LETTER FROM THE CHAIRMAN OF EXPLAURUM LIMITED
For personal use only
23 July 2015
Dear Scheme Shareholder
The Board of Directors and management of Explaurum Limited (EXU) are pleased to provide you with the opportunity
to participate in the combination of Auzex and EXU, whereby the two companies will merge. The combination will be a
transformative transaction for both companies and is unanimously supported by EXU’s Board of Directors.
EXU is an Australian company listed on the Australian Securities Exchange (ASX).
The Board of Directors of EXU believes the Merger of EXU and Auzex will provide material value to the shareholders of
both EXU and Auzex, including:
(a)
the proposed Merger will create a highly attractive listed junior gold company, with an exciting flagship project
with a shallow, high-grade under-explored open-pittable gold deposit;
(b)
numerous untested soil anomalies within 10km radius of the known gold deposit;
(c)
leveraging project and operational synergies between EXU and Auzex;
(d)
creation of a larger-scale entity that has a larger market capitalisation and improved access to capital markets;
and
(e)
a strengthened Board which will provide a strong leadership team with a proven track record of gold exploration,
development and production.
Auzex’s Board of Directors has announced it unanimously supports the Merger and recommends that you vote in favour
of the Scheme, in the absence of a Superior Proposal. As an Auzex Shareholder, your vote is extremely important to
ensure that the Merger is implemented. Therefore, on behalf of the Board of Directors and management of Explaurum
Limited, I encourage you to vote in favour of the Scheme and look forward to you being a part of this new ASX-listed
emerging gold company, Explaurum Limited.
Yours sincerely
Patrick Flint Chairman
SCHEME BOOKLET
| Merger with Explaurum Limited •
3
For personal use only
NOTICE OF COURT ORDERED SCHEME MEETING
Notice of Court ordered meeting of Auzex Shareholders
By order of the Supreme Court of Queensland made on 23 July 2015, pursuant to section 411(1) of the Corporations
Act, a meeting of Auzex Shareholders other than Explaurum Limited and its Related Bodies Corporate (Scheme
Shareholders) will be held at 15 Ivory Lane, Brisbane on Monday 24 August 2015 at 10:00 am (Brisbane time).
The Court has directed that Mr Chris Baker act as Chairman of the meeting or failing him, Mr John Lawton, and has
directed the Chairman to report the result of the meeting to the Court.
Information on the Scheme is set out in the Booklet of which this notice forms part.
Business of the meeting
The purpose of the meeting is to consider and, if thought fit, to agree (with or without modification) to a scheme of
arrangement proposed to be made between Auzex and Auzex Shareholders.
Scheme Resolution
‘That pursuant to and in accordance with the provisions of section 411 of the Corporations Act, the Scheme
(namely, the scheme of arrangement proposed between Auzex and Scheme Shareholders, referred to as the
‘Scheme’, as contained in and more particularly described in the Booklet accompanying the notice convening
this meeting) is agreed to with or without modification as approved by the Court (terms in this resolution having
the same meaning as in the Booklet).’
Defined Terms
Terms used in this Notice of Scheme Meeting have the same meaning as defined in the Booklet (of which this notice
forms part) accompanying this Notice of Scheme Meeting.
Shareholders who are entitled to vote
The Court has determined that the time for determining eligibility to vote at the Scheme Meeting is 6:00 pm (Brisbane
time) on 22 August 2015. Only those Auzex Shareholders entered on the Auzex Share Register at that time will be
entitled to attend and vote at the Scheme Meeting.
Explaurum Limited and its Related Bodies Corporate are not entitled to vote at the Scheme Meeting.
Voting in person
To vote in person, attend the Scheme Meeting at the time and place set out above in this Notice of Meeting.
Voting by proxy
To vote by proxy, please complete, sign and return the enclosed Scheme Meeting Proxy Form in accordance with the
following instructions. If you require an additional proxy form, Auzex will supply it on request.
An Auzex Shareholder who is entitled to vote at the Scheme Meeting may appoint:
4
(a)
one proxy if the Auzex Shareholder is only entitled to one vote; or
(b)
one or two proxies if the Auzex Shareholder is entitled to more than one vote.
• SCHEME BOOKLET | Merger with Explaurum Limited
For personal use only
Where the Auzex Shareholder appoints two proxies, the appointment may specify the proportion or number of votes that
each proxy may exercise. If the appointment does not specify a proportion or number, each proxy may exercise one-half
of the votes, in which case any fraction of votes will be disregarded.
A proxy need not be an Auzex Shareholder.
The proxy form must be signed by the member or the member’s attorney. Proxies given by a corporation must be
executed in accordance with the Corporations Act and the constitution of that corporation.
The proxy form (and any power of attorney under which it is signed) must be received by Computershare Investor
Services Pty Limited via:
(a)
fax on 1800 783 447(from within Australia) or +61 3 9473 2555 (from outside Australia); or
(b)
by mail to Computershare Investor Services Pty Limited, GPO Box 242, Melbourne Victoria 3001 Australia,
no later than 48 hours before the commencement of the Scheme Meeting, that is by no later than 10.00 am Brisbane
time on 22 August 2015. Any proxy form received after that time will not be valid for the scheduled meeting.
Voting by attorney
A member may appoint an attorney to act on the member’s behalf at the meeting. The power of attorney or such
other evidence of the attorney’s appointment and authority to the satisfaction of the Directors must be received by
Computershare Investor Services at least 48 hours before the time for holding of the meeting or any adjourned meeting
that is by no later than 10:00 am Brisbane time on 22 August 2015.
Court approval
In accordance with section 411(4)(b) of the Corporations Act, the Scheme (with or without modification) must be
approved by an order of the Court. If the resolution put to this meeting is passed by the Requisite Majority and the other
Scheme Conditions to the Scheme are satisfied, Auzex intends to apply to the Court on 2 September 2015 for approval
of the Scheme.
Enquiries
For further information, please contact the Auzex Information Line on (07) 3106 5044 from within Australia or
+61 7 3106 5044 from outside Australia, between 9:00 am and 5:00 pm (Brisbane time).
By order of the Board
Paul Frederiks
Company Secretary
23 July 2015
SCHEME BOOKLET
| Merger with Explaurum Limited •
5
IMPORTANT DATES
For personal use only
The key dates for the proposed Scheme Meeting of Auzex Shareholders and the Second Court Hearing to approve the
Scheme are summarised below. The first Court hearing to convene the Scheme Meeting has already been held.
EVENTDATE
Time and date by which the Scheme Meeting Proxy Form must be received to be valid for the Scheme Meeting
10:00 am on
22 August 2015
Time and date for determining eligibility to vote at the Scheme Meeting
6:00 pm on
22 August 2015
Scheme Meeting
10:00 am on
24 August 2015
If the Scheme is approved by the Requisite Majority of Scheme Shareholders and the Scheme Conditions are
satisfied or waived, the expected timetable for implementation of the Scheme is:
Second Court Hearing for approval of the Scheme
2 September 2015
Effective Date: Scheme takes effect
7 September 2015
Record Date: Time and date for determining entitlement to the Scheme Consideration
14 September 2015
Implementation Date: Transfer of Auzex Shares from Scheme Shareholders to EXU pursuant to the Scheme and issue of
Scheme Consideration
21 September 2015
Dispatch of holding statements for New EXU Shares to Eligible Scheme Shareholders
24 September 2015
Commencement of quotation of New EXU Shares on ASX
25 September 2015
The timetable and dates above (and the references to these dates throughout this Booklet) are indicative only and,
among other things, are subject to all necessary approvals. Auzex can vary these times and dates without directly
notifying Auzex Shareholders. Changes to the timetable will however be announced by EXU through the ASX and
notified on Auzex’s website at www.auzex.com.
All times and dates referred to in this Booklet are times and dates in Brisbane, Australia, unless otherwise indicated.
6
• SCHEME BOOKLET | Merger with Explaurum Limited
For personal use only
TABLE OF CONTENTS
1
OVERVIEW, SCHEME MEETING DETAILS AND HOW TO VOTE
10
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
1.11
What is the proposal?
What is this document?
What are the conditions to the Merger?
The Scheme in the best interests of Auzex Shareholders
Your vote is important
Approval requirements – Requisite Majority
Entitlement to vote
What you should do next
Scheme Meeting
Address for return of voting forms
For further information
10
10
10
10
10
11
11
11
11
12
12
2
ADVANTAGES AND DISADVANTAGES OF THE SCHEME
13
2.1
2.2
Advantages - Key reasons to vote for the Scheme
Disadvantages - Reasons to vote against the Scheme
13
15
3
FREQUENTLY ASKED QUESTIONS
17
4
THE MERGER AND THE SCHEME
24
4.1Background
4.2
Profile of EXU after completion of the Merger
4.3
Terms of the Merger Implementation Agreement
4.4
The Scheme
4.5
Scheme Consideration
4.6
Unanimous recommendation of the Auzex Directors
4.7
Independent Expert’s Conclusion
4.8
Scheme Conditions
4.9
Scheme Shareholder deemed warranties
4.10
Taxation consequences of the Merger Scheme
4.11
Ineligible Overseas Shareholders
24
24
24
25
25
26
26
26
27
28
28
5
PROFILE OF AUZEX
29
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
5.11
Auzex establishment
Activities since establishment
Auzex’s business
Auzex’s projects
Directors and management of Auzex
Auzex Capital Structure and ownership
Auzex historical financial information
Material changes in the financial position of Auzex
Operations of Auzex if Scheme does not proceed
Auzex risk factors
Material Contracts
29
29
30
30
32
34
35
39
39
39
39
SCHEME BOOKLET
| Merger with Explaurum Limited •
7
TABLE OF CONTENTS
For personal use only
6
PROFILE OF EXPLAURUM LIMITED
44
44
44
45
46
46
47
47
51
51
53
53
7
54
PROFILE OF THE MERGED GROUP
7.1Introduction
7.2
Overview of the Merged Group
7.3
Strategy of the Merged Group
7.4
Directors of the Merged Group
7.5
Operations of the Merged Group
7.6
Capital Structure and ownership of the Merged Group
7.7
Directors’ interests in Shares and Options of the Merged Group
7.8
Intentions of Auzex and EXU in relation to EXU
7.9
Financial information for the Merged Group
54
54
54
54
56
56
56
57
57
8
RISKS OF THE MERGER SCHEME
60
8.1
8.2
8.3
8.4
8.5
Risks specific to the Scheme and the creation of the Merged Group
Risks specific to the Merged Group
Risks specific to Auzex
General risks
Other relevant considerations
60
61
63
64
66
9
DETAILS OF THE MERGER AND ITS IMPLEMENTATION
67
9.1
9.2
9.3
9.4
9.5
9.6
9.7
9.8
9.9
Elements of the Merger
Entitlement to participate in the Scheme
Actions already undertaken by Auzex and EXU
Scheme Conditions
Scheme Meeting
Court approval
Steps after Court approval at the Second Court Hearing
Warranties by Scheme Shareholders under the Scheme
New EXU Shares
67
67
68
69
69
69
69
71
71
10
AUSTRALIAN TAXATION IMPLICATIONS
72
10.1Introduction
10.2
Australian Resident Auzex Shareholders
10.3
Revenue account
10.4
Consequences of holding EXU Shares
10.5
Non-Australian Resident Auzex Shareholders
8
44
6.1Overview
6.2
The Lyons Project
6.3
EXU Capital Raising
6.4
Directors and management
6.5
Directors’ interests in EXU Shares
6.6
Capital Structure and ownership of Explaurum Limited
6.7
EXU recent share price performance
6.8
EXU historic financial information
6.9Subsidiaries
6.10
Rights attaching to EXU Shares
6.11
Material Contracts
6.12
Continuous Disclosing Entity
• SCHEME BOOKLET | Merger with Explaurum Limited
72
72
73
74
74
TABLE OF CONTENTS
For personal use only
11
ADDITIONAL INFORMATION
76
11.1Introduction
11.2
Intention of Auzex Directors regarding the business of Auzex
11.3
Intention of Auzex Directors concerning the Scheme
11.4
Interests of Auzex Directors in Auzex securities
11.5
Interests of Auzex and Auzex Directors in EXU securities
11.6
Interests of EXU and EXU’s associates in Auzex Securities
11.7
Benefits to Auzex officers in connection with retirement from office
11.8
Agreements or arrangements connected with or conditional on the Scheme
11.9
Auzex Directors’ interests in EXU contracts
11.10
Disclosure of payments and benefits to Auzex Directors, secretaries and executive officers
11.11
Disclosure of interests
11.12
Disclosure of fees and other benefits
11.13
EXU capital structure
11.14
Capital raising by EXU
11.15
Material changes in financial position
11.16
Creditors of Auzex
11.17
Right to inspect and obtain copies of the Auzex Share Register
11.18
ASX and ASIC waivers, approvals and exemptions
11.19
No relevant restrictions in the Auzex constitution
11.20
Sale of Auzex Shares in the six months ended 21 June 2015
11.21
No unacceptable circumstances
11.22
Auzex Shareholders in jurisdictions outside Australia
11.23
Consents and disclaimers
11.24
Regulatory and legal
11.25
Supplementary information
11.26
Information relating to ore reserves and mineral resources
11.27
Effects of rounding
11.28
Data in charts, graphs and tables
11.29
No other material information
76
76
76
76
77
77
77
77
78
78
78
78
79
79
79
79
79
79
79
80
80
80
80
81
81
82
82
82
82
12
83
DEFINITIONS AND INTERPRETATION
12.1Definitions
12.2
General Interpretation
83
93
13
94
CORPORATE INFORMATION
Annexure Independent Expert’s Report
Annexure B
Scheme
Annexure C
Deed Poll
SCHEME BOOKLET
| Merger with Explaurum Limited •
9
1 OVERVIEW, SCHEME MEETING DETAILS AND HOW TO VOTE
For personal use only
1.1 What is the proposal?
(a)
On 30 April 2015 Auzex Exploration Limited (Auzex) and Explaurum Limited (EXU) announced a
proposed Merger. The Merger is to be implemented through a scheme of arrangement between Auzex
and Auzex Shareholders (other than EXU and its Related Bodies Corporate).
(b)
A scheme of arrangement is a Court-supervised process under which the shareholders of Auzex will
have the opportunity to vote for or against the proposed Merger.
(c)
If the Scheme is approved by Scheme Shareholders and the Court, and the Scheme Conditions are
satisfied:
(i)
EXU will acquire all of the Auzex Shares in exchange for the Scheme Consideration in the form
of New EXU Shares; and
(ii)
Auzex will become a wholly owned subsidiary of EXU.
(d)
The number of New EXU Shares each Scheme Shareholder will be entitled to as the Scheme
Consideration is the number of Auzex Shares they hold on the Record Date, multiplied by the Share
Scheme Ratio of four (4) New EXU Shares for each Auzex Share.
(e)
If the Scheme is not approved the Merger will not occur and Auzex will continue as a stand-alone
unlisted public company.
1.2 What is this document?
This document (Booklet) contains information about the proposed Merger. It also provides you, as an Auzex
Shareholder, with information to consider before voting on the resolution to approve the Scheme at the Scheme
Meeting scheduled to be held on 24 August 2015.
1.3 What are the conditions to the Merger?
The Scheme to implement the proposed Merger is subject to the satisfaction or waiver of the Scheme
Conditions, including:
(a)
no Material Adverse Change or Regulated Event occurring before 8:00 am on the Second Court Date;
and
(b)
the Scheme being approved by the Requisite Majority of Scheme Shareholders and by the Court.
Refer to section 4.8 for details of the Scheme Conditions.
1.4 The Scheme is in the best interests of Auzex Shareholders
(a)
The Auzex Directors unanimously recommend that, in the absence of a Superior Proposal, you vote in
favour of the Scheme.
(b)
The Independent Expert has concluded that the Merger is fair and reasonable to Auzex Shareholders
and, on that basis, in the absence of any other information or a superior offer, the Merger is in the best
interests of Auzex Shareholders as at 23 July 2015, being the date of the Independent Expert’s Report.
A copy of the Independent Expert’s Report is attached as Annexure A.
1.5 Your vote is important
10
(a)
For the Scheme to be implemented, it is necessary that the Requisite Majority of Scheme Shareholders
vote in favour of passing the resolution to approve the Scheme at the Scheme Meeting.
(b)
The Scheme Meeting will be held at 15 Ivory Lane, Brisbane at 10:00am on 24 August 2015.
• SCHEME BOOKLET | Merger with Explaurum Limited
For personal use only
1.6 Approval requirements – Requisite Majority
(a)
To pass the resolution approving the Scheme, votes in favour of the Scheme must be cast at the
Scheme Meeting by:
(i)
more than 50% of Scheme Shareholders present and voting (whether in person, by proxy, by
attorney or, in the case of a corporation, by corporate representative); and
(ii)
at least 75% of the total number of votes cast by Scheme Shareholders entitled to vote on that
resolution.
(b)
Voting at the Scheme Meeting will be by poll rather than by show of hands. The Notice of Scheme
Meeting is set out in the pages immediately after the letters from the Chairmen of Auzex and EXU at the
beginning of this Booklet.
(c)
EXU and its Related Bodies Corporate will not vote on the Scheme. As at the date of this Booklet, EXU
and its Related Bodies Corporate do not hold any Auzex Shares.
1.7 Entitlement to vote
(a)
Auzex Shareholders who are registered on the Auzex Share Register at 6:00 pm Brisbane time on 22
August 2015 may attend and vote at the Scheme Meeting.
(b)
Registrable transfers or transmission applications received after that time will be disregarded in
determining entitlements to vote at the Scheme Meeting.
1.8 What you should do next:
(a)
Step 1: Read this Booklet in full
You should read and carefully consider the information included in this Booklet to help you make an
informed decision in relation to your Auzex Shares and on how to vote in relation to the Scheme. If you
have any doubt as to what action you should take, you should promptly consult your financial, legal,
taxation or other professional adviser.
(b)
Step 2: Vote on the Scheme
As an Auzex Shareholder, it is your right to vote on whether the Scheme should be approved, and
therefore whether the Merger should proceed. You should note that the Scheme is subject to the
Scheme Conditions. Even if the Scheme is approved at the Scheme Meeting, it is possible that the
Merger will not proceed if the other Scheme Conditions have not been satisfied.
1.9 Scheme Meeting
(a)
Auzex Shareholders as at 6:00 pm (Brisbane time) on 22 August 2015 are entitled to vote on the
Scheme. You can vote:
(i)
in person by attending the Scheme Meeting to be held at 10.00 am (Brisbane time) on
24 August 2015 at 15 Ivory Lane, Brisbane;
(ii)
by proxy using the enclosed Proxy Form;
(iii)
by attorney; or
(iv)
by corporate representative (if the Auzex Shareholder is a company).
(b)
If you wish to vote FOR the Scheme by proxy you should place an ‘X’ in the ‘FOR’ box on the Proxy Form.
You must return your validly completed Form by 10:00 am on 22 August 2015 to ensure it is valid.
(c)
You can do this by using the enclosed reply paid envelope or by faxing the form to the Auzex Share
Registry on fax number 1800 783 447 from within Australia or +61 3 9473 2555 from outside Australia.
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11
1.10 Address for return of voting forms
For personal use only
Auzex Shareholders should mail or fax their proxy form or power of attorney to Computershare Investor Services Pty
Limited (Auzex’s Share Registry) at the following address or fax number:
Computershare Investor Services Pty Limited
GPO Box 242
Melbourne Victoria 3001
AUSTRALIA
Fax: 1800 783 447 (from within Australia) or +61 3 9473 2555 (from outside Australia),
no later than 48 hours before the commencement of the Scheme Meeting, that is by no later than 10:00 am (Brisbane
time) on 22 August 2015. Any proxy form received after that time will not be valid for the Scheme Meeting.
1.11 For further information
If you have any questions after reading this Booklet, please call the Auzex Information Line on 07 3106 5044 from
within Australia or +61 7 3106 5044 from outside Australia, between 9:00 am and 5:00 pm (Brisbane time).
12
• SCHEME BOOKLET | Merger with Explaurum Limited
For personal use only
2 ADVANTAGES AND DISADVANTAGES OF THE SCHEME
Auzex Shareholders should carefully consider the following advantages and disadvantages and risks of the Merger and
other relevant considerations, as well as the other information contained in this Booklet, in deciding whether or not to
vote in favour of the Scheme to implement the Merger.
2.1 Advantages - Key reasons to vote for the Scheme
1.
Auzex Shareholders will receive shares quoted on ASX, providing liquidity for their equity
interest in the Merged Group, and greater access for the Merged Group to global capital
markets and reduced cost of capital
(a)
Auzex will be a subsidiary of EXU. The Merger is expected to provide increased market capitalisation,
greater liquidity of issued securities and increased exposure and access to capital markets and potential
investors, providing the Merged Group with greater financial capacity and therefore an improved ability to
capitalise on its growth opportunities not otherwise available to Auzex as a stand-alone entity.
(b)
In addition:
(i)
Auzex Shareholders may benefit as shareholders in EXU from enhanced analyst research
coverage as a result of the Merger. This diverse coverage by research analysts should help to
ensure that EXU is more highly visible among the investment community.
(ii)
EXU will have a more diverse shareholder base.
2.
Creation of a larger-scale advanced exploration / pre-development focused gold company,
listed on ASX, which has a larger market capitalisation and improved access to capital
markets and access to growth opportunities otherwise unlikely to be available to Auzex as a
stand-alone company
The Merger will enable Auzex Shareholders to participate in the Merged Group which will have
enhanced scale and increased market presence.
The Merged Group’s greater scale and scope are also expected to increase access to additional sources
of capital in the equity and debt markets over time. The Merged Group will have a stronger balance
sheet and greater financial capacity relative to Auzex as a stand-alone entity.
EXU will have a JORC Inferred mineral resource base of approximately 310,000 to 380,000 ounces of
gold with exploration potential both laterally and at depth.
JORC 2012 Inferred Mineral Resource (gold), Gault Prospect, Tampia gold project
Cut off
g/t Au
Tonnes
(,000)
Au (cut)
g/t Au
Contained gold
Ounces
Au (uncut)
g/t Au
0.7
7,100
1.6
370,000
2.0
1.0
4,700
2.0
310,000
2.5
2.0
1,600
3.4
170,000
4.6
Notes
(i)
About 90% of the resource (at 0.7grams per tonne) is in the upper 100 metres and 73% in
the upper 80 metres.
(ii)
Details of the estimation were set out in Appendix 1 to the EXU announcement to ASX on 30
April 2015.
(iii)
Oxide Resources are not significant at about 15,000 ounces at 0.7 grams per tonne cut off.
SCHEME BOOKLET
| Merger with Explaurum Limited •
13
For personal use only
3.
Strengthened Board will provide a strong leadership team with a proven track record of
gold exploration, development and production
The Merger of Auzex and EXU will create a unified experienced and focussed management team, with
complementary skills and experience, to manage the development and operations of each company’s
Projects into the future.
4
Provides a platform to build a significant Australian gold company
From a management perspective, the Merger provides:
(a)
5
(i)
accelerating the exploration program at the Projects;
(ii)
fast-tracking development of the Projects; and
(iii)
consolidating additional development opportunities;
(b)
skills to better liaise with financiers for funding for the development of the Projects;
(c)
a platform to better utilise Auzex’s and EXU’s existing management experience and industry
relationships to identify further value adding opportunities; and
(d)
growth and development opportunities to help attract and retain highly skilled staff.
Potential cost savings from synergies by combining Auzex and EXU, leveraging resource,
project, operational and financial synergies
(a)
Combining Auzex and EXU may create potential cost savings through the elimination of
duplicated roles and improved efficiencies.
(b)
Functions such as company secretarial and financial management functions will be centralised
in Brisbane to best ensure that support services are provided in an efficient and timely manner.
6.
There is no alternative proposal to the Merger
There has not been any competing proposal to the Merger of Auzex and EXU. Auzex is not aware of any
alternative proposals to the proposed Merger.
7.
The Independent Expert has concluded that the Merger is in the best interests of Auzex
Shareholders
8.
(a)
BDO Corporate Finance (QLD) Ltd was commissioned by the Auzex Board as the Independent
Expert to assess the merits of the Scheme and the Merger.
(b)
The Independent Expert has concluded the Merger is fair and reasonable to Auzex Shareholders
and, on that basis, in the absence of any other information or a superior offer, the Merger is in
the best interests of Auzex Shareholders as at 23 July 2015, being the date of the Independent
Expert’s Report.
(c)
A copy of Independent Expert’s Report is attached as Annexure A. Auzex Shareholders should
read the Independent Expert’s Report carefully and in its entirety, and should have regard to the
disadvantages of the Merger as set out in that report and in section 2.2 of this Booklet below.
Auzex Shareholders who are Australian residents for taxation purposes and receive EXU Shares
should generally be able to obtain CGT scrip-for-scrip roll-over relief on any capital gains
(a)
14
the opportunity for the management to leverage off its skills base and EXU’s financial strength
to add significant value by:
Generally, CGT roll-over relief should enable Australian tax resident Auzex Shareholders who
receive New EXU Shares under the Scheme to elect to defer any CGT liability they would otherwise
incur on any gains on the disposal of their Auzex Shares under the Scheme until the time they
dispose of those New EXU Shares. Refer to section 10 for further details on certain Australian
taxation considerations for Auzex Shareholders, including the availability of CGT roll-over relief.
• SCHEME BOOKLET | Merger with Explaurum Limited
For personal use only
(b)
9.
10.
The Auzex Directors recommend that Auzex Shareholders should obtain their own taxation
advice that will take into account their own personal circumstances.
The Merger is unanimously recommended by the Auzex Directors as being in the best
interests of Auzex Shareholders in the absence of a Superior Proposal
(a)
The Auzex Directors believe that the Merger is in the best interests of Auzex Shareholders and
unanimously recommend that Auzex Shareholders vote in favour of the Scheme, in the absence
of a Superior Proposal. The Auzex Directors have formed their conclusion and made their
recommendation based on, among other things, the matters outlined in this section 2 and the
key risk factors outlined in section 8 of this Booklet.
(b)
Each Auzex Director who holds Auzex Shares, or on whose behalf Auzex Shares are held,
intends to vote those Auzex Shares in favour of the Scheme, in the absence of a Superior
Proposal.
The Merger has the unanimous support of the Explaurum Limited Board
The Merger is also unanimously supported by the EXU Board.
2.2 Disadvantages - Reasons to vote against the Scheme
This section summarises the reasons identified by the Auzex Directors as to why you may consider voting against the
Scheme.
1.
You may hold a different view to the Auzex Directors and the Independent Expert in relation
to the Scheme
Notwithstanding the unanimous recommendation of the Auzex Directors and the conclusions of the
Independent Expert, you may believe that the Scheme is not in your best interests.
There is no obligation to follow the recommendation of the Auzex Directors or to agree with the opinion
of the Independent Expert.
2.
You may believe there is the potential for a Superior Proposal to be made in the future
You may believe that a Superior Proposal, which is more attractive for Auzex Shareholders than the
Scheme, could emerge in the foreseeable future. Implementation of the Scheme will mean that existing
Auzex Shareholders will not receive the benefit of any such proposal.
Since the announcement of the Scheme and up to the date of this Booklet, the Auzex Directors have
not received or become aware of a Superior Proposal and have no basis for believing that a Superior
Proposal will emerge.
The Auzex Directors note that the Merger Implementation Agreement prohibits Auzex from soliciting
Competing Proposals. Auzex is however permitted to respond to any Competing Proposals should the
Auzex Directors determine that failing to do so would likely constitute a breach of their fiduciary or
statutory duties. Further details of the key terms of the Merger Implementation Agreement are provided
in section 4.3 of this Booklet.
3.
You may also believe it is in your best interests to maintain your current investment and
risk profile
While EXU has a Project with asset characteristics in common with Auzex, the operational profile, size, debt
profile and geographic exposure of the Merged Group will be different from that of Auzex on a standalone
basis. It is possible that you may wish to maintain an interest in Auzex as a standalone company because
you are seeking an investment in a company with the specific characteristics of Auzex.
SCHEME BOOKLET
| Merger with Explaurum Limited •
15
For personal use only
You may also believe that the integration of Auzex and EXU may be more difficult or take more time than
currently anticipated and there is a risk that synergies may not be realised.
Further details of the risks associated with the Merger and investing in the Merged Group are set out in
section 8 of this Booklet. Auzex Shareholders are encouraged to read this section carefully and in its entirety.
The Auzex Directors note that the Merged Group’s shares will trade on the ASX. Accordingly, if you
receive New EXU Shares under the Scheme, and you do not wish to hold them after the Implementation
Date, you will have the option to sell them on the ASX.
4.
The value of the Scheme Consideration is not certain and will depend on the price at which
New EXU Shares trade on the ASX after the Implementation Date
If the Scheme is implemented, Auzex Shareholders will receive the Scheme Consideration of four (4)
New EXU Shares in respect of each Auzex Share they hold on the Record Date.
The value of New EXU Shares received by Auzex Shareholders on implementation of the Scheme will
depend on the price at which the Merged Group’s Shares trade on the ASX as at the Implementation Date.
Following implementation of the Scheme, the price of the Merged Group’s Shares may rise or fall based
on market conditions and the Merged Group’s financial and operational performance. If the price of the
Merged Group’s Shares falls, the value of the New EXU Shares received as Scheme Consideration will
decline. If the price of the Merged Group’s Shares increases, the value of the New EXU Shares received
as Scheme Consideration will increase.
Further, in circumstances where Auzex Shareholders do not intend to continue to hold their New EXU
Shares, there is a risk that a significant number of Auzex Shareholders may seek to sell their New EXU
Shares, which may adversely impact the price of the Merged Group’s Shares.
Accordingly, there is no guarantee as to the future value of the Scheme Consideration to be received
under the Scheme.
5.
The potential tax consequences pursuant to the Scheme may be adverse to your own
financial position
If the Scheme proceeds, there may be tax consequences for you as an Auzex Shareholder which may
include tax payable on any gain in the disposal of your Auzex Shares.
A general guide to the taxation implications of the Scheme is set out in section 10 of this Booklet. This
guide is expressed in general terms and you should seek independent professional advice regarding the
tax consequences applicable to your own circumstances.
The Auzex Directors consider that the potential disadvantages of, and other reasons to vote against, the Scheme
outlined above are outweighed by the potential advantages of, and other reasons to vote in favour of, the Scheme (set
out in “Advantages - Key reasons to vote for the Scheme” in section 2.1 above) and that the Scheme is in the best
interests of Auzex Shareholders, in the absence of a Superior Proposal.
The Auzex Directors believe however that Auzex Shareholders should take the potential disadvantages of, and other
reasons to vote against, the Scheme set out above into consideration when deciding whether or not to vote in favour of
the Scheme.
16
• SCHEME BOOKLET | Merger with Explaurum Limited
3 FREQUENTLY ASKED QUESTIONS
For personal use only
This section answers some frequently asked questions about the Scheme and the Merger. It is not intended to address
all issues relevant to Auzex Shareholders. This section should be read together with all other parts of this Booklet.
Question
Answer
Further information
What is the Merger?
On 30 April 2015 Auzex and EXU announced their
intention to merge by Auzex becoming a wholly owned
subsidiary of EXU, a company listed on ASX.
sections 1 and 9
The Merger will be implemented by way of a scheme of
arrangement between Auzex and Scheme Shareholders.
What is a scheme of
arrangement?
A scheme of arrangement is a statutory procedure
commonly used to enable one company to merge with
another. The Scheme is the mechanism by which Auzex
and EXU propose to merge by EXU acquiring all of the
shares of Auzex, and requires the approval of Scheme
Shareholders by the Requisite Majority, and by the Court.
section 4.1(b)
What is the Scheme?
The Scheme is a scheme of arrangement between Auzex
and Scheme Shareholders to effect the merger of Auzex
and EXU through the acquisition by EXU of all of the
issued Auzex Shares in exchange for the issue of the
Scheme Consideration in the form of New EXU Shares. If
the Scheme proceeds, Auzex will become a wholly owned
subsidiary of EXU.
sections 1 and 4.1(b)
Who is entitled to
participate in the
Scheme?
Auzex Shareholders (other than EXU and its Related
Bodies Corporate) on the Auzex Share Register as at
6:00 pm on the Record Date are entitled to participate
in the Scheme. If the Scheme is approved and
implemented, Scheme Shareholders (other than Ineligible
Overseas Shareholders) will receive New EXU Shares as
their Scheme Consideration.
section 9.2
SCHEME BOOKLET
| Merger with Explaurum Limited •
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Question
Answer
Further information
Who is an Ineligible
Overseas Shareholder
for the purposes of the
Scheme?
A Scheme Shareholder will be an Ineligible Overseas
Shareholder for the purposes of the Scheme if their
address as shown in the Auzex Share Register at 6:00
pm on the Record Date is a place outside Australia and
its external territories and New Zealand unless EXU is
satisfied, acting reasonably, that the laws of that Scheme
Shareholder’s country of residence (as shown in the
Auzex Share Register) permit the issue and allotment
of New EXU Shares to that Scheme Shareholder, either
unconditionally or after compliance with conditions which
EXU in its sole discretion regards as acceptable.
section 4.11
What do they receive
under the Scheme?
Ineligible Overseas Shareholders will not be issued EXU
Shares under the Scheme. Instead, the New EXU Shares
that they would otherwise have been entitled to have
issued to them under the Scheme (had they not been
ineligible) will be issued to the Sale Nominee to sell on
market following implementation of the Scheme. All
such New EXU Shares will be sold by the Sale Nominee
as soon as reasonably practicable and in any event not
more than 15 Business Days after the Implementation
Date. There is no guarantee of the amount of cash
that Ineligible Overseas Shareholders will receive from
the sale of the New EXU Shares. This will depend on
the prices that can be achieved by the Sale Nominee,
and applicable brokerage, stamp duty and other selling
costs, taxes and charges. See section 4.11 for more
information, including the process by which the Sale
Nominee will sell the New EXU Shares and distribute the
net Cash Proceeds.
18
• SCHEME BOOKLET | Merger with Explaurum Limited
For personal use only
Question
Answer
Further information
What is the effect of the
Scheme?
The Merger is proposed to be implemented by way of the
Scheme.
sections 1 and 4.4
Subject to the qualifications referred to below, all Scheme
Shareholders will receive the Scheme Consideration,
whether or not they voted for or against the Scheme,
once the Scheme has become Effective.
Ineligible Overseas Shareholders will not receive EXU
Shares under the Scheme, but will instead receive a pro
rata share of the net Cash Proceeds (in Australian dollars)
from the sale by the Sale Nominee of the New EXU
Shares attributable to Ineligible Overseas Shareholders.
Upon completion of the Scheme, Auzex will become a
wholly owned subsidiary of EXU. Auzex Shareholders will
retain an economic interest in Auzex’s current projects after
the Merger through their shareholding in EXU. The Share
Scheme Ratio will determine the number of New EXU
Shares Scheme Shareholders will receive for each Auzex
Share they hold on the Record Date.
What are the Scheme
Conditions?
The Scheme will become Effective only if, among other
things, the following conditions are satisfied or waived:
section 4.8
(a) no material Adverse Change or Regulated Event
occurring before 8:00 am on the Second Court Date;
and
(b) the Scheme being approved by the Requisite Majority
of Scheme Shareholders and by the Court.
What are the reasons
to vote in favour of the
Scheme?
The Auzex Directors believe that the Scheme is in the
best interests of Auzex Shareholders. The benefits of the
Merger include:
section 2
(a) listing on ASX providing Auzex Shareholders with
liquidity for their shareholding in the Merged Auzex
and EXU;
(b) a unified entrepreneurial and experienced
management team;
(c) a platform to build a significant Australian gold and
mineral company and attract new management;
(d) allows the Tampia gold project to be accelerated
through feasibility; and
(e) being listed on ASX providing greater access to global
capital markets and access to growth opportunities
otherwise unlikely to be available to Auzex as a
stand-alone company.
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| Merger with Explaurum Limited •
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Question
Answer
Further information
What are the key risks of
the Merger Scheme?
The risks associated with the Scheme include:
section 8
(a) those general risks associated with an investment in
a listed company;
(b) specific risks associated with an investment in a
minerals exploration company;
(c) specific risks associated with an investment in the
Merged Group, including exposure to the gold price,
the risks of development costs, environmental and
approval risks; and
(d) merger related risks, including transaction costs and
those risks associated with the integration of Auzex
and EXU including staff retention, financing and
implementation of the Merger.
What is the Scheme
Consideration?
If you are an Eligible Scheme Shareholder (i.e. not an
Ineligible Overseas Shareholder), you will receive the
Scheme Consideration in the form of New EXU Shares.
section 4.5
The Scheme Consideration to which each Scheme
Shareholder will be entitled is the number of Auzex
Shares held by the Scheme Shareholder on the Record
Date multiplied by the Share Scheme Ratio.
EXU and its Related Bodies Corporate do not have a
Relevant interest in any Auzex Shares and will therefore
not receive any of the Scheme Consideration.
Is EXU bound to
provide the Scheme
Consideration?
Yes. Under the Deed Poll, EXU undertakes in favour
of each Scheme Shareholder to, among other things,
provide the Scheme Consideration in accordance with the
terms of the Scheme (subject to the Scheme becoming
Effective).
Under the Scheme, the Scheme Shareholders appoint
Auzex and its directors, officers and secretaries (jointly
and severally) as their agent and attorney to enforce the
Deed Poll against EXU on their behalf.
20
• SCHEME BOOKLET | Merger with Explaurum Limited
section 9.3(b)
and Annexure C
For personal use only
Question
Answer
Further information
What happens if the
Merger Scheme is
approved?
If the resolution to approve the Scheme is passed by
the Requisite Majority of Scheme Shareholders at the
Scheme Meeting, Auzex will apply to the Court at the
Second Court Hearing on the Second Court Date for
orders approving the Scheme.
sections 9.6 and 9.7
At the Second Court Hearing each of Auzex and EXU will
provide a certificate to the Court confirming whether the
Scheme Conditions (other than the condition relating
to Court approval) has been satisfied or (if applicable)
waived in accordance with the Merger Implementation
Agreement.
What happens if
the Scheme is not
approved?
If the Scheme is not approved by the Requisite Majority
or the Court, or the Scheme Conditions are not satisfied
or waived:
sections 5.9
and 8.5(d)
(a) The Merger will not occur and Auzex will continue to
run its business in the same manner as it is currently
operating. Auzex Shareholders will therefore continue
to be exposed to the risks and benefits of owning
Auzex Shares, including the risks set out in section
8.3.
(b) Transaction costs of approximately $400,000 will be
borne by Auzex, which will impact Auzex’s financial
position.
(c) Auzex will be liable to repay to EXU the amount of
$800,000 advanced to Auzex pursuant to the loan
agreement summarised in section 5.11.1 of this
Booklet. This may require Auzex to seek alternative
sources of funds within three months.
Auzex may also become obliged to pay EXU a break fee
under the terms of the Merger Implementation Agreement
(MIA) if an Auzex Director changes his recommendation
that scheme Shareholders approve the Scheme, or
Auzex breaches the MIA in a manner permitting EXU to
terminate it.
What do Auzex’s
Directors recommend?
The Auzex Directors unanimously recommend that, in the
absence of a Superior Proposal, Scheme Shareholders
vote in favour of the Scheme.
section 4.6
Each Auzex Director who has a Relevant Interest in Auzex
Shares and in respect of which they also have a power
to vote intends to vote in favour of the Scheme, in the
absence of a Superior Proposal.
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Question
Answer
Further information
What is the Independent
Expert’s opinion on the
Merger?
The Independent Expert has concluded that the Merger
is fair and reasonable to Auzex Shareholders and, on
that basis, in the absence of any other information or
a superior offer, the Merger is in the best interests of
Auzex Shareholders as at 23 July 2015, being the date of
Independent Expert’s Report.
Annexure A
The Independent Expert’s Report is attached as Annexure
A and you should read it in full.
What is EXU’s strategy?
EXU’s objective will be the development of the Tampia
Project to production and development of EXU’s Lyons
Project.
When and where will
the Scheme Meeting be
held?
The Scheme Meeting will be held on Monday 24 August
2015 at 10:00 am (Brisbane time) at 15 Ivory Lane,
Brisbane.
Who is entitled to vote?
Auzex Shareholders who are recorded as members on
the Auzex Share Register as at 6:00 pm (Brisbane time)
on 22 August 2015 are entitled to vote at the Scheme
Meeting.
How will the Auzex
Directors vote?
Each Auzex Director intends to vote any Auzex Shares
in which they hold a Relevant Interest and in respect of
which they also have the power to vote in favour of the
Scheme at the Scheme Meeting, in the absence of a
Superior Proposal.
section 4.6(b)
What voting majority
is required for Auzex
Shareholders to approve
the Scheme?
For the Scheme to be approved by Auzex Shareholders,
votes in favour of the Scheme must be received from:
section 1.6
(a) a majority in number (more than 50%) of Scheme
Shareholders present and voting at the Scheme
Meeting (in person, by proxy, by attorney or, in the
case of corporate Scheme Shareholders, by corporate
representative); and
(b) Scheme Shareholders who together hold at least
75% of the total number of votes cast on the
resolution.
Will I be bound by the
Scheme if I do not vote
or if I vote against the
Scheme?
22
Yes, if the Scheme is approved and becomes Effective,
then any Auzex Shares held by you at 6:00 pm on the
Record Date will be transferred to EXU and you will
receive the Scheme Consideration, notwithstanding that
you did not vote, or that you voted against the Scheme.
• SCHEME BOOKLET | Merger with Explaurum Limited
section 7.3
For personal use only
Question
Answer
Further information
When will I be issued the
Scheme Consideration?
If the Scheme becomes Effective, the Scheme
Consideration (being New EXU Shares) will be issued on
the Implementation Date, which is expected to be
21 September 2015.
What are the taxation
implications of the
Merger?
The tax consequences can vary depending on the Auzex
Shareholder’s particular circumstances. The general
comments below are provided as a guide only and do not
amount to tax advice. Each Auzex Shareholder should
consult their own tax adviser for tax advice in relation to
the implications of participating in the Scheme.
section 10
(a) Generally, Australian resident Scheme Shareholders
should be eligible for CGT roll-over relief which, if
elected, will enable them to defer any CGT liability in
respect of any gains on the disposal of Auzex Shares
until the New EXU Shares are sold.
(b) Any gains made by non-Australian resident Scheme
Shareholders will generally not be subject to CGT
provided their shareholding is less than 10% of the
total Auzex Shares on issue.
What other information
is available?
If you have any questions in relation to this Booklet you
can call the Auzex Information Line on 07 3106 5044 (for
Australian callers) or +61 7 3106 5044 (for international
callers) on weekdays between 9:00 am and 5:00 pm
(Brisbane time).
If you are in any doubt about how to deal with this
document, you should contact your broker, financial
advisor or legal advisor immediately.
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4 THE MERGER AND THE SCHEME
4.1Background
For personal use only
(a)
(b)
Merger Implementation Agreement
(i)
On 30 April 2015 EXU announced the intention for EXU to acquire Auzex.
(ii)
Under the Merger Implementation Agreement dated 16 May 2015 (MIA), Auzex and EXU agreed
to the Merger that will result in the two companies’ projects being held under the control of EXU,
an Australian company listed on ASX. In particular, pursuant to the MIA Auzex and EXU agreed
to merge pursuant to which EXU will:
(A)
be owned by Scheme Shareholders and EXU Shareholders; and
(B)
continue to be listed on ASX.
(iii)
Key terms of the MIA are summarised in section 4.3 below.
(iv)
Auzex and EXU are seeking to implement this Merger by Auzex proposing a scheme of
arrangement pursuant to which Auzex will become a wholly owned subsidiary of EXU.
The Scheme
(i)
Pursuant to this Booklet, Auzex is proposing to implement the Merger pursuant to a scheme of
arrangement between Auzex and Auzex Shareholders.
(ii)
A scheme of arrangement is a statutory Court supervised procedure that is commonly used to
enable one company to merge with another. It is an arrangement between a company and its
shareholders.
(iii)
The Scheme will not proceed unless all Scheme Conditions are satisfied or, where possible, waived.
4.2 Profile of EXU after completion of the Merger
(a)
If the Scheme is Effective according to its terms, EXU will become the parent company of Auzex.
(b)
Further details of the structure of the Merged Group after completion of the Merger are set out in
section 7 of this Booklet.
4.3 Terms of the Merger Implementation Agreement
(a)
The MIA sets out each of Auzex’s and EXU’s rights and obligations in connection with the
implementation of the Merger.
(b)
Key terms of the MIA are:
(i)(Conditions Precedent to the Scheme) implementation of the Scheme will be subject to and
conditional upon the following:
(A)
Auzex Shareholders and the Court approving the Scheme; and
(B)
no Material Adverse Change or Regulated Event occurs before 8:00 am on the Second Court Date;
(ii)(Consideration): the total consideration to be paid to the Auzex Shareholders is 67,205,796
New EXU Shares which are to be apportioned amongst the Auzex Shareholders in accordance
with the Share Scheme Ratio of four (4) New EXU Shares for each Auzex Share;
(iii)(Board): upon implementation of the Merger, the EXU Board will be comprised of two current
EXU Directors (Patrick Flint and Mark Calderwood) and two Directors nominated by Auzex (Chris
Baker and John Lawton);
(iv)(Loan Agreement): EXU has lent the sum of $800,000 to Auzex under the Loan Agreement (a
summary of which is set out in section 5.11.1).
24
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(v)(Exclusivity): Auzex and EXU have agreed to deal with each other exclusively regarding any
change of control transaction and, before the earlier of Scheme becoming Effective, the End
Date or 23 October 2015, to not solicit, discuss or enter into any commitments regarding a
Competing Proposal from a third party, and to notify the other of details of any Competing
Proposal they may receive. The exclusivity is subject to an exception where compliance with the
exclusivity obligations would breach the fiduciary or statutory obligations of the Auzex Board or
EXU Board as relevant.
(vi)(Break Fees): restrictions are imposed on both Auzex and EXU engaging with third parties and
a break fee of $250,000 will be payable by a party (Defaulting Party) to the other party in
certain circumstances, including:
(A)
where the Defaulting Party is in material breach of the MIA;
(B)
where a Regulated Event occurs in relation to the Defaulting Party;
(C)
in the case of Auzex, an Auzex Director makes a public statement changing or withdrawing
their support or recommendation of the Scheme or recommends a Competing Proposal to
Auzex Shareholders, each in the absence of a Superior Proposal); or
(D)
Auzex Shareholders do not approve the Scheme by the Requisite Majority,
and the MIA is terminated in accordance with its terms before the Implementation Date.
The agreed amount of the break fee is greater than 1% of the transaction value because:
•
the break fee arrangements are mutual;
•
the break fee was agreed after substantial negotiation between Auzex and EXU to
determine the most appropriate structure for the scheme; and
•
the break fee was regarded by Auzex and EXU as a reasonable estimate of the costs
that each may incur in legal, technical and other costs in carrying out the Scheme.
4.4 The Scheme
(a)
If the Scheme is approved by the Requisite Majority of Scheme Shareholders and the Court and
becomes Effective, all Auzex Shares outstanding at 6:00 pm on the Record Date, and not already owned
by EXU or its Related Bodies Corporate, will be transferred to EXU.
(b)
See Annexure B for a copy of the Scheme.
(c)
Implementation of the Scheme is subject to the Scheme Conditions being satisfied, including the
condition that the Scheme may be implemented only if the Requisite Majority of Scheme Shareholders
vote in favour of the Scheme at the Scheme Meeting.
(d)
The Scheme Meeting at which Scheme Shareholders may vote for the Scheme will be held at 10:00 am
on 24 August 2015 at 15 Ivory Lane, Brisbane.
(e)
EXU and its Related Bodies Corporate do not hold any Auzex Shares and will not vote on the Scheme.
(f)
A summary of the Scheme Conditions is provided in section 4.8, and a summary of the steps necessary
to implement the Scheme is provided in section 9.
4.5 Scheme Consideration
(a)
Under the Scheme Auzex Shareholders (other than EXU and its Related Bodies Corporate) are to receive
four (4) New EXU Shares for each Auzex Share they hold.
(b)
The Share Scheme Ratio was developed on the basis of:
(i)
the respective agreed fair value of the assets of Auzex and EXU; and
(ii)
the number of issued shares of each Auzex and EXU respectively.
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(c)
The Share Scheme Ratio will result in Auzex Shareholders holding approximately 49.30% of the issued
shares of the Merged Group (49.77% on a fully diluted basis).
(d)
Where a Scheme Shareholder is an Ineligible Overseas Shareholder, the number of New EXU Shares to
which that Scheme Shareholder would otherwise be entitled will be allotted to the Sale Nominee who
will sell those New EXU Shares as soon as practicable (at the risk of the Ineligible Overseas Shareholder)
and pay the Cash Proceeds received, after deducting any applicable brokerage, stamp duty and other
taxes and charges, to that Ineligible Overseas Shareholder in full satisfaction of that Ineligible Overseas
Shareholder’s rights to any Scheme Consideration under the Scheme.
4.6 Unanimous recommendation of the Auzex Directors
(a)
The Auzex Directors unanimously recommend that, in the absence of a Superior Proposal, Auzex
Shareholders vote in favour of the Scheme at the Scheme Meeting.
(b)
The Auzex Directors believe that the reasons for Auzex Shareholders to vote in favour of the Scheme
outweigh the potential disadvantages and reasons to vote against the Scheme. In the absence of a
Superior Proposal, each Auzex Director intends to vote in favour of the Scheme any Auzex Shares in
which they have a Relevant Interest and in respect of which they have power to vote.
(c)
In making their recommendation and determining how to vote on the Scheme, the Auzex Directors have
considered:
(i)
the advantages and disadvantages of the Scheme, as set out in section 2 of this Booklet;
(ii)
the implications of the Scheme (and Merger) not being approved, as summarised in section 8.5(d);
(iii)
the opinion of the Independent Expert contained in the Independent Expert’s Report (refer to
section 4.7 and Annexure A), that the Merger is in the best interests of Auzex Shareholders; and
(iv)
the alternatives to the Scheme that are available to Auzex.
4.7 Independent Expert’s Conclusion
(a)
Auzex commissioned BDO Corporate Finance (QLD) Ltd as the Independent Expert to prepare a report
on whether or not the Scheme is in the best interests of Auzex Shareholders.
(b)
The Independent Expert has concluded that the Merger is fair and reasonable to Auzex Shareholders
and, on that basis, in the absence of any other information or a superior offer, the Merger is in the best
interests of Auzex Shareholders as at 23 July 2015, being the date of Independent Expert’s Report.
(c)
The Independent Expert’s Report is attached to this Booklet as Annexure A. You should read the
Independent Expert’s Report in full.
4.8 Scheme Conditions
(a)
Under the Merger Implementation Agreement (MIA), Auzex and EXU agreed that the Merger will not
be implemented until certain conditions have been fulfilled or waived. The conditions that have not yet
been fulfilled as at the date of this Booklet are:
(i)(No Auzex Material Adverse Change): no Material Adverse Change in respect of Auzex
occurring or becoming known to EXU, and no Material Adverse Matter in respect of Auzex
becomes known to EXU, after the date of the MIA being 16 May 2015 and before 8:00 am AEST
on the Second Court Date;
(ii)(No Auzex Regulated Event): no Regulated Event in respect of Auzex occurring or becoming
known to EXU after 16 May 2015 and before 8:00 am AEST on the Second Court Date;
(iii)(No EXU Material Adverse Change): no Material Adverse Change in respect of EXU occurring
or becoming known to Auzex, and no Material Adverse Matter in respect of EXU becomes known
to Auzex, after 16 May 2015 and before 8:00 am AEST on the Second Court Date;
26
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(iv)(No EXU Regulated Event): no Regulated Event in respect of EXU occurring or becoming
known to Auzex after 16 May 2015 and before 8:00 am AEST on the Second Court Date;
(v)(Auzex Warranties): the Auzex Warranties being true and correct in all material respects on
16 May 2015 and as at 8:00 am AEST on the Second Court Date (unless any warranty relates
to an earlier date, in which case as at such date);
(vi)(EXU Warranties): the EXU Warranties being true and correct in all material respects on
16 May 2015 and as at 8:00 am AEST on the Second Court Date (unless any warranty relates
to an earlier date, in which case as at such date);
(vii)(ASIC consents): before 8:00 am AEST on the Second Court Date, ASIC issuing or providing
such consents, waivers or approvals or doing such other things as are reasonably necessary to
implement the Scheme; and
(viii)(No adverse regulatory action): no Regulatory Authority having:
(b)
(A)
undertaken a judicial proceeding seeking to enjoin, restrain or otherwise prohibit or
impose adverse conditions on the Scheme which remain in effect as at 8:00 am AEST
on the Second Court Date;
(B)
issued an order, decree or ruling prohibiting or imposing adverse conditions on or
otherwise preventing completion of the Scheme which remains in effect as at 8:00 am
AEST on the Second Court Date; or
(C)
declined to issue an order, decree, ruling, notification or communication by 8:00 am
AEST on the Second Court Date that is required for the Scheme to be implemented in
accordance with this deed.
The Scheme is also conditional on the statutory requirements for approval of the Scheme, being:
(i)(Approval by Auzex Shareholders): Auzex Shareholders approving the Scheme by the
majorities required under section 411(4)(a) of the Corporations Act in relation to the Scheme
Meeting convened by the Court;
(ii)(Approval by the Court): the Court approving the Scheme in accordance with section 411(4)
(b) of the Corporations Act;
(iii)(Court conditions): such other conditions made or required by the Court under section 411(6)
of the Corporations Act in relation to the Scheme as are acceptable to EXU and Auzex have been
satisfied; and
(iv)(Court orders coming into effect): the coming into effect, pursuant to section 411(10) of the
Corporations Act, of the orders of the Court made under section 411(4)(b) of the Corporations
Act (and, if applicable, section 411(6) of the Corporations Act) in relation to the Scheme.
4.9 Scheme Shareholder deemed warranties
Pursuant to clause 7.6(b) of the Scheme, the Scheme Shareholders are deemed to have warranted to EXU that:
(a)
all their Auzex Shares (including any rights and entitlements attaching to those shares) which are
transferred to EXU under the Scheme will, at the date of the transfer to EXU, be fully paid and free from
all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legal or
otherwise, and restrictions on transfer of any kind; and
(b)
they have full power and capacity to sell and to transfer their Auzex Shares, together with any rights
attaching to such shares.
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4.10 Taxation consequences of the Merger Scheme
(a)
A general guide to the Australian taxation consequences of the Scheme for Scheme Shareholders is set
out in section 10 of this Booklet.
(b)
The guide in section 10 is not intended to, and does not, provide specific advice in respect of the
individual tax consequences of the Scheme for any Scheme Shareholder. Auzex recommends that all
Scheme Shareholders obtain their own independent, professional tax advice before determining how to
vote on the Scheme.
4.11 Ineligible Overseas Shareholders
28
(a)
EXU is not obliged to issue, and will not issue, any Scheme Consideration in the form of New EXU
Shares to any Ineligible Overseas Shareholder.
(b)
The New EXU Shares that would have been issued to Ineligible Overseas Shareholders will be issued to
the Sale Nominee on the Implementation Date. EXU will procure that, as soon as reasonably practicable
(and in any event not more than 15 Business Days after the Implementation Date), the Sale Nominee:
(i)
sells on ASX all of the New EXU Shares issued to the Sale Nominee in relation to Ineligible
Overseas Shareholders in such manner, at such price and on such other terms as the Sale
Nominee determines in good faith and at the risk of Ineligible Overseas Shareholders; and
(ii)
promptly after the last such sale, the Sale Nominee will pay to each Ineligible Overseas
Shareholder their proportion of the Cash Proceeds (after deducting any applicable brokerage,
stamp duty and other taxes and charges) calculated on an average basis so that all Ineligible
Overseas Shareholders receive the same price per New EXU Share, subject to rounding, in full
and final satisfaction of that Ineligible Overseas Shareholder’s rights to Scheme Consideration
under the Scheme.
(c)
The Sale Nominee will pay the relevant proportion of the Cash Proceeds to each Ineligible Overseas
Shareholder in accordance with any current notification made by each such Ineligible Overseas
Shareholder for the payment of any Auzex dividends by deposit to a nominated bank account or, where
there is no such current notification, by sending, or procuring the despatch to each such Ineligible
Overseas Shareholder by prepaid post to the registered address of the Ineligible Overseas Shareholder
at 6:00 pm on the Record Date, a cheque in the name of that Ineligible Overseas Shareholder for the
relevant amount (denominated in Australian dollars).
(d)
Pursuant to clause 5.6(e) of the Scheme, Ineligible Overseas Shareholders appoint Auzex as their agent
to receive on their behalf any financial services guide or other notices (including any updates of those
documents) that the Sale Nominee is required to provide to Ineligible Overseas Shareholders under
the Corporations Act. Copies of any document Auzex receives from the Sale Nominee as agent for the
Ineligible Overseas Shareholders can be obtained by contacting Auzex’s Company Secretary.
(e)
Auzex, EXU and the Sale Nominee give no assurance as to the price that will be achieved for the sale
of New EXU Shares as described above. The market price of EXU Shares is subject to change from time
to time. You can obtain up-to-date information on the market price of EXU Shares from ASX, code EXU.
The proportionate share of Cash Proceeds that Ineligible Overseas Shareholders will receive may be
more or less than the market value of New EXU Shares that would otherwise have been issued to that
Ineligible Overseas Shareholder at the date of receipt of payment.
(f)
The amount of money received by an Ineligible Overseas Shareholder for EXU Shares may be less than
the actual price that is received by the Sale Nominee for the EXU Shares.
• SCHEME BOOKLET | Merger with Explaurum Limited
5 PROFILE OF AUZEX
For personal use only
5.1 Auzex establishment
Auzex is an unlisted exploration company which was established through the demerger of the non- Bullabulling
gold project assets of Auzex Resources Limited and was incorporated on 6 October 2011.
Auzex was established to advance its current portfolio and identify advanced exploration projects, predominantly
in gold and tin. Its strategy is to become a self-funded mineral explorer, focusing initially on the Tampia gold
project tenements (90% interest) it acquired in Western Australia.
As part of the demerger of the non-Bullabulling gold project assets of Auzex Resources Limited, Auzex
Resources Limited shareholders who were on the share register on 30 December 2011 received one (1) new
Auzex Exploration Share for each six (6) Auzex Resources Limited shares. Auzex Shares were transferred to
eligible Auzex Resources Limited shareholders on 6 January 2012 and share certificates were dispatched on
16 January 2012.
At the time of the demerger Auzex’s assets were valued at approximately $10 million and consisted of early
stage gold and tin projects on the east coast of Australia. It held $2 million in cash and 7,022,472 million
shares in Bullabulling Gold Limited (ASX:BAB). The exploration assets included:
• Khartoum tin-tungsten project (Queensland – 100%);
• Running Brook copper-gold project (Queensland – 100%);
• Galala Range gold-tungsten-molybdenum project (Queensland – 100%);
• Lyell gold project (New Zealand – 73%);
• Seven Hills gold project (New South Wales – 100%); and
• Kingsgate molybdenum-bismuth-silica project (New South Wales – 100%).
5.2 Activities since establishment
Since its establishment, Auzex has achieved the following:
• Acquired 90% of the Tampia gold project in the eastern goldfields of West Australia, with the vendors retaining a 10% interest. The Tampia gold project will be the focus of exploration and development;
• Developed new drilling targets for resource assessment on the Tampia gold project in Western Australia;
• Signed a Land Access Agreement over the Tampia gold project in Western Australia;
• Completed 3D geological modelling of the Khartoum tin project areas as the basis for targeting future exploration and resource assessment;
• Acquired additional prospective tenements around the Khartoum and Runningbrook projects;
• Completed an initial 492 metres diamond drilling program at Tampia to provide geological data of the known gold mineralisation and confirm previous results;
• Sold its interest in Bullabulling Gold Limited (7,022,472 shares) into the takeover by Norton Gold Fields Ltd for approximately $561,800; and
• Sold its interest in Jervois Mining Limited for $20,784.
Auzex has also relinquished tenements associated with the Klondyke / Seven Hills in NSW, Galala Range in
North Queensland and the Lyell Gold Project in New Zealand. The relinquishment of these tenements resulted
in a total impairment of $3,872,788 in FY12/13 and $774,771 for FY13/14. This has consolidated Auzex’s
projects into four significant projects being:
•
•
•
•
Tampia gold project (Western Australia - 90% interest);
Khartoum tin-tungsten project (Queensland – 100% interest);
Running Brook copper-gold project (Queensland – 100% interest); and
Kingsgate molybdenum-bismuth-silica project (New South Wales – 100% interest).
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5.3 Auzex’s business
For personal use only
Auzex is a company at the exploration end of the mineral resources development and mining value chain.
Auzex’s strategy is to use new 3D geological and GIS tools and techniques that are available to explorers to
identify, target and develop mineral resources in both two and three dimensions at each of Auzex’s projects to
develop new exploration and resource development targets.
5.4 Auzex’s projects
5.4.1 Tampia gold project (Auzex Exploration 90%) Western Australia
(a)Overview
(b)
Development by Auzex
The Tampia gold project was acquired by Auzex in 2012, whose activities have since largely focussed on
resolving access issues and the consolidation and reinterpretation of existing data, and diamond drilling
(2014) at the Tampia Hill prospect on the Exploration Licence and both mining leases.
In August 2014, Auzex completed an initial small diamond drilling program comprising four holes
totalling 491.6m at Tampia which confirmed the location and grades of the previous drilling results
and highlighted the structure of the mineralised zone. The Tampia gold project area covers a sequence
of late Archaean mafic-felsic granulite facies gneiss and granitoid. The lowest unit in the sequence as
interpreted from the structural position of the units is a suite of banded feldspar-biotite-quartz granulite
that also can contain graphite and pyrrhotite in augen gneiss. The original sequence for this unit is
believed to be clastic sediment, wacke, arenite and graphitic shale. The next unit is feldspar-biotiteamphibole-pyroxene granulite that appears to contain a mixture of sedimentary and mafic precursor
lithologies. The uppermost part of the sequence consists of a mafic granulite dominated by pyroxeneplagioclase-amphibole lithologies. Minor biotite, spinel, enstatite and quartz with pyrrhotite up to 2%
also occur. The precursor lithology is inferred to be tholeiitic basalt. This sequence is intruded by quartzfeldspar granitoid dykes and sills that have complex cross-cutting relationships suggesting multiple
phases of emplacement. This entire sequence is intruded by a number of unmetamorphosed dolerite
dykes that are thought to be of Proterozoic in age.
Gold mineralisation at Gault is dominantly disseminated throughout, or concentrated within, pods of
hornblende-biotite-pyroxene and hornblende-biotite-plagioclase within pyroxene and biotite bearing
mafic granulites. The gold occurs with disseminated non-magnetic pyrrhotite, arsenopyrite, chalcopyrite
and rare pyrite. Total sulphide contents of mineralised intersections are between 5% and 10%, with
a maximum estimated 15% sulphide. Sulphides occur along S1 foliation planes and are folded by F1
minor folds. Mineralisation occurs in elongate to ellipsoidal pods that vary in size from 1-20 m thick,
50-150 m wide (east-west) and 50-200 metres long (north-south).
Four mineralised shoots were identified in the north of the prospect, with another two zones in the
central and southern parts. Average grades within a zone >1g/t Au vary between 1 to 20 g/t Au over
5-20 m intervals. The northern zone has yielded the best grades.
30
The Tampia gold project is Auzex’s primary project, located 300 kilometres east of Perth in the wheat
belt of Western Australia. The project comprises eight exploration licences, three prospecting licences
and two mining leases. Exploration at the Tampia gold project is still considered to be at an early stage
and exploration methods and modelling are yet to be extensively applied.
Auzex acquired an 80% participating interest in the Tampia gold project in February 2012 for a
$500,000 cash payment to Tampiagold Pty Ltd and Goldoro Pty Ltd.
On 30 June 2015 Auzex acquired a further 10% participating interest from Tampiagold Pty Ltd and
Goldoro Pty Ltd, taking Auzex’s participating interest to 90%, in consideration for Auzex releasing
Tampiagold Pty Ltd and Goldoro Pty Ltd from principal and interest totalling $193,803 owing to Auzex
pursuant to a loan agreement dated 5 October 2012.
Tampiagold Pty Ltd and Goldoro Pty Ltd retain a free carried interest to completion of a definitive feasibility
study. They then retain a 10% participating interest or convert to equity and, or, a royalty interest.
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(c)
Current drilling program
Auzex commenced a new drill program on 17 June 2015, which was jointly planned by Auzex and EXU
and consists of five diamond drill holes totalling approximately 590 metres and is expected to take six
weeks to complete. The program is an extension of the drilling undertaken by Auzex in July and August
2014 which consisted of four diamond drill holes totalling 492 metres.
The current program is expected to provide insight to the geology and structure of the gold
mineralisation which will be used in follow up resource drilling programs, as well as an understanding
of the continuity of mineralisation along strike and down dip. Sections of the mineralised drill core will
be used for initial metallurgical test work to determine the gold recovery within the oxidised and fresh
lithologies, together with mineralisation characteristics critical for future process plant design.
The objectives of the drilling program include to:
•
•
•
•
•
provide geological and structural data of the known mineralisation zones;
test for continuity of mineralisation;
confirm previous drilling intercepts and test resource model;
provide fresh drill core for metallurgical test work; and
enable planning for follow up resource drilling.
Exploration at Tampia is still considered to be at an early stage, and modern exploration methods and
modelling have yet to be extensively applied. The strategy in the next twelve months is to deliver a
number of gold targets that will add significantly to the current resource.
(d)
Key highlights
Key highlights of Tampia include:
(i)
high grade near surface gold mineralisation discovered is well drilled in part to mostly shallow
depth, but open in all directions and at depth;
(ii)
the area has significant gaps in drilling. If infill drilling is successful, an increase in
mineralisation is anticipated;
(iii)
significant potential for further discoveries within 10km radius with a number of strong
geochemical and auger/RAB anomalies;
(iv)
Tampia is located on private land in the outer wheat belt close to sealed roads, power, water,
accommodation, services and labour; and
(v)
Tampia is located 135km by road from Westonia and about 185km by road from Southern
Cross and Marvel Loch.
5.4.2 Khartoum tin and tungsten project (Auzex 100%) north Queensland
The tenements in the north Queensland project area were initially acquired based on Auzex’s prospectivity
models for intrusion related tin mineralisation similar to the porphyry style tin and tungsten mineralisation of the
mines of the Bolivian tin belt. These models continue to be used to acquire prospective tenements around our
main targets. This led to four new tenement applications around the Khartoum tin project area, which have been
targeted for high grade tin vein mineralisation in the exo-contact of tin rich granites and low grade high tonnage
tin mineralisation within the tin granites. These tenements have now all been granted.
Located approximately 100km south-west of Cairns in north Queensland, the geology of the Khartoum
tenement is dominated by highly fractionated coarse-grained granites with excellent potential to host economic
tin-tungsten mineralisation. The project area covers a Late Carboniferous-Early Permian felsic intrusive (the
Elizabeth Creek Granite), containing over fifty tin, tungsten, molybdenum and gold occurrences. Historic
production is estimated to be 15,000t tin. Outcropping tin mineralisation is associated with 107 recognised
greisen zones covering an aggregate area exceeding 50 square kilometres.
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5.4.3 Running Brook copper and gold project (Auzex 100%) north Queensland
For personal use only
The Running Brook project area was originally highlighted by Auzex’s prospectivity modelling studies for granite
related gold mineralisation and is located in north Queensland, 150km south- west of Cairns north of Mt
Surprise. This project was modelled on the prolific Kidston gold mine (3.5Moz between 1985 and 2001) located
approximately 120km south of Running Brook.
Initial soil sampling identified anomalous gold and copper, with a 30ppb Au in soil anomaly defined over a
1000m x 300m area. Sampling also highlighted a 150ppm Cu in soil anomaly measuring 1000m x 500m that
partially overlaps the gold in soil anomaly to the north. Infill and extension soil sampling was then completed
with additional gold and copper anomalies defined.
5.4.4 Kingsgate molybdenum and silica project (Auzex 100%) New South Wales
The Kingsgate project was acquired by Auzex after prospectivity modelling for granite related gold mineralisation
over Eastern Australia and the West coast of New Zealand identified the granites in the Kingsgate region
as having the potential to host intrusion related gold mineralisation. Located 20km east of Glen Innes, the
Kingsgate Mine was the second largest producer of molybdenum in Australia. Much of the ore was mined from
high grade quartz pipes between the 1880s and 1920s. No modern exploration had been completed prior to
Auzex acquiring the project.
5.5 Directors and management of Auzex
5.5.1 Management
(a)
The Auzex Board of Directors and management team have significant experience in the Australian and
New Zealand mining sectors. This includes greenfields exploration through to resource assessment,
mine development and operations.
(b)
Details of the directors and management of Auzex and a brief description of their qualifications and
other directorships are set out below.
5.5.2Directors
As at the date of this Booklet the Auzex Directors are:
(a)
Chris Baker - Non-executive Chairman
(b)
John Lawton - Managing Director
(c)
Greg Partington - Director of Operations
(d)
Paul Frederiks - Non-executive Director and Company Secretary
The Directors of Auzex and a brief description of their qualifications and other directorships are set out below:
Chris Baker – Non-executive Chairman
B.Sc (Hons.), MBA, FAusIMM, IOD
Chris Baker is a company director with over 30 years’ experience in the Australian and New Zealand resources
sector. His background is as a metallurgist and his experience includes technical, operational and managing
roles in the mining sector including gold, uranium, tungsten, titanium and coal. He has been involved in
project development, has extensive experience in joint ventures and governance and has a broad and practical
understanding of the mining industry and the multitude of disciplines that comprise successful projects and
successful companies.
Chris has a Bachelor of Science (Hons) in Mineral Technology and an MBA, both from Otago University, and is a
Fellow of the Australasian Institute of Mining and Metallurgy. He is a member of the Institute of Directors (NZ).
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His positions include: Chief Executive Officer of Straterra Inc., a group that represents the resource sector in New
Zealand; Chairman of the Coal Association of New Zealand; Chairman of MinEx, the New Zealand mineral sector
Health and Safety Council; Chairman of RSC Mining and Mineral Exploration Ltd. He was formerly a non-executive
Director and then Chairman of ASX listed company Auzex Resources Limited (September 2005 to April 2012).
Chris has been a Director of Auzex since incorporation.
John Lawton – Managing Director
B.Sc. (App.Sci.), MAusIMM, MAICD
John Lawton is the founder of the Auzex group of mining companies and a geologist with 40 years industry
experience in mineral exploration, project development, operations corporate management and mergers and
acquisitions, including 20 years in management of ASX-listed gold mining and exploration companies.
John founded Auzex Resources Limited in 2003 and held the positions of Executive Chairman or Managing
Director throughout its nine year life during which time the company acquired and developed the Bullabulling
gold deposit near Coolgardie in the Eastern Goldfields of Western Australia.
John was a co-founder and Executive Director of Ross Mining NL throughout its existence from incorporation in
1986 to merger in 2000, a company which was a low cost and profitable gold miner, developing and operating
seven low grade open-cut gold mines in central Queensland, New South Wales and Solomon Islands. The
company was innovative in its approach and regularly paid dividends to shareholders.
John has a Bachelor of Science in Applied Geology and is a member of the Australasian Institute of Mining and
Metallurgy and the Australian Institute of Company Directors.
John has been a Director of Auzex since incorporation.
Dr Greg Partington – Director of Operations
Ph.D., MAusIMM
Dr Greg Partington is a founding Director of the Auzex group of companies and is also the Managing Director
of his own company, Kenex Knowledge Systems Ltd, based in New Zealand and Western Australia, focusing
on creating business opportunities in the spatial world. He was formerly Operations Director of the ASX listed
company Auzex Resources Limited (September 2005 to April 2012).
Greg has over 30 years’ experience in the exploration industry in Australia, Pacific Islands and Melanesia where
he worked as the exploration manager for Northern Gold and General Manager, exploration for Ross Mining NL.
He also has eleven years’ experience in developing earth science GIS databases for use in exploration targeting
and resource development.
Greg has expertise in mineral exploration, structural geology, database development and management, spatial
analysis of data using Geographic Information Systems (GIS), and business management. He has focussed
on gold exploration, but has experience in tin-tantalum deposits and platinum exploration. He has also been
continuously active in geoscientific research and published a number of papers on his research.
Greg has been a Director of Auzex since incorporation.
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Paul Frederiks – Non-executive Director and Company Secretary
B.Bus (Acc.), FCPA, FCIS, FAICD
Paul Frederiks has extensive experience in public company financial and secretarial management with more
than 29 years’ experience in the mining and resources sector.
He held the position of Company Secretary and Chief Financial Officer of Ross Mining NL for over eight years
until 2000. He also has expertise in ASX listed public company reporting, financial modelling and forecasting,
treasury management and hedging, project financing and corporate governance.
Paul established his own consultancy in 2000 providing company financial and secretarial services to both
listed and unlisted public companies. He was Company Secretary of Billabong International Limited from 2000
to 2004, and Company Secretary and a non-executive Director of the listed company Auzex Resources Limited
(September 2005 to April 2012).
He was previously Company Secretary of the listed company Geodynamics Limited and more recently was
Chief Financial Officer and Company Secretary of ASX listed Discovery Metals Limited. Paul is a fellow of CPA
Australia, the Australian Institute of Company Directors and the Governance Institute of Australia and formerly
the QLD branch councillor of Chartered Secretaries Australia and Chairman of the QLD Public Company
Discussion Group.
Paul is currently also a Director of Multiphase Drilling Solutions Pty Ltd and Blanckensee Consulting Pty Ltd and
Chief Financial Officer and Company Secretary of juwi Renewable Energy Pty Ltd.
Paul has been a Director of Auzex since incorporation.
5.6 Auzex Capital Structure and ownership
As at the date of this Booklet, Auzex has the following securities on issue.
Class of Security Fully paid ordinary shares
Number on Issue
16,801,449
As at the date of this Booklet, the ten largest shareholders are:
Shareholder
Percentage
Shareholding
EPOCC XT LLC
2,861,350
17.03
Misty Grange Pty Ltd
1,211,123
7.21
HSBC Custody Nominees (Australia) Limited
1,037,581
6.18
National Nominees Limited
933,273
5.55
John Andrew Rodgers
600,000
3.57
Bullabulling Gold (UK) Limited
570,371
3.39
JP Morgan Nominees Australia Limited
565,943
3.37
Peninsula Goldfields Pty Ltd
546,669
3.25
Jervois Mining Limited
515,000
3.07
CRM Holdings Pty Ltd
500,000
2.98
34
Number of
Auzex Shares
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As at the date of this Booklet:
(a)
The top twenty holders of ordinary equity held 11,657,499 shares representing 69.38% of Auzex Shares.
(b)
Directors held or controlled 723,444 ordinary shares representing 4.31% of Auzex Shares.
5.7 Auzex historical financial information
(a)
Introduction
This section contains historical financial information for Auzex derived from Auzex’s audited financial
statements for the financial years ended 30 June 2013 and 30 June 2014 and management accounts
for the six months ended 31 December 2014.
Auzex has inadvertently failed to comply with its obligations, as a disclosing entity under the
Corporations Act, to prepare and give to ASIC reviewed financial reports and directors’ reports for each
of the six months ended 31 December 2013 and 31 December 2014. Auzex is acting to rectify this
oversight, and will provide to Auzex Shareholders, not less than 10 days before the Scheme Meeting, a
financial report and directors’ report for the six months ended 31 December 2014 reviewed by Auzex’s
external auditors.
(b)
Basis of preparation
The historical financial information of Auzex presented is in an abbreviated form and does not contain all
the disclosures, presentation, statements or comparatives that are usually provided in an annual report
prepared in accordance with the Corporations Act. Auzex considers that for the purposes of this Booklet
the historical financial information presented in an abbreviated form is more meaningful to Auzex
Shareholders.
The historical financial information of Auzex has been prepared in accordance with the recognition and
measurement principles contained in Australian Accounting Standards.
Auzex’s recent statutory historical consolidated income statements, historical consolidated statements of
financial position and historical consolidated cash flow statements are disclosed in the annual financial report
for the financial years ended 30 June 2014 and 30 June 2013 which can be found at www.auzex.com.
The historical financial information below consists of the historical consolidated income statements for
the 6 months ended 31 December 2014 and for the financial years ended 30 June 2014 and 30 June
2013 and the historical consolidated statement of financial position as at 31 December 2014 relate to
Auzex (the Auzex Historical Financial Information) on a standalone basis and accordingly does not
reflect any impact of the Scheme.
The pro forma financial effect of the Scheme on the Merged Group is set out in section 7.9 of this Booklet.
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(c)
Auzex Historical Consolidated Income Statement
The Historical Consolidated Income Statements of Auzex for the 6 months ended 31 December 2014
and for the financial years ended 30 June 2014 and 30 June 2013 is shown below:
Year ended Year ended Six months ended
30 June 2013
30 June 2014 31 December 2014
(audited)
(audited)
(unaudited and
unreviewed)
$
$$
CONTINUING OPERATIONS
Other income on expiry of an option
for the disposal of non-current assets
-
30,714
-
Profit on disposal of Available for Sale assets
-
413,804
-
Interest Income
20,064
43,373
20,112
TOTAL REVENUE
20,064
487,891
20,112
Impairment/write-off of Exploration Expenses
3,872,788
774,771
14,524
Impairment of Available for Sale asset
1,196,204
-
-
946,941
505,385
647,719
-
22,603
-
General & Administrative Expenses
Finance Costs
TOTAL EXPENSES FROM
CONTINUING OPERATIONS
Profit/(Loss) from Continuing Operations before Income Tax Expense
Income Tax Benefit attributable to Operating Loss
Profit/(Loss) from Continuing Operations
after Income Tax Expense
6,015,9331,302,759 662,243
(5,995,869) (814,868)(642,131)
-
-
-
(5,995,869) (814,868)(642,131)
OTHER COMPREHENSIVE INCOME
Items that may be reclassified
subsequently to profit or loss
Net Gain/(Loss) on Foreign Currency
taken to profit and loss
-
(24,958)
-
Net Gain/(Loss) on Foreign Currency
Translation Reserve taken to equity
8,017
-
-
Total Other Comprehensive
Income for the period
8,017
(24,958)
-
(5,987,852)
(839,826)
(642,131)
TOTAL COMPREHENSIVE INCOME/(LOSS)
FOR THE PERIOD ATTRIBUTABLE TO THE OWNERS
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(d)
Summary of Consolidated Statements of Financial Position
Year ended Year ended Six months ended
30 June 2013
30 June 2014 31 December 2014
(audited)
(audited)
(unaudited and
unreviewed)
$
$$
CURRENT ASSETS
Cash
Term Deposits (secured)
358,896354,214 90,791
75,000
75,000
65,000
Other Receivables
165,102
262,138
218,722
TOTAL CURRENT ASSETS
598,998 691,352374,513
NON CURRENT ASSETS
Investments in Available for Sale Assets
Deferred Exploration Expenditure
Property Plant & Equipment
168,780
-
-
3,987,612
3,942,662
4,398,928
50,423
38,753
30,339
TOTAL NON CURRENT ASSETS
4,206,815 3,981,4154,429,267
TOTAL ASSETS
4,805,813 4,672,7674,803,780
CURRENT LIABILITIES
Convertible Notes
-
525,000
525,000
Payables
516,723 577,613831,884
Provision for Employee Benefits
102,638
TOTAL CURRENT LIABILITIES
619,361 1,195,6061,468,753
92,993
111,869
NON CURRENT LIABILITIES
Provision for Rehabilitation
123,605
TOTAL NON CURRENT LIABILITIES
123,605 123,605123,605
TOTAL LIABILITIES
742,966 1,319,2111,592,358
NET ASSETS
123,605
123,605
4,062,847 3,353,5563,211,422
EQUITY
Contributed Equity
Other Reserves
Retained profits/(losses)
TOTAL EQUITY
10,325,014
10,455,549
10,955,549
24,958
-
-
(6,287,125)
(7,101,993)
(7,744,127)
4,062,847 3,353,5563,211,422
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(e)
Summary of Consolidated Statements of Cash Flows
Year ended Year ended Six months ended
30 June 2013
30 June 2014 31 December 2014
(audited)
(audited)
(unaudited and
unreviewed)
$ $$
CASH FLOWS FROM/(USED IN)
OPERATING ACTIVITIES
Goods and services tax received
Payments to suppliers and employees
Interest received
Net cash flows from/(used in) operating activities
115,185
73,479
48,342
(861,215)
(511,072)
(464,334)
19,683
43,979
20,188
(726,347)
(393,614)
(395,804)
CASH FLOWS FROM/(USED IN)
INVESTING ACTIVITIES
Proceeds from sale of fixed assets
2,016
-
-
Proceeds from Available for Sale Assets
-
582,584
-
Purchase of property, plant & equipment
-
(5,073)
-
Payments for exploration and evaluation expenditure
(1,004,750)
(844,114)
(367,619)
Net cash flow from/(used in) investing activities
(1,002,734)
(266,603)
(367,619)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash from Demerger from Auzex Resources Limited
-
-
-
1,045,500
130,535
500,000
-
525,000
-
Share Capital raising expenses
(93,119)
-
-
NET CASH FLOW FROM FINANCING ACTIVITIES
952,381 655,535500,000
Proceeds from issue of shares
Proceeds from Convertible notes
Net increase / (decrease) in cash held
(776,700)
(4,682)
(263,423)
Add: Opening cash carried forward
1,135,596
358,896
354,214
CLOSING CASH CARRIED FORWARD
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358,896354,21490,791
For personal use only
5.8 Material changes in the financial position of Auzex
In the six month period ended 31 December 2014 the Cash held by Auzex declined from $354,214 to $90,791,
as a result of cash expended in Auzex’s operations including expenditure in preparing for a proposed Initial
Public Offering in October 2014. Cash held by Auzex as at 30 April was $72,964.
Subject to the foregoing paragraph, to the knowledge of Auzex, there have been no material changes to the
financial position of Auzex since 30 June 2014, being the last balance sheet laid before Auzex in general
meeting or sent to Auzex Shareholders in accordance with section 314 or 317 of the Corporations Act, except
as disclosed in this Booklet.
5.9 Operations of Auzex if Scheme does not proceed
In the event that the Scheme does not proceed, Auzex will remain unlisted and will continue as a standalone
entity with the Auzex Board and management continuing to implement the strategies it had in place prior to the
announcement of the Scheme.
Auzex has sufficient funds to meet its obligations in respect of the Scheme, but may be liable to repay the loan
of $800,000 from EXU – refer to the following section 5.11.1. In that event, Auzex will consider:
(a) capital raising initiatives;
(b)
asset sales;
(c)
inviting EXU to exercise its option to convert the Outstanding Monies to Auzex Shares in satisfaction of
the Loan (refer to paragraph 5.11.1(b)).
5.10 Auzex risk factors
Risk factors relating to Auzex and its business are discussed in section 8 of this Booklet.
5.11 Material Contracts
5.11.1 Loan Agreement with EXU
On 23 April 2015, Auzex entered into a loan agreement with EXU (which was subsequently amended on 19 May
2015) pursuant to which EXU agreed to advance a loan of $800,000 (Loan) to Auzex (Loan Agreement).
Auzex has drawn down the full amount of $800,000 under the Loan Agreement.
The loan is secured by a general security interest granted to EXU over the assets, undertakings and unpaid
capital of Auzex.
The key terms of the Loan Agreement are:
(a)
Repayment Date: the repayment date is the earliest to occur of:
(i)
the date that is 3 months after termination of the MIA (including if Scheme Shareholders do not
approve the Scheme), other than solely as a result of a material breach of a term of the MIA by EXU;
(ii)
5 Business Days after the date on which Auzex receives a notice from EXU that it is in default of
its obligations under the Loan Agreement; and
(iii)
12 months after the date of the Loan Agreement,
(Repayment Date)
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(b)
(c)
Election or Conversion: EXU shall, on or before the date that is 2 Business Days prior to the
Repayment Date, give written notice to Auzex that it wishes to either:
(i)
have all debts and monetary liabilities of Auzex to EXU under the Loan Agreement (Outstanding
Monies) repaid on the Repayment Date (Repayment Election); or
(ii)
have the Outstanding Monies converted into Auzex Shares on the Repayment Date,
provided that if no election is made by EXU within the period required, EXU is deemed to have
made the Repayment Election.
Interest: the Loan is interest free.
The Loan Agreement otherwise contains representations and warranties which are customary for an
agreementof its kind.
5.11.2 Joint Venture Agreement
On 17 February 2012, Auzex entered into a joint venture agreement with both Tampiagold Pty Ltd (Tampiagold)
and Goldoro Pty Ltd (Goldoro) (together the Tampiagold Parties) jointly as tenants in common in equal shares.
The material terms of the joint venture agreement are as follows:
(a)(Purpose): Auzex and the Tampiagold Parties formed an unincorporated joint venture on 17 February
2012 for the purpose of exploring and developing the project as a commercial venture;
(b)(Participation Interest): the participation interests are:
(c)
(d)
(e)
40
(i)
90% held by Auzex; and
(ii)
10% held by the Tampiagold Parties;
(Free Carry): Auzex will contribute cash calls to meet all joint venture expenditure during the
free carry period;
(i)
the free carry period commences on 17 February 2012 and ends on the date that a bankable
feasibility study has been completed in relation to the project, finance is secured for mining
operations on a non-binding but firm basis, or if Auzex elects to proceed with the development
of the project based on the findings of the bankable feasibility study and the terms of the
finance;
(ii)
at the end of the free carry period, each participant must contribute cash calls on a pro rata
basis in accordance with their participation interests to meet the joint venture expenditure;
(Termination): the joint venture will terminate on the earlier of the following dates:
(i)
any date specified by Auzex after it has given an unwind notice under the sale and purchase
agreement;
(ii)
upon one of the participants holding 100% of the participation interest;
(iii)
the date that all of the participants agree in writing to terminate the joint venture; or
(iv)
on the expiry of the last of the tenements.
(Disposal of Joint Venture Assets): if the joint venture is terminated by agreement in writing by all of
the participants or due to the expiry of the last of the tenements, on termination all joint venture assets
will be:
(i)
distributed to or held for the benefit of the participants in proportion to their participation
interests; or
(ii)
sold with the net proceeds of the sale being divided among the participants in accordance with
their respective participation interests.
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5.11.3 Joint Venture Management Agreement
Auzex, Tampiagold and Goldoro (each a Participant) are parties to a Joint Venture Management Agreement
(Management Agreement), under the terms of which Auzex is appointed as the manager for the Tampia gold
project (Manager) to do all things necessary for the efficient and economic conduct of operating the Tampia
gold project.
(a)(Manager responsibilities): As the Manager, Auzex is responsible for, among other things:
(i)
making cash calls on a monthly basis and paying joint venture expenditure;
(ii)
maintaining and operating the project account;
(iii)
ensuring compliance with all laws;
(iv)
obtaining and maintaining authorisations for the Tampia gold project in the name of the
Participants;
(v)
keeping the joint venture committee informed of all matters pertaining to the operations of the
Tampia gold project;
(vi)
distributing available cash to Participants;
(vii)
maintaining and protecting joint venture assets;
(viii)
engaging qualified and competent personnel;
(ix)
as directed by the joint venture committee, procure feasibility studies and arranging, managing
and co-ordinating the development, construction and commissioning of any new mines;
(x)
preparing half yearly programs and budgets;
(xi)
preparing monthly contribution statements giving a monthly summary of cash calls and
disbursements; and
(xii)
providing monthly progress reports to the joint venture committee.
(b)(Agreements with associates): The Manager must ensure that any agreement it enters into with
any associate of the Manager is first approved by the joint venture committee and on reasonable arms
length commercial terms.
(c)(Indemnity): Under the terms of the Management Agreement, Auzex, as Manager, is indemnified on
terms which are customary for joint venture management agreements.
(d)(Reimbursement for Costs): The Manager is entitled to be reimbursed for all reasonable expenses
incurred in the course of undertaking its duties under the Management Agreement, but is not otherwise
entitled to remuneration or other additional amounts, such as the costs of its internal executives’ time in
managing the duties or internal administrative costs.
(e)(Termination): The Management Agreement may be terminated:
(i)
by the joint venture committee and the Manager together agreeing to terminate in writing;
(ii)
if the Manager has committed a material breach under the Management Agreement, and the
Manager fails to rectify the breach within 20 business days after the joint venture committee
provides notice to the Manager, the Management Agreement will terminate on the expiry of the
20 business day period;
(iii)
if a Participant (who is not an associate of the Manager) has committed a material breach under
the Management Agreement, and the Participant fails to rectify the breach within 20 business
days after the Manager provides notice to the Participant, the Management Agreement will
terminate on the expiry of the 20 business day period;
(iv)
by the joint venture committee by written notice to the Manager, if the Manager is insolvent;
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(v)
by the Manager by written notice to a Participant, if a Participant (who is not an associate of the
Manager) is insolvent;
(vi)
by the joint venture committee by giving not less than 6 months written notice to the Manager if
the Manager or its associate holds less than a 50% interest in the Tampia gold project;
(vii)
on completion of the Tampia gold project Joint Venture Agreement; or
(viii)
by the joint venture committee if the Manager is guilty of gross negligence or wilful misconduct
in performing the duties under the Management Agreement.
5.11.4 Compensation and Access Deed
Swanara Pty Ltd (Swanara) is the registered owner of private land in the South West Mineral Field, Western
Australia (Private Land). A portion of the Private Land overlaps the area of the mining tenements owned by the
Tampia JV (Overlap Area).
On 17 July 2013, Auzex (as the manager of the Tampia JV) entered into a compensation and access deed
(Compensation and Access Deed) with Swanara, under which Swanara grants the Tampia JV access to the
Overlap Area for exploration purposes.
The material terms of the Compensation and Access Deed are:
(a)(Purpose): Swanara allows Auzex, as the manager of the joint venture, to conduct exploration activities
on the mining tenements which overlap some of the private land owned by Swanara,
(b)(Compensation): Auzex must pay compensation to Swanara at the rate of $40,000 every six months,
payable in advance,
(c)(Interest): if Auzex is one calendar month late on payment of compensation to Swanara under the
compensation and access deed, Auzex must pay interest at a rate 10% per month which accrues daily.
(d)(Term): the Compensation and Access Deed shall continue to be in force until the first to occur of:
(i)
if the mining tenements are forfeited – the date of forfeiture;
(ii)
if one or more of the mining tenements expire, are surrendered, or are otherwise terminated
with the result that there is no overlap area in existence – the date of the expiration, surrender
or other termination of that mining tenement;
(iii)
Auzex notifies Swanara that they have no further interest in the overlap area;
(iv)
Auzex becomes the registered proprietors of all or a portion of the overlap area;
(v)
the Compensation and Access Deed being terminated; or
(vi)
the date which is three years from the date of the Compensation and Access Deed.
(e)(Termination):
42
(i)
Swanara may terminate the Compensation and Access Deed with immediate effect in the event
that Auzex is in default; and
(ii)
Auzex may terminate the Compensation and Access Deed at the earlier of:
(A)
Auzex giving notice to Swanara that it abandons its rights pursuant to the Compensation
and Access Deed;
(B)
Auzex withdrawing its applications for or wholly surrendering the tenements; or
(C)
the expiry of the term.
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5.11.5 Debt for Equity Swap Agreement
Pursuant to the MIA, it is a Scheme Condition that Auzex, EXU and the Auzex Directors enter into agreements
under which all liabilities of Auzex to the Auzex Directors as at 16 May 2015 will, subject to the Scheme
becoming Effective, be extinguished on and from the Effective Date, in consideration for EXU issuing to the
Auzex Directors on the Implementation Date, pro rata to their share of the total liabilities, a total of 12,000,000
EXU Creditor Options.
The liabilities owed by Auzex to the directors are for unpaid salaries and fees. As stated in Auzex’s 2014 Annual
Report:
* At 30 June 2014 accrued liabilities includes $886,003 payable to the Directors of the Company in
respect of salaries and fees owing to them (2013: $278,236). Subsequently on 29 September 2014,
Directors resolved to forgive $415,814 of this liability reducing the liability to $470,189 having regard
to market conditions and the intention to list the Company on ASX in the December 2014 quarter.
The Directors have agreed to defer the payment of the amounts owing to them until such time as the
Company has the ability pay the amounts while progressing its exploration program.
Auzex, EXU and the four Auzex Directors have entered into a debt for equity swap agreement which satisfies
that Condition. The liabilities of Auzex to the Auzex Directors, and the EXU Creditor Options to which they will be
entitled in consideration for the extinguishment of the liabilities subject to the Scheme becoming Effective, are
set out in the table below.
Please note:
•
The Auzex Liability to be extinguished, is the amount of unpaid salary and fees owing to each director.
•
The total number of 12,000,000 EXU Creditor Options was fixed by negotiation. As shown by the
valuation at clause 9.2.4 of the IER, the value of the EXU Creditor Options is very substantially less than
the liabilities released.
•
The number of EXU Creditor Options to be received by each director is in proportion to the proportion of
the total liabilities to be released.
Auzex Director
Chris Baker
$91,875
1,248,000
John Lawton
$347,622
4,728,000
Greg Partington
$269,303
3,660,000
Paul Frederiks
$174,350
2,364,000
$883,150
12,000,000
TOTAL
Auzex Liability to be Extinguished
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6 PROFILE OF EXPLAURUM LIMITED
6.1Overview
For personal use only
Explaurum Limited (EXU) was incorporated on 9 May 2005 and is listed on the ASX, having commenced
quotation on 20 July 2005.
EXU is a Western Australia (WA) based mineral exploration company engaged in the exploration and
development of gold and base metals within the Lyons Project in WA.
As an exploration entity, EXU has no operating revenue or earnings.
EXU’s stated business strategy is to continue exploration activity on EXU’s mineral projects, identify and assess
new mineral project opportunities throughout the world and review development strategies where individual
projects have reached a stage that allows for such an assessment.
6.2 The Lyons Project
The Lyons Project is located approximately 230km northwest of Meekatharra in Western Australia. EXU
acquired the Lyons Project in June 2013 through the acquisition of Ninghan Exploration Pty Ltd from Mr Mark
Calderwood.
At the time of acquisition, the project comprised one granted exploration licence and three licence applications.
Following the acquisition EXU completed a detailed review of historic exploration data, completed an initial
sampling program and arranged for the reprocessing and analysis of available geophysical data.
During the half year ended 31 December 2014, EXU continued development of the Lyons Project with desktop
studies and work undertaken focused on selecting initial target areas. Five target areas prospective for gold and
base metals were identified for follow up exploration.
During the same period, the three exploration licence applications were approved and following the initial target
review analysis, EXU completed the partial surrender of the least prospective portions of two larger licences.
The Lyons Project now comprises four granted exploration licences totalling 908 square kilometres.
EXU’s current intentions are to continue with the development of the Lyons Project particularly in relation to the
five initial target areas with erosional regolith suitable for systematic soil and rock chip sampling and mapping
to significantly increase the ability to narrow-in on gold and base metal occurrences worthy of drilling. The Lyons
project area is best suited to seasonal programs due to the summer heat and wet season.
6.3 EXU Capital Raising
In May and June 2015 EXU completed a placement of 43,333,370 Shares at $0.03 per Share together with
10,833,378 attaching Placement Options to raise approximately $1.3 million (Placement). The Placement was
undertaken in two separate tranches as follows:
44
(a)
on 7 May 2015, EXU issued the first tranche of the Placement for 64,003,420 Shares (T1 Shares)
at a price of $0.003 each (on a pre-Consolidation basis) to raise approximately $192,000 using its
placement capacity under the ASX Listing Rules; and
(b)
on 29 June 2015, EXU issued:
(i)
1,600,103 Placement Options to subscribers for the T1 Shares (T1 Options); and
(ii)
36,933,028 Shares and 9,233,275 attaching Placement Options.
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6.4 Directors and management
Patrick Flint - Independent Non-Executive Chairman
CA, B Com, MAICD
Age: 50 Appointed: 27 November 2013
Mr Patrick Flint has been involved in the resources sector as a Director or Company Secretary of ASX and
Toronto Stock Exchange listed companies with mineral projects in Australia, Africa and Asia for the past 20
years. He has significant experience with project acquisitions, joint venture negotiations and management,
fundraising and corporate matters.
He is also Non-executive Chairman of Nemex Resources Limited and AVZ Limited and is Company Secretary of
Red Metal Limited (all of which are listed on ASX).
Mark Calderwood - Technical Director
CP AusIMM
Age: 47 Appointed: 7 August 2013
EXU appointed Mr Mark Calderwood as Technical Director in conjunction with the acquisition of the Lyons Project.
Mr Mark Calderwood has 30 years’ experience with both exploration and production companies in Australia and
Africa.
Mr Calderwood was Managing Director of ASX-100 listed gold producer Perseus Mining Limited, a West African
gold producer and explorer from its inception in 2003 until January 2013. Mr Calderwood steered Perseus from
an exploration company to a +200,000oz per year producing gold company. Under Mr Calderwood’s leadership
Perseus discovered more than 6.8 million ounces of gold, built the Edikan Gold Mine, Ghana, on time and on
budget and commenced commercial production in January 2012.
Previously, Mr Calderwood spent more than a decade with Mt Edon Gold Mines, before moving onto Border
Gold, a junior gold explorer which later became Moto Gold Mines. In 1995 he moved to Ghana to run gold
explorer Leo Shield Exploration NL’s Ghana office. Leo Shield ultimately created Perseus Mining in 2003.
During 2003 and 2004, whilst waiting for Perseus to list, he was Moto’s Exploration Manager for its world-class
gold project in the Democratic Republic of Congo.
Mr Calderwood is a Chartered Professional Member of the Australasian Institute of Mining and Metallurgy, a
Non-executive Director of Burey Gold and Non-executive Chairman of Manas Resources Limited.
Paul Jurman - Non-executive Director / Company Secretary
CPA, B Com
Age: 42 Appointed Director: 21 September 2012, Secretary since 23 November 2006
Mr Paul Jurman is a Certified Practising Accountant with over 10 years’ experience and has been involved with
a diverse range of Australian public listed companies in company secretarial and financial roles.
He is also a Director and Company Secretary of ASX listed Nemex Resources Limited and Company Secretary of
Carnavale Resources Limited.
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6.5 Directors’ interests in EXU Shares
For personal use only
As at the date of this Booklet, the interests of the EXU Directors in the share capital of EXU is as follows:
(a)
Interests in issued EXU Share Capital
Director
Patrick Flint
Mark Calderwood
EXU Shares
EXU Options
1,257,813
125,000
3,870,000
250,000
900,000
125,000
Paul Jurman
6.6 Capital Structure and ownership of Explaurum Limited
46
(a)
Issued Shares
As at the date of the Booklet EXU has the following EXU Shares on issue:
Class of Security Fully paid ordinary Shares (b)
Options
As at the date of the Booklet EXU has the following EXU Options on issue:
Details EXU Capital Raising Options
As at the date of this booklet, EXU’s ten largest shareholders are:
Number on Issue
68,982,491
Number on Issue
10,833,378
Shareholder
Number of
EXU Shares
Percentage
Shareholding
Pershing Australia Nominees Pty Ltd <Placement A/c>
10,934,318
15.85%
J P Morgan Nominees Australia Limited
4,410,567
6.39%
HSBC Custody Nominees (Australia) Limited - GSCO ECA 3,144,004
4.56%
Ajava Holdings Pty Ltd
2,840,082
4.12%
Mark Calderwood
2,620,000
3.80%
Redtown Enterprises Pty Ltd
2,286,611
3.31%
BT Portfolios Services Ltd <Warrell Holdings S/F A/c>
1,666,668
2.42%
Jervois Mining Limited
1,666,666
2.42%
Ellamar Pty Ltd
1,600,000
2.32%
Auralandia Pty Ltd
1,562,115
2.26%
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As at the date of this Booklet EXU has the following Substantial Shareholders:
Shareholder
Mark Calderwood
Number of
EXU Shares
Percentage
Shareholding
3,870,000
5.6%
Note: The 3.8% stated as Mr Calderwood’s shareholding in the list of the largest 10 EXU Shareholders is the
shareholding held by Mr Calderwood personally. The 5.6% shareholding stated above is the shareholding of
Mr Calderwood and his associates as defined in the Corporations Act.
As at the date of this Booklet:
(i)
As at 6 July 2015 the top twenty holders of ordinary equity held 43,965,320 EXU Shares
representing 63.73% of total EXU Shares.
(ii)
As at the date of this Booklet EXU Directors held or controlled 6,027,813 EXU Shares representing
8.74% of total EXU Shares.
6.7 EXU recent share price performance
(a)
The closing price of EXU Shares on ASX as at 22 July 2015 (last trading day immediately before the
date of the Booklet was lodged for registration) was $0.051 (5.1 cents).
(b)
During the three months ended 22 July 2015:
(c)
(i)
the highest recorded daily closing price for EXU Shares on ASX was $0.055 (5.5 cents) on
21 July 2015; and
(ii)
the lowest recorded daily closing price for EXU Shares on ASX was $0.02 (2 cents) (stated on a
post Consolidation basis) on 22 April 2015.
The last recorded sale price for EXU Shares on ASX before the public announcement of the Merger on
30 April 2015 was $0.002 on 22 April on a pre-Consolidation basis.
6.8 EXU Historic financial information
(a)
Introduction
This section contains historical financial information for EXU derived from EXU’s audited financial statements
for the financial years ended 30 June 2013 and 30 June 2014, and reviewed financial statements for the six
months ended 31 December 2014, which were reviewed by EXU’s auditors.
(b)
Basis of preparation
The historical financial information of EXU presented is in an abbreviated form and does not contain all the
disclosures, presentation, statements or comparatives that are usually provided in an annual report prepared in
accordance with the Corporations Act.
The historical financial information of EXU has been prepared in accordance with the recognition and
measurement principles contained in Australian Accounting Standards.
EXU’s recent statutory historical consolidated income statements, historical consolidated statements of financial
position and historical consolidated cash flow statements are disclosed in the annual financial report for the
financial years ended 30 June 2014 and 30 June 2013, and for the six months ended 31 December 2014, all
of which can be found at www.explaurum.com.au.
The historical financial information below consists of the historical consolidated income statements for the last
6 months ended 31 December 2014 and for the financial years ended 30 June 2014 and 30 June 2013 and the
historical consolidated statement of financial position as at 31 December 2014 relate to EXU (the EXU Historical
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47
Financial Information) on a standalone basis and accordingly does not reflect any impact of the Scheme.
For personal use only
The pro forma financial effect of the Scheme on the Merged Group is set out in section 7 of this Booklet.
(c)
EXU Historical Consolidated Income Statement
The historical consolidated income statements of EXU for the last 6 months ended 31 December 2014 and for
the financial years ended 30 June 2014 and 30 June 2013 are shown below:
Year ended Year ended Six months ended
30 June 2013
30 June 2014 31 December 2014
audited
auditedreviewed
$
$$
CONTINUING OPERATIONS
REVENUES
Interest Income
6,473
13,175
3,794
Foreign exchange gain
5,007
-
8,884
Total Revenue
11,480 13,17512,678
EXPENSES
Exploration expenditure written off
-
(690)
-
(156,489)
(124,111)
(61,601)
(14,438)
(13,569)
(6,675)
Directors, staff and equity compensation
(471,793)
(76,898)
(37,777)
Administration
(169,330) (62,494)(33,668)
Legal, regulatory and compliance
Advertising and promotion
Depreciation and amortisation
(3,561)
(5,230)
(3,896)
TOTAL EXPENSES FROM CONTINUING OPERATIONS
(815,611) (282,992)(143,617)
PROFIT/(LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAX EXPENSE
(804,131)
(269,817)
(130,939)
-
-
-
(804,131)
(269,817)
(130,939)
Loss after tax from discontinued operation
(5,913,692)
(359,960)
-
NET LOSS FOR THE PERIOD
(6,717,823)
(629,777)
(130,939)
Income Tax Benefit attributable to Operating Loss
PROFIT/(LOSS) FROM CONTINUING OPERATIONS
AFTER INCOME TAX EXPENSE
OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be reclassified subsequently
to profit or lossExchange differences realised on sale of subsidiaries
Disposal of subsidiary
OTHER COMPREHENSIVE INCOME/(LOSS) NET OF TAX
(1,523)
(15,004)
-
-
(232,963)
-
(1,523)
(247,967)
-
TOTAL COMPREHENSIVE INCOME/(LOSS)
FOR THE PERIOD, NET OF TAX
(6,719,346)
(877,744)
(130,939)
48
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Loss attributable to:
Owners of the Parent
(4,706,842) (622,031)(130,939)
Non-controlling interests
(2,010,981)(7,746)
(6,717,823) (629,777)(130,939)
Total comprehensive gain/(loss) attributable to:
Owners of the Parent
(4,591,376) (603,655)(130,939)
Non-controlling interests
(2,127,970)(274,089)
(6,719,346) (877,744)(130,939)
(d)
Summary of Consolidated Statements of Financial Position
Year ended Year ended Six months ended
30 June 2013
30 June 2014 31 December 2014
audited
auditedreviewed
$
$$
CURRENT ASSETS
Cash and cash equivalents
360,589
455,530
277,259
Trade and other Receivables
4,271
34
5,237
TOTAL CURRENT ASSETS
364,860
455,564
282,496
NON CURRENT ASSETS
Receivables
Plant and equipment
9,375 9,3759,375
30,422
15,959
12,063
Deferred Exploration Expenditure
577,308
230,473
266,881
TOTAL NON CURRENT ASSETS
617,105
255,807
288,319
TOTAL ASSETS
981,965
711,371
570,815
CURRENT LIABILITIES
Trade and other payables
30,379
37,524
27,907
TOTAL CURRENT LIABILITIES
30,379
37,524
27,907
TOTAL LIABILITIES
30,379
37,524
27,907
951,586
673,847
542,908
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
Parent entity interest
Non-controlling interests
TOTAL EQUITY
14,418,701
15,018,706
15,018,706
4,577,517 3,193,7943,193,794
(16,916,622)
(17,538,653)
(17,669,592)
2,079,596 673,847542,908
(1,128,010)
-
-
951,586
673,847
542,908
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For personal use only
(e)
Summary of Consolidated Statements of Cash Flows
Year ended Year ended Six months ended
30 June 2013
30 June 2014 31 December 2014
audited
auditedreviewed
$
$$
CASH FLOWS FROM/(USED IN)
OPERATING ACTIVITIES
Payments to suppliers and employees
Interest received
(865,179)
(265,992)
(154,541)
6,473
13,175
3,794
NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES
(858,706)
(252,817)
(150,747)
CASH FLOWS FROM/(USED IN)
INVESTING ACTIVITIES
Funds leaving group on disposal of subsidiary
-
(9,327)
-
Payments for plant and equipment
(8,939)
(15,000)
-
Proceeds on disposal of plant and equipment
11,301
19,228
-
(2,262,018)
(115,910)
(36,408)
-
(50,000)
-
Payments for exploration expenditure
Payments for subsidiary
NET CASH FLOW FROM/(USED IN) INVESTING ACTIVITIES
(2,259,656)
(171,009)
(36,408)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares and options
Proceeds from shares issued to non-controlling
interests in subsidiary
Issue costs – shares and options
NET CASH FLOW FROM FINANCING ACTIVITIES
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning
of the financial period
Effects of exchange rate fluctuation on cash held
CASH AND CASH EQUIVALENTS AT
END OF THE FINANCIAL PERIOD
50
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995,357
534,357
-
1,872,600
-
-
(65,488)
(14,352)
-
2,802,469
520,005
-
(315,893)
96,179(187,155)
663,226
360,589
455,530
13,256
(1,238)
8,884
360,589
455,530
277,259
For personal use only
6.9Subsidiaries
EXU has the following wholly owned subsidiaries, which upon the Scheme being implemented will remain wholly
owned subsidiaries of EXU:
Name
Place of
incorporation
Percentage
Equity Interest
Erongo Sands Pty Ltd
Australia
100%
Ninghan Exploration Pty Ltd
Australia
100%
6.10 Rights attaching to EXU Shares
(a)
General
The rights and liabilities attaching to EXU Shares are set out in its constitution, and are regulated by
the Corporations Act, the ASX Listing Rules and the general law. Set out below is a summary of the
principal rights and liabilities attaching to EXU Shares. This summary is not exhaustive and is not a
definitive statement of the rights and liabilities of shareholders.
(b)
Voting rights
(i)
Subject to any rights or restrictions for the time being attached to any class or classes of EXU
Shares every shareholder present at a general meeting, in person or by proxy, representative or
attorney has one vote on a show of hands and on a poll, one vote for each fully paid EXU Share.
(ii)
The holder of partly paid shares has such number of votes in respect of the share on a poll that
is equivalent to the proportion that the amount paid (excluding any amount paid or credited
as paid in advance of a call) on the shares bears to the total issue price of the share. A
shareholder is not entitled to vote at a general meeting unless all calls and other sums presently
payable by the member in respect of a share have been paid.
(iii)
Where an EXU Share is jointly held, only one of the joint holders may vote.
(c)
General meeting and notices
Each EXU Shareholder is entitled to receive notice of, and to attend and vote at EXU’s general meetings
and to receive all notices, accounts and other documents required to be sent to shareholders under the
EXU constitution, the Corporations Act or the ASX Listing Rules.
(d)
Dividends
Subject to the Corporations Act and the rights of persons (if any) entitled to shares with special rights to
dividends, EXU’s profits which the EXU Directors determine to distribute by way of dividends are divisible
amongst the holders of EXU Shares in proportion to the amounts paid (excluding amounts credited) on
the EXU Shares.
(e)
Variation of class rights
At present, EXU has only ordinary shares on issue. The rights and restrictions attaching to a class of
shares can only be altered with the written consent of holders of at least 75% of the shares issued in
that class or with the approval of a special resolution passed at a meeting of holders of the shares of
that class.
(f)
Further issues of EXU Shares and options
EXU Directors may, subject to the Corporations Act, the ASX Listing Rules or any special rights conferred
on the holders of any EXU Share or class of shares, issue EXU Shares or grant options over EXU Shares
to any person at any time and on any terms and conditions as they think fit.
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For personal use only
52
(g)
Pre-emptive rights
EXU Shareholders do not have any pre-emptive rights under the EXU constitution. Under the ASX Listing
Rules, certain restrictions apply to a listed company offering its shares otherwise than pro rata among
shareholders.
(h)
Winding up
Subject to the rights of holders of shares issued on special terms and conditions, on a winding up of
EXU, the liquidator may, with the sanction of a special resolution of EXU, divide among the shareholders
in kind the whole or any part of EXU’s property. The liquidator may set such value as it deems fair on
any property to be so divided and may determine how the division is to be carried out as between
shareholders or different classes of shareholders.
(i)
Buy backs
Subject to applicable laws, in particular the Corporations Act and the ASX Listing Rules, EXU may buy
back its shares on such terms and conditions as the EXU Board may determine from time to time.
(j)
Transfer of shares
Subject to the ASX Listing Rules, the ASX Settlement Operating Rules and the EXU constitution, EXU
Shares are transferable in accordance with CHESS (for CHESS Approved Securities), by instrument in
writing in any usual or common form or in any other form that the EXU Directors approve. EXU Directors
may, subject to the requirements of the ASX Listing Rules, request its share registry to apply a holding
lock to prevent a transfer of EXU Shares in EXU.
(k)
Forfeiture after failure to pay calls on partly paid shares
If a shareholder fails to pay a call or another amount that is payable on EXU Shares within 10 business
days after the date for payment has expired, then after notification, and before payment, EXU Directors
may resolve that the shareholder has forfeited those EXU Shares. A forfeited EXU Share is deemed to
be the property of EXU, and subject to the Listing Rules and the ASTC Settlement Rules, may be sold or
otherwise disposed of on such terms and in such manner as the EXU Directors think fit.
(l)
Holding statements
(i)
EXU will apply to participate in CHESS, in accordance with the ASX Listing Rules and the
ASX Settlement Operating Rules, for those investors who have, or wish to have, a sponsoring
stock broker. EXU Shareholders who do not wish to participate through CHESS will be issuer
sponsored by EXU.
(ii)
Electronic sub-registers mean that EXU will not be issuing share certificates to EXU
Shareholders. Instead, following the issue of EXU Shares comprising the Scheme Consideration,
EXU Shareholders will be sent an initial statement of holding (similar to a bank account
statement) that sets out the number of EXU Shares which have been issued to them. That
statement will also provide details of the shareholder’s holder identification number (HlN) in
the case of a holding on the CHESS sub register, or security holder reference (SRN) in the case
of holding on the issuer-sponsored sub-register. EXU Shareholders will be required to quote
their HIN or SRN, as applicable in all dealings with a stockbroker or the EXU Share Registry. An
updated holding statement will be sent to an EXU Shareholder at the end of each month where
the balance of the shareholder’s holding of EXU Shares changes.
(m)
Directors
The minimum number of EXU Directors is three and the maximum ten. The EXU Board may appoint new
directors subject to the number of EXU Directors not being more than the permitted maximum of nine.
Except for the EXU managing director, and subject to the Corporations Act and the ASX Listing Rules,
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an EXU Director must retire from office or seek re-election by no later than the third annual general
meeting following his or her appointment or election or three years, whichever is longer. At least one
EXU Director must retire from office at each annual general meeting. A retiring EXU Director is eligible
for re-election.
(n)
Indemnities and insurance
EXU must to the extent permitted by law and subject to the Corporations Act, indemnify current and past
EXU Directors, secretaries and executive officers of EXU against a liability incurred by the person acting
in that capacity and against all legal costs incurred in connection with proceedings in which the person
becomes involved because of that capacity.
(o)
Amendment of the EXU Constitution
The Corporations Act provides that the constitution of a company may be modified or repealed by a
special resolution passed by the members of the company. The EXU constitution does not impose any
further requirements to be complied with to effect a modification of the constitution, or to repeal it.
6.11 Material Contracts
(a)
Merger Implementation Agreement
EXU has entered into the Merger Implementation Agreement dated 16 May 2015 with Auzex to set out
the terms on which Auzex and EXU will effect the Merger. See section 4.3 of this Booklet for a summary
of the Merger Implementation Agreement.
(b)
Ninghan Sale Agreement
Pursuant to a share sale agreement under which EXU acquired its interest in Exploration Licence
52/2883 and 52/2906 which make up part of the Lyons Project (Ninghan Tenements) (through the
acquisition of Ninghan Exploration Pty Ltd), EXU agreed to make the following performance based
payments to the vendor:
(i)
if a JORC compliant inferred mineral resource of at least 500,000oz of gold or gold equivalent at
greater than or equal to 1.5g/tonne gold or gold equivalent (Lyons Resource) is determined to
exist on any part of the Ninghan Tenements prior to 24 June 2016, EXU must issue 5,000,000
EXU Shares (capped to a maximum value of $2,000,000 based on the average closing price of
the EXU Shares in the 30 days prior to the announcement of the Lyons Resource).
(ii)
If EXU sells, disposes of an interest in, or enters into a joint-venture in respect of the Ninghan
Tenements then any future obligation to issue the EXU Shares referred to above ceases and is
replaced by the obligation for EXU to:
(A)
pay to the vendor a gross royalty of 1.0% on minerals sold from the Ninghan Tenements
(Royalty); and
(B)
ensure any purchaser of any interest in the Ninghan Tenements enters into a deed in a
form acceptable to the vendor evidencing acceptance and payment of the Royalty.
6.12 Continuous Disclosing Entity
(a)
EXU is a ‘disclosing entity’ under the Corporations Act and is subject to regular reporting and disclosure
obligations under the Corporations Act and the Listing Rules. Shareholders seeking further information
on EXU are directed to the list of publicly available announcements listed on the ASX (www.asx.com.au,
company code ‘EXU’) or on EXU’s website (www.explaurum.com.au).
(b)
As at the date of this Booklet, EXU advises that it is not withholding any information from disclosure on
the basis of an exception from disclosure in the Listing Rules.
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7 PROFILE OF THE MERGED GROUP
For personal use only
7.1Introduction
(a)
This section of the Booklet sets out the profile of the Merged Group immediately after the Merger.
(b)
If the Merger with Explaurum Limited (EXU) is implemented, Auzex will become a wholly owned
subsidiary of EXU and Auzex Eligible Scheme Shareholders will become shareholders in EXU.
7.2 Overview of the Merged Group
After the Merger:
(a)
EXU will continue to be listed on ASX; and
(b)
EXU’s focus will be:
(i)
development of the Tampia gold project; and
(ii)
exploration of the Lyons Project.
7.3 Strategy of the Merged Group
The Merged Group will be focused primarily on developing the Tampia gold project, with a view to becoming
a successful mid-tier Australian gold producer. The Auzex Directors believe that the key to unlocking the full
potential of the Tampia gold project is by combining the right mix of both exploration and operational skills which
Auzex and EXU currently have.
The strategic objective is to take the Tampia gold project through to completion of a bankable feasibility study,
and to development and production within an optimal timeframe. EXU will continue to implement an exploration,
feasibility and development program in line with Auzex’s and EXU’s strategic objectives.
7.4 Directors of the Merged Group
(a)
Proposed structure of the EXU Board of Directors
Pursuant to the Merger Implementation Agreement (MIA), on the Effective Date the EXU Board
will be comprised by:
Chris Baker, Chairman;
John Lawton, Managing Director;
Mark Calderwood, Technical Director; and
Patrick Flint, Non-executive Director.
(b)
Profiles of EXU Directors
Chris Baker – Non-executive Chairman
B.Sc (Hons.), MBA, FAusIMM, IOD
Chris Baker is a company director with over 30 years’ experience in the Australian and New Zealand resources sector.
His background is as a metallurgist and his experience includes technical, operational and managing roles in
the mining sector including gold, uranium, tungsten, titanium and coal. He has been involved in project development,
has extensive experience in joint ventures and governance and has a broad and practical understanding of the mining
industry and the multitude of disciplines that comprise successful projects and successful companies.
Chris has a Bachelor of Science (Hons) in Mineral Technology and an MBA, both from Otago University, and is a
Fellow of the Australasian Institute of Mining and Metallurgy. He is a member of the Institute of Directors (NZ).
His positions include: Chief Executive Officer of Straterra Inc., a group that represents the resource sector in New
Zealand; Chairman of the Coal Association of New Zealand; Chairman of MinEx, the New Zealand mineral sector
Health and Safety Council; Chairman, RSC Mining and Mineral Exploration Ltd. He was formerly a non-executive
Director and then Chairman of ASX listed company Auzex Resources Limited (September 2005 to April 2012).
Chris has been a Director of Auzex since incorporation.
54
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John Lawton – Managing Director
B.Sc. (App.Sci.), MAusIMM, MAICD
John Lawton is the founder of the Auzex group of mining companies and a geologist with 40 years industry
experience in mineral exploration, project development, operations and corporate management, including 20
years in management of ASX-listed gold mining and exploration companies.
John founded Auzex Resources Limited in 2003 and held the positions of Executive Chairman or Managing
Director throughout its nine year life during which time the company acquired and developed the Bullabulling
gold deposit near Coolgardie in the Eastern Goldfields of Western Australia.
John was a co-founder and executive director of Ross Mining NL throughout its existence from incorporation in
1986 to merger in 2000, a company which was a low cost and profitable gold miner, developing and operating
seven low grade open-cut gold mines in central Queensland, New South Wales and Solomon Islands. The
company was innovative in its approach and regularly paid dividends to shareholders.
John has a Bachelor of Science in Applied Geology and is a member of the Australasian Institute of Mining and
Metallurgy and the Australian Institute of Company Directors.
John has been a Director of Auzex since incorporation.
Mark Calderwood, Technical Director
CP AusIMM
EXU appointed Mark Calderwood as Technical Director in conjunction with the acquisition of the Lyons Project.
Mark has 30 years’ experience with both exploration and production companies in Australia and Africa.
He was Managing Director of ASX-100 listed gold producer Perseus Mining Limited, a West African Gold
producer and explorer from its inception in 2003 until January 2013. Mark steered Perseus from an exploration
company to a +200,000oz per year producing gold company. Under his leadership Perseus discovered
more than 6.8 million ounces of gold, built the Edikan Gold Mine, Ghana, on time and on budget and started
commercial production in January 2012.
Previously, Mark spent more than a decade with Mt Edon Gold Mines, before moving onto Border Gold, a junior
gold explorer which later became Moto Gold Mines. In 1995 he moved to Ghana to run gold explorer Leo Shield
Exploration NL’s Ghana office. Leo Shield ultimately created Perseus Mining in 2003.
During 2003 and 2004, whilst waiting for Perseus to list, he was Moto’s Exploration Manager for its world-class
gold project in the Democratic Republic of Congo.
Mark is a Chartered Professional Member of the Australasian Institute of Mining and Metallurgy, a Non-executive
Director of Burey Gold and Non-executive Chairman of Manas Resources Limited.
Patrick Flint, Independent Non-executive Director
CA, B Com, MAICD
Patrick has been involved in the resources sector as a director or company secretary of ASX and Toronto Stock
Exchange listed companies with mineral projects in Australia, Africa and Asia for the past 20 years. He has
significant experience with project acquisitions, joint venture negotiations and management, fundraising and
corporate matters.
He is also Non-executive Chairman of Nemex Resources Limited and AVZ Limited, and is Company Secretary
of Red Metal Limited (all of which are listed on ASX).
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7.5 Operations of the Merged Group
For personal use only
The objectives of the Merged Group will be to advance the Tampia gold project and Lyons gold project, and other
projects owned by Auzex.
7.6 Capital Structure and ownership of the Merged Group
(a)
Issued Shares
Class of Security Number on Issue
Fully paid ordinary Shares 136,188,287
(b)
Options
Details
Number on Issue
EXU Capital Raising Options
10,833,378
EXU Creditor Options
12,000,000
(c)
Major Shareholders
As at the date of this Booklet, the ten largest shareholders in the Merged Group are expected to be:
Shareholder
Number of
Auzex Shares
Percentage
Shareholding
EPOCC XT LLC
11,445,400
8.40
Pershing Australia Nominees Pty Ltd <Placement A/c>
10,934,318
8.03
HSBC Custody Nominees (Australia) Limited
7,294,328
5.36
JP Morgan Nominees Australia Limited
6,674,339
4.90
Misty Grange Pty Ltd
4,844,492
3.56
National Nominees Limited
3,733,092
2.74
Ajava Holdings Pty Ltd
2,840,082
2.09
Mark Calderwood
2,620,000
1.92
John Andrew Rodgers
2,400,000
1.76
Redtown Enterprises Pty Ltd
2,286,611
1.68
7.7 Directors’ interests in Shares and Options of the Merged Group
As at the date of this Booklet, the interests of the Auzex and EXU Directors in the share capital of the Merged
Group is expected to be:
56
Interests in issued EXU Share Capital
Director
Chris Baker
EXU Shares
EXU Options
103,688
1,248,000
John Lawton
2,192,232
4,728,000
Patrick Flint
1,257,813
125,000
Mark Calderwood
3,870,000
250,000
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7.8 Intentions of Auzex and EXU in relation to EXU
This section sets out the intentions of Auzex and EXU in relation to the Merged Group if the Merger is completed.
The statements in this section reflect the intentions of Auzex and EXU at the date of this Booklet only:
(a)
Corporate matters in relation to Auzex
If the Merger is implemented it is intended that as Auzex will be a wholly owned subsidiary of EXU, the
Auzex Board will be reconstituted so that it comprises persons nominated by the EXU Board.
(b)
Continuation of Auzex and EXU business
(i)
It is the intention of Auzex and EXU that the Merged Group will continue to operate and develop
the Tampia gold project and Lyons gold project.
(ii)
The board of the Merged Group will decide how the development of the Projects is to be funded
following implementation of the Merger having regard to the cash position and ongoing funding
requirements of the Merged Group.
(c)
Head office
EXU’s corporate headquarters will be based in Brisbane, Queensland.
(d)
Board
The composition of the board of EXU is discussed in section 7.4. It is intended that the Merged Group
will adhere to the ASX corporate governance principles consistent with the approach currently adopted
by Auzex and EXU.
(e)
Reporting
Auzex and EXU intend that the Merged Group will continue to lodge its annual, half yearly and quarterly
reports in line with EXU’s existing timetable and applicable laws (including the Listing Rules).
(f)
Other intentions in relation to Auzex and EXU
Other than as set out or referred to in this section 7.8, it is the present intention of Auzex and EXU that
the Merged Group will:
(i)
generally continue the businesses of Auzex and EXU in a manner consistent with past practice; and
(ii)
continue the employment of Auzex’s and EXU’s present employees.
7.9 Financial information for the Merged Group
(a)
(b)
Introduction
(i)
This section contains historical financial information for Auzex and EXU as at 30 April 2015 and pro
forma historical financial information for the Merged Group as if the Merger had occurred on that date.
(ii)
The historical information for Auzex and EXU as at 30 April 2015 is derived from management
accounts prepared in accordance with the recognition and measurement principles contained in
Australian accounting standards.
(iii)
The proforma adjustments and proforma historical financial position of the Merged Group after
the merger have been prepared by Mr Paul Frederiks B.Bus (Acc.), FCPA, FCIS, FAICD,
Non-Executive Director and Company Secretary of Auzex.
(iv)
The information is intended to be illustrative only. It is not a forecast and will not necessarily
reflect the actual position and balances on completion of the Merger or on any other date.
Pro forma historical financial position of the Merged Group after the Merger
The following table shows:
(i)
A summary of the unaudited historical consolidated balance sheet of Auzex as at 30 April 2015
extracted from the unaudited management accounts of Auzex (Unaudited Auzex Balance
Sheet). For further detail refer to section 5.7 of this Booklet.
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(ii)
58
A summary of the unaudited historical consolidated balance sheet of EXU as at 30 April 2015
extracted from the unaudited management accounts of EXU (Unaudited EXU Balance Sheet).
(iii)
Unaudited proforma adjustments relating to the Merger as if they had occurred on 30 April 2015
(Pro forma Adjustments).
(iv)
A summary of the unaudited pro forma historical consolidated balance sheet of the Merged Group
as at 30 April 2015, derived from the Unaudited Auzex Balance Sheet, the Unaudited EXU Balance
Sheet and the Pro forma Merger Adjustments (Pro forma Merged Group Balance Sheet).
All historical and pro forma historical financial information is presented in an abbreviated form that
does not include all of the disclosures usually provided in an annual report prepared in accordance with
the Corporations Act.
(c)
The pro forma adjustments
The pro forma adjustments made in the following table are:
Note 1 – cash and cash equivalents: A total of two adjustments:
(i)
Cash receipt of $1,030,000, representing the issue of 36,933,333 Shares at an issue price of
$0.03 cents per Share pursuant to tranche 2 of the Placement, and 10,833,333 free Options
issued in accordance with the Placement raising a gross sum of $1,108,000 less costs of
$78,000 raising a net sum of $1,030,000. The amount of $192,000 raised pursuant to tranche
1 of the Placement is included in the historical information regarding EXU as at 30 April 2015
(refer section 6.3 of this Booklet).
(ii)
Cash expense of $400,000 being anticipated costs of the Merger.
Note 2 – receivables and loan payable: Elimination of loan of $100,000 provided by EXU to Auzex
in April 2015.
Note 3 – deferred exploration expenditure: Adjustment to reduce the carrying value of the Deferred
Exploration Expenditure to reflect the fair value based on the consideration issued for the acquisition.
Note 4 – convertible notes: Adjustment to convert notes into equity.
Note 5 – trade and other payables: Amounts owing to related parties totalling $883,150 forgiven
in exchange for 12,000,000 creditor options in EXU and an amount of $66,432 being interest on
convertible notes also converted into equity.
Note 6 – Provision for annual leave: Amounts owing to related parties totalling $105,205 forgiven in
exchange for 12,000,000 creditor options as outlined above.
Note 7 – issued capital: A total of three adjustments:
(i)
Net pro forma adjustment of $1,030,000 in respect of the Placement.
(ii)
Issue of shares for exercise of convertible notes of $525,000 and accumulated interest of $66,432.
(iii)
Write off of Auzex accumulated losses of $7,939,302 and Deferred Exploration Expenditure of
$2,579,860 against issued capital.
Note 8 – share based payment reserve: Issue of a total of 12,000,000 Creditor Options valued at
$272,285 using the Black & Scholes option valuation model to the Auzex Related Party Creditors upon
implementation of the Merger.
Note 9 – accumulated losses: A total of four adjustments:
(i)
The expense of $272,285 associated with the issue of a total of 12,000,000 Creditor Options
valued at $272,285.
(ii)
Write off of Auzex accumulated losses of $7,939,302 against issued capital.
(iii)
Write off of amounts owing to Auzex related parties totalling $988,355.
(iv)
Write off costs of the transaction of $400,000.
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HistoricalHistorical
30 April 2015
30 April 2015
Pro-Forma
EXU
Auzex
Pro-Forma
30 April 2015
management
management adjustmentsNotes Pro-Forma
account
accountsmerged
unaudited and
unaudited and
unreviewedunreviewed
$
$
$$
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
TOTAL CURRENT ASSETS
309,400
72,964
1,949
630,000
1.
1,012,364
279,056
311,349
352,020
281,005
630,0001,293,369
NON - CURRENT ASSETS
Receivables
Plant and equipment
Deferred exploration expenditure 109,375 (100,000)2.
12,063
26,501
269,310
4,610,156
(2,579,860)
3.
9,375
38,564
2,299,606
TOTAL NON - CURRENT ASSETS 390,748 4,636,657(2,679,860)2,347,545
TOTAL ASSETS
702,097
4,988,677
(2,049,860)
3,640,914
LIABILITIES
CURRENT LIABILITIES
Loan payable –
100,000
(100,000)
2.
0
Convertible Notes
525,000
(525,000)
4.
-
1,109,851
(949,582)
5.
216,542
Trade and other payables
56,273
TOTAL CURRENT LIABILITIES
56,273 1,734,851(1,574,582) 216,542
NON - CURRENT LIABILITIES
Provision for annual leave
-
113,974
(105,205)
6.
8,769
Provision for rehab
123,605
TOTAL NON - CURRENT LIABILITIES
237,579 (105,205) 132,374
TOTAL LIABILITIES
NET ASSETS
0
123,605
56,273
1,972,430
(1,679,787)
348,916
645,824
3,016,247
(370,073)
3,291,998
EQUITY
Issued capital
Option premium reserve
15,210,715
10,955,549
TOTAL EQUITY
7.
3,193,794
Share based payment reserve
Accumulated losses
(8,897,730)
(17,758,685)
(7,939,302)
645,824
3,016,247
SCHEME BOOKLET
17,268,534
3,193,794
272,285
8.
272,285
8,255,372
9.
(17,442,615)
(370,073)
| Merger with Explaurum Limited •
3,291,998
59
8 RISKS OF THE MERGER SCHEME
For personal use only
Auzex Shareholders should be aware that there are a number of risks, both general and specific, associated with the
Scheme.
This section outlines:
(a)
risks specific to the Scheme and the creation of the Merged Group (see section 8.1 of this Booklet);
(b)
risks specific to the Merged Group (see section 8.2 of this Booklet);
(c)
risks specific to Auzex (see section 8.3 of this Booklet); and
(d)
general investment risks (see section 8.4 of this Booklet).
The outline of risks in this section 8 is a summary only and should not be considered exhaustive. No assurances or
guarantees are given in relation to the future performance of, profitability of, or potential payment of dividends by any of,
Auzex, EXU or the Merged Group.
These risk factors do not take into account the investment objectives, financial situation, position and particular needs
of any Auzex Shareholder.
You should carefully consider the risk factors discussed in this section 8, as well as the other information contained in
this Booklet before voting on the Scheme.
8.1 Risks specific to the Scheme and the creation of the Merged Group
60
(a)
Market value of the Scheme Consideration
Under the terms of the Scheme, Scheme Shareholders will receive four (4) New EXU Shares for each
Auzex Share they hold. The value of the Scheme Consideration that would be realised by individual
Auzex Shareholders will be dependent on the price at which New EXU Shares trade on the ASX after the
Implementation Date.
For Ineligible Overseas Shareholders, the value of the consideration they will receive will depend on
the price realised by the Sale Nominee in respect of the sale of New EXU Shares attributable to the
Ineligible Overseas Shareholders.
Some Scheme Shareholders may not intend to continue to hold the New EXU Shares received under
the Scheme and may wish to sell them on the ASX soon after the Implementation Date. In addition,
the Sale Nominee will sell New EXU Shares on the ASX as soon as reasonably practical after the
Implementation Date. There is a risk that such sales may exert downward pressure on the price of EXU
Shares in the short term.
In any event, there is no guarantee regarding the market price of the EXU Shares before the Scheme
Meeting or after the Implementation Date. Future market prices may either be above or below current
or historical market prices. Information about the current trading prices of EXU Shares may be obtained
from www.asx.com.au.
In providing services to EXU in connection with the sale of New EXU Shares to which the Ineligible
Overseas Shareholders would otherwise have been entitled, the Sale Nominee is not acting as agent or
sub agent of any Ineligible Overseas Shareholder.
(b)
Integration and synergies
There is a risk that implementation and other one-off costs may be substantial or greater than
reasonably anticipated. This could have a material adverse impact on the Merged Group’s financial
position and performance.
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The transition of information systems and data, technical, financial and legal information and resources
may not proceed smoothly and may divert management’s attention from managing the Merged Group’s
business. There is a risk that revenue streams or operations could be disrupted or that costs associated
with the transition may be greater than expected, which could adversely affect the Merged Group’s
financial position and performance.
(c)
Accounting revisions may be required
Auzex has particular accounting policies and methods which are fundamental to how it records
and reports its financial position and results of operations. The Auzex Directors may have exercised
judgement in selecting and applying certain accounting policies or methods which might have been
reasonable under the circumstances yet might have resulted in reporting materially different outcomes
than would have been reported under EXU’s policies and methods.
While no material differences between Auzex and EXU policies and methods have been identified to
date, there remains some uncertainty associated with the extent of any impact of such differences. The
integration of Auzex’s accounting functions may lead to revisions of these accounting policies, which
may adversely impact on the Merged Group’s reported results of operations and/or financial position
and performance.
(d)
Change in risk and investment profile
Auzex Shareholders, other than the Ineligible Overseas Shareholders, will receive New EXU Shares in
exchange for their Auzex Shares. An investment in the Merged Group is not an identical substitute for an
investment in Auzex as the Merged Group will have a different risk and investment profile.
Auzex Shareholders who receive New EXU Shares will be exposed to risk factors relating to EXU and
certain risks relating to the Merged Group. In some cases those risks are different or additional to those
of Auzex. See section 8.2 of this Booklet for details of the risks relating to the Merged Group.
The investment profile of Auzex Shareholders who receive New EXU Shares will also change. The
operational profile, capital structure and size of the Merged Group will be different from that of Auzex on
a standalone basis.
These changes in risk and investment profile may be considered a disadvantage by some Auzex
Shareholders.
8.2 Risks specific to the Merged Group
(a)
Exploration success
The Merged Group’s projects are at various stages of exploration, and potential investors should
understand that exploration and development are high-risk undertakings.
There can be no assurance that exploration will result in the conceptual project developments discussed
in this Booklet being achieved. Even if an apparently viable deposit is identified, there is no guarantee
that it can be economically exploited.
In the event that exploration programs prove to be unsuccessful this could lead to a diminution in the
value of the assets, a reduction in the case reserves of the Merged Group and possible relinquishment
of the assets.
(b)
Loss of key personnel
The Merged Group’s business model will depend on a management team with the talent and experience
to develop exploration projects. There is a risk that operating and financial performance would be
adversely affected by the loss of these key personnel.
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62
(c)
Title risk and native title
The Merged Group may lose title to, or interests in, its tenements if an appeal or challenge is made in
respect of that title or interest. Moreover, if the conditions to which those tenements are subject are not
satisfied by the Merged Group, or if insufficient funds are available to meet expenditure commitments,
this may lead to dilution of its interest in, or the loss of, such permits or licences without compensation.
It is also possible that, in relation to tenements which the Merged Group has an interest or will in the
future acquire such an interest, there may be areas over which legitimate common law native title rights
of Aboriginal Australians exist. If native title rights do exist, the ability of the Merged Group to gain
access to tenements (through obtaining consent from any relevant landowner) or to progress from the
exploration phase to the development and mining phases of operations may be adversely affected.
(d)
Environmental
If the Merged Group is responsible for environmental damage it may incur substantial costs for
environmental rehabilitation, damage control and losses by third parties resulting from its operations.
Environmental and safety legislation may change in a manner that may require stricter or additional
standards than those now in effect, a heightened degree of responsibility for companies and their
directors and employees and more stringent enforcement of existing laws and regulations. This may
lead to increased costs or other difficulties with compliance for the Merged Group.
(e)
Ability to exploit discoveries
It may not always be possible for the Merged Group to participate in the exploitation of successful
discoveries made in areas in which the Merged Group has an interest. Such exploitation may involve
the need to obtain licences or clearances from the relevant authorities, which may require conditions
to be satisfied or the exercise of discretion by such authorities. It may or may not be possible for such
conditions to be satisfied.
Furthermore, the decision to proceed to further exploitation may require the participation of other
companies whose interests and objectives may not be the same as those of the Merged Group. Such
further work may also require the Merged Group to meet or commit to financing obligations, which it
may not have anticipated or may not be able to commit to due to lack of funds or inability to raise funds.
(f)
Access to infrastructure
Access to the appropriate infrastructure is an essential component in the exploitation of successful
exploration discoveries. There is a risk that in order to secure a position with respect to infrastructure
access, the Merged Group may be required to enter into commitments (for example for the cost of
feasibility studies) in advance, which may then expose the Merged Group to financial obligations, which
might also include ‘take or pay’ obligations.
(g)
Operating risks
The operations of the Merged Group may be affected by various factors, including failure to locate or
identify mineral deposits, failure to achieve predicted grades in exploration and mining, operational and
technical difficulties encountered in commissioning and operating plant and equipment, mechanical
failure or plant breakdown, unanticipated metallurgical problems which may affect extraction costs,
adverse weather conditions, industrial and environmental accidents, industrial disputes, unexpected
shortages or increases in the costs of consumables, spare parts, plant and equipment and many other
factors beyond the control of the Merged Group.
No assurances can be given that the Merged Group will achieve commercial viability through the
successful exploration and/or mining of its tenement interests. Until the Merged Group is able to realise
value from its Projects, it is likely to incur ongoing operating losses.
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(h)
Regulatory risk
The Merged Group’s will be subject to extensive laws and regulations relating to matters including
licence consents and conditions including environmental compliance and rehabilitation, taxation,
employee relations, worker health and safety, waste disposal, protection of the environment, native title
and heritage matters, protection of endangered and protected species and other matters. The Merged
Group will require permits from regulatory authorities to perform its operations. These permits relate to
exploration, development, production and rehabilitation activities.
Obtaining necessary permits can be a time consuming process and there is a risk that the Merged
Group will not obtain these permits on acceptable terms, in a timely manner or at all. The costs and
delays associated with obtaining necessary permits and complying with these permits and applicable
laws and regulations could materially delay or restrict the Merged Group from proceeding with the
development of a project or the operation or further development of a mine. Any failure to comply with
applicable laws and regulations or permits, even if inadvertent, could result in material fines, penalties or
other liabilities. In extreme cases, failure could result in suspension of the Merged Group’s activities or
forfeiture of one or more of the Merged Group’s tenements.
(i)
Cash flow and requirements for capital
There is a risk that difficult conditions in the equity and debt markets may prevail at any time that the
Merged Group needs to source funding to develop its projects, and may make it more difficult and
costly for the Merged Group to obtain funding. There can be no certainty that the Merged Group will
have access to sufficient financial resources to fund the development of its projects into a producing
operation.
If the Merged Group is unable to obtain additional financing as and when needed, it may be required to
reduce the scope of its operations or limit expansion.
(j)
Health and safety
(i)
Any future operations of the Merged Group will be subject to strict health and safety laws and
regulations. The Merged Group may be liable for any conduct which violates such laws and
regulations. Penalties for breaching health and safety laws can be significant and include
criminal penalties. Victims of workplace accidents may also commence civil proceedings
against the Merged Group. These events might not be insured by the Merged Group or may be
uninsurable.
(ii)
In addition, any changes in health and safety laws and regulations may increase compliance
costs for the Merged Group. Such an event would negatively impact the financial results of the
Merged Group.
8.3 Risks specific to Auzex
(a)
Illiquidity of Auzex shares
Auzex is not listed on ASX, and so there is a limited ability for Auzex Shareholders to realise the value of
their Auzex Shares.
(b)
Limited operating history
Auzex was incorporated in 2011 and has limited operating and financial history. No assurances can be
given that Auzex will achieve commercial viability through the successful exploration of its assets. Until
Auzex is able to realise value from its projects, it is likely to incur ongoing operating losses.
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(c)
Private land owners
The Tampia gold project is located in the wheatbelt of Western Australia where landholdings are typically
designated as private land.
Landholders may deny access to their farmland for mineral exploration unless access agreements
between themselves and the Merged Group are concluded. While Auzex has entered into the
Compensation and Access Deed (the terms of which are summarised in section 5.11.4) with the
landowner over which the Tampia gold project exists, the term of the agreement expires on
17 July 2016, following which the Merged Group will be required to negotiate an extension for further
exploration, and there is a risk that access to some areas may be denied in the future.
8.4 General risks
64
(a)
General equity market risks
As an entity with listed ordinary shares on the ASX, the market price of the Merged Group’s Shares
is influenced by a variety of general business cycles and economic and political factors in Australia,
including economic growth, interest rates, exchange rates, inflation, employment levels, changes in
government fiscal, monetary and regulatory policy in relevant jurisdictions and changes to accounting or
financial reporting standards.
There can be no guarantee that a liquid market in Merged Group Shares will exist after completion
of the Merger. There may be relatively few, or many, potential buyers or sellers of Merged Group
Shares on ASX at any given time. This may affect the prevailing market price at which Merged Group
shareholders are able to sell their shares.
(b)
Economic conditions
Economic conditions, both domestic and global, may affect the performance of Auzex or EXU. Adverse
changes in such things as global and country-by country economic growth, the level of economic
activity and inflation, interest rates, exchange rates, government policy (including fiscal, monetary and
regulatory policies), general consumption and consumer spending, employment rates and industrial
disruption, amongst others, are outside the control of Auzex or EXU and may result in material adverse
impacts on the business and operating results of Auzex or EXU.
(c)
Government policy and legislation
Auzex or EXU may be affected by change to government policies and legislation, including those relating
to the minerals industry.
(d)
Litigation risk
As with any company, the Merged Group will be exposed to the risks of litigation which may have a
material adverse effect on its financial position. The Merged Group could become exposed to claims or
litigation by a person alleging they are owed fees for services, or by employees, regulators, competitors
or other third parties. To the extent that such claims or litigation are not covered by insurance, an
adverse outcome in litigation or the cost of initiating or responding to potential or actual claims or
litigation may have a material adverse impact on financial performance.
As at the date of this Booklet, neither Auzex nor EXU is aware of any material contractual disputes or
litigation matters in respect of them respectively.
(e)
Taxation risks
A change to the current taxation regime may affect Auzex or EXU and Auzex Shareholders or EXU
Shareholders. Personal tax liabilities are the responsibility of each individual investor in Auzex or EXU.
Auzex and EXU are not responsible for taxation or penalties incurred by investors in Auzex or EXU.
• SCHEME BOOKLET | Merger with Explaurum Limited
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(f)
Accounting standards
Australian accounting standards are set by the Australian Accounting Standards Board (AASB) and are
outside the Auzex Directors’ and EXU Directors’ and Auzex’s and EXU’ control. Changes to accounting
standards issued by AASB could materially adversely affect the financial performance and position
reported in the financial statements of either Auzex or EXU.
(g)
Macro-economic risks
Changes in the general economic outlook both in Australia and globally may impact the performance of
the Merged Group and its projects. Such changes may include:
(i)
interest rates;
(ii)
contractions in the Australian economy or increases in the rate of inflation resulting from
domestic or international conditions (including movements in domestic interest rates and
reduced economy activity);
(iii)
increases in expenses (including the cost of goods and services used by the Merged Group);
(iv)
increase in unemployment rates; and
(v)
fluctuations in equity markets in Australia and internationally.
(h)
Commodity price volatility and exchange rate risks
If the Merged Group achieves success leading to mineral production, the revenue it will derive through
the sale of commodities exposes the potential income of the Merged Group to commodity price and
exchange rate risks. Commodity prices fluctuate and are affected by many factors beyond the control of
the Merged Group. Such factors include supply and demand fluctuations for commodities, technological
advancements, forward selling activities and other macro- economic factors (outlined above).
Furthermore, international prices of various commodities are denominated in United States dollars,
whereas the income and expenditure of the Merged Group will be taken into account in Australian
dollars, exposing the Merged Group to the fluctuations and volatility of the rate of exchange between the
United States dollar and the Australian dollar as determined in international markets.
(i)
Gold price
The demand for, and price of, gold is dependent on a variety of factors which will be beyond the Merged
Group’s control including expectations regarding inflation, interest rates and global and regional demand
for, and supply of, gold as well as general global economic conditions. Fluctuations in gold prices,
development and operating costs may have a material adverse effect on the Merged Group’s exploration
activities, business activities and financial condition.
(j)
Competition risk
The industry in which the Merged Group will be involved is subject to domestic and global competition.
The Merged Group will have no influence or control over the activities or actions of its competitors,
which activities or actions may, positively or negatively, affect the operating and financial performance of
the Merged Group’s business.
(k)
Impact of hostilities, terrorism or other force majeure events
War, other hostilities, terrorism or major catastrophes can adversely affect global and Australian market
conditions. Such events can have direct and indirect impacts on the Merged Group’s business and
earnings.
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8.5 Other relevant considerations
For personal use only
(a)
(b)
(c)
Dividends and franking capacity
(i)
To date Auzex and EXU have not paid any dividends and Auzex has no board approved dividend
policy in place as at the date of this Booklet.
(ii)
After the Merger, EXU will not have any cash-flow generating assets and it is unlikely that a
dividend will be paid by the Merged Group in the short-term.
Taxation implications for Auzex Shareholders
(i)
The Merger may have taxation implications for Auzex Shareholders.
(ii)
The taxation implications of the Merger are complex and depend on the laws of the country
in which an Auzex Shareholder is a tax resident. Auzex Shareholders should consider these
implications when deciding how to vote in relation to the Merger. A more detailed discussion of
the Australian taxation consequences of the Merger is contained in section 10 of this Booklet.
The discussion is in general terms and does not take into account the particular circumstances
of Auzex Shareholders. It is recommended that all Auzex Shareholders should, in considering
the implications to them of the Merger, obtain independent professional tax advice regarding the
income tax and capital gains tax implications specific to their circumstances.
Independent Expert’s opinion
(i)
Auzex has commissioned the Independent Expert as an independent expert to prepare a report
stating whether, in its opinion, the advantages of the Merger outweigh the disadvantages and if
the Merger is in the best interests of Auzex Shareholders.
(ii)
The Independent Expert has concluded that the Merger is fair and reasonable to Auzex
Shareholders and, on that basis, in the absence of any other information or a superior offer, the
Merger is in the best interests of Auzex Shareholders as at 23 July 2015, being the date of the
Independent Expert’s Report.
(iii)
A copy of the Independent Expert’s Report is attached as Annexure A to this Booklet.
(d)
Implications if the Merger does not proceed
If Auzex Shareholders do not approve the Scheme the Merger will not proceed. In that event:
(i)
Auzex will continue to be owned by the existing Auzex Shareholders;
(ii)
Auzex wll be required to repay the loans provided by EXU totalling $800,000 no later than April
2016 or, if EXU so elects, issue up to 6.67 million Auzex Shares to EXU, representing 28.4% of
the total issued shares of Auzex;
(iii)
Auzex would be required to raise additional capital to fund the further development of its
Projects. There is no guarantee that Auzex will be able to raise the full amount of any additional
capital required on terms acceptable to Auzex;
(iv)
Auzex may be required to pay a break fee to EXU of $250,000 if the failure of the
Scheme Shareholders to approve the Scheme follows an Auzex Director withdrawing his
recommendation that Scheme Shareholders vote in favour of the Scheme, or if the MIA is
terminated by EXU as a result of breach of the MIA by Auzex; and
(v)
transaction costs of approximately $400,000 will be incurred.
Auzex has sufficient funds to pay the costs and potential costs associated with the Scheme. There is
a risk that Auzex may not be able to procure funding sufficient to repay the loans provided by EXU, in
which case, unless EXU elects to convert its loan into Auzex Shares, Auzex may necessarily be placed
into administration.
66
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9 DETAILS OF THE MERGER AND ITS IMPLEMENTATION
For personal use only
9.1 Elements of the Merger
(a)
(b)
General
(i)
The Merger is to be effected by a scheme of arrangement pursuant to section 411 of the
Corporations Act between Auzex and the Scheme Shareholders.
(ii)
For the Merger with EXU to proceed, the Scheme must be approved by the Requisite Majority of
Scheme Shareholders, and by the Court at the Second Court Hearing.
Key Dates
(i)
If the Scheme is approved, there are two important dates - the Record Date and the
Implementation Date.
(ii)The Record Date is the date on which the Auzex Share Register is examined to determine who
is entitled to participate in the Scheme and receive the Scheme Consideration in the form of
New EXU Shares. The Record Date is currently expected to be 6:00 pm (Brisbane time) on
14 September 2015.
(iii)The Implementation Date is the date on which New EXU Shares will be issued to Eligible Scheme
Shareholders under the Scheme (or issued to the Sale Nominee in the case of Ineligible Overseas
Shareholders). The Implementation Date is currently expected to be 21 September 2015.
(iv)
New EXU Shares issued as Scheme Consideration are expected to commence trading on ASX on
or about 25 September 2015.
(c)
Merger Implementation Agreement
Auzex and EXU entered into the Merger Implementation Agreement on 16 May 2015, in which they
agreed (among other things) to their respective obligations in implementing the Scheme. The key terms
of the Merger Implementation Agreement are summarised in section 4.3 of this Booklet.
(d)
The Scheme
(i)
If the Scheme is approved by the Requisite Majority of Scheme Shareholders and by the Court,
and becomes Effective, all Auzex Shares outstanding at 6:00 pm on the Record Date, and not
already owned by EXU or EXU or their Related Bodies Corporate, will be transferred to EXU.
(ii)
The Scheme Consideration to be issued to Auzex Shareholders is described in section 4.5 of this
Booklet.
(iii)
See Annexure B to this Booklet for a copy of the Scheme.
(iv)
Implementation of the Scheme is subject to the Scheme Conditions being satisfied, including
the condition that the Scheme may only be implemented if the Requisite Majority of Scheme
Shareholders vote in favour of the Scheme at the Scheme Meeting.
(v)
The Scheme Meeting at which Auzex Shareholders may vote for the Scheme will be held at
10:00 am on 24 August 2015 at 15 Ivory Lane, Brisbane.
(vi)
A summary of the Scheme Conditions is provided at section 4.8 of this Booklet, and a summary
of the steps necessary to implement the Scheme is provided in this section 9.
9.2 Entitlement to participate in the Scheme
(a)
Scheme Shareholders as at 6:00 pm on the Record Date will be entitled to participate in the Scheme
and be entitled to the Scheme Consideration. EXU is however not obliged to issue, and will not issue,
any EXU Shares to any Ineligible Overseas Shareholder.
(b)
The way in which Scheme Shareholders participate will depend on whether they are classified as Eligible
Scheme Shareholders or as Ineligible Overseas Shareholders. Refer to section 4.11 for details regarding
the participation by Ineligible Overseas Shareholders.
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(c)
EXU will not vote on the Scheme. As at the date of this Booklet, EXU does not own or control any Auzex
Shares. If EXU becomes an Auzex Shareholder on or before the Record Date, EXU will never-the-less be
excluded from voting on the Scheme.
9.3 Actions already undertaken by Auzex and EXU
Since signing the MIA, Auzex and EXU have undertaken the following activities to progress the Implementation of
the Scheme.
(a)
(b)
(c)
(d)
Appointment of Independent Expert
(i)
Auzex commissioned the Independent Expert to prepare a report on whether the Scheme is in
the best interests of Auzex Shareholders.
(ii)
The Independent Expert has concluded that the Merger is fair and reasonable to Auzex Shareholders
and, on that basis, in the absence of any other information or a superior offer, the Merger is in the
best interests of Auzex Shareholders as at 23 July 2015, being the date of the Independent Expert’s
Report. A copy of the Independent Expert’s Report is attached as Annexure A.
Execution of Deed Poll by EXU
(i)
On 16 July 2015 EXU executed the Deed Poll in favour of each Scheme Shareholder pursuant
to which EXU covenants to perform its obligations under the Scheme. The key obligation of EXU
under the Scheme is to issue the Scheme Consideration to Eligible Scheme Shareholders and
to the Sale Nominee in relation to Ineligible Overseas Shareholders, subject to satisfaction of the
Scheme Conditions.
(ii)
The Deed Poll may be relied upon by a Scheme Shareholder, despite the fact that they are not a
party to it, and pursuant to the Scheme each Scheme Shareholder appoints Auzex as its agent
and attorney to enforce their rights against EXU under the Deed Poll.
(iii)
The Deed Poll is governed by the laws of Queensland and is set out in full at Annexure C.
Lodgement of draft Booklet with ASIC
(i)
On 30 June 2015 Auzex lodged a draft of this Booklet with ASIC pursuant to section 411(2)(b) of
the Corporations Act. ASIC has registered the draft Booklet for the purposes of section 412(6)
of the Corporations Act.
(ii)
Auzex has requested that ASIC provide a statement, in accordance with section 411(17)(b) of
the Corporations Act, that ASIC has no objection to the Scheme. If ASIC provides that statement,
it will be produced to the Court at the time of the Court hearing to approve the Scheme.
(iii)
EXU has also lodged a copy of this Booklet with ASX.
(iv)
Neither ASIC, ASX nor any of their officers takes any responsibility for the contents of this Booklet.
First Court Hearing
(i)
On 23 July 2015 the Supreme Court of Queensland ordered that Auzex convene the Scheme
Meeting for 10:00 am on 24 August 2015 at 15 Ivory Lane, Brisbane for the purpose of
allowing Auzex Shareholders to consider, and if thought fit, approve the Scheme.
(ii)
Auzex Shareholders should note that the fact that the Court has ordered that the meeting
be convened and has approved this Booklet (including the explanatory statement required to
accompany the notice of the Scheme Meeting) does not mean that the Court:
(A)
(B)
68
has formed any view as to the merits of the proposed Scheme or as to how Auzex
Shareholders should vote (on this matter Auzex Shareholders must form their own decision); or
has prepared, or is responsible for, the content of the Booklet.
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(iii)
An order under subsection 411(1) is not an endorsement of, or any other expression of opinion
on, the Scheme. The Court is not in any other way responsible for the contents of this Booklet.
(iv)
For a Scheme to proceed, the Requisite Majority must approve the Scheme at the Scheme
Meeting. Details of how to vote at the Scheme Meeting are set out at the beginning of this
Booklet in section 1, ‘Overview, Scheme Meeting Details and How to Vote’. A copy of the Notice
of the Scheme Meeting is set out in pages 6 and 7.
9.4 Scheme Conditions
(a)
Implementation of the Scheme is subject to satisfaction of the Scheme Conditions, which are set out in
section 4.8.
(b)
As at the date of this Booklet, Auzex is not aware of any circumstances that would cause any of the
Scheme Conditions to not be satisfied. Auzex Shareholders will receive an update on the status of the
Scheme Conditions at the Scheme Meeting.
(c)
EXU will also announce to ASX any relevant matter that affects the likelihood of a Scheme Condition
being satisfied or not being satisfied, in accordance with EXU’s continuous disclosure obligations. These
details will be published on ASX’s website (www.asx.com.au) and will also appear on Auzex’s website
(www.auzex.com).
9.5 Scheme Meeting
(a)
The Scheme Meeting is scheduled to be held at 15 Ivory Lane, Brisbane on 24 August 2015 at 10:00 am.
(b)
For the Scheme to be approved by Auzex Shareholders, votes in favour of the Scheme must be received
from:
(i)
a majority in number (more than 50%) of Auzex Shareholders present and voting at the Scheme
Meeting (in person, by proxy, by attorney or, in the case of corporate Auzex Shareholders, by
corporate representative); and
(ii)
Auzex Shareholders who together hold at least 75% of the total number of votes cast on the
resolution.
9.6 Court approval
(a)
To become Effective, the Scheme must be approved by the Court at the Second Court Hearing. If the
Scheme is approved by the Requisite Majority of Auzex Shareholders, and all other Scheme Conditions
(other than its approval by the Court) have been satisfied or waived, Auzex will apply to the Court for
orders approving the Scheme at the Second Court Hearing.
(b)
Each Auzex Shareholder has the right to seek leave to appear at the Second Court Hearing and be heard
in respect of the Scheme. The Court may refuse to approve the Scheme even if it is approved by the
Requisite Majority of Auzex Shareholders.
9.7 Steps after Court approval at the Second Court Hearing
(a)
Action by Auzex
If the Scheme is approved by the Court, Auzex will:
(i)
promptly lodge with ASIC an office copy of the orders approving the Scheme in accordance with
section 411(10) of the Corporations Act;
(ii)
close the Auzex Share Register as at 6:00 pm on the Record Date and determine entitlements
to the Scheme Consideration in accordance with the Scheme and provide such information to
EXU (or its share registry) in such form as EXU may reasonably require to facilitate the payment
of the Scheme Consideration;
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(b)
(c)
(d)
(iii)
promptly register all transfers of Scheme Shares to EXU in accordance with the Scheme; and
(iv)
promptly do all other things contemplated by or necessary to give effect to the Scheme and the
orders of the Court approving the Scheme.
Record Date
(i)
The Record Date for the Scheme is currently expected to be 6:00 pm on 14 September 2015.
Only Scheme Shareholders whose names appear on the Auzex Share Register at 6:00 pm on
the Record Date will be entitled to receive the Scheme Consideration.
(ii)
For the purposes of determining persons entitled to Scheme Consideration, dealings in
Auzex Shares will be recognised by Auzex provided that registrable transfers or transmission
applications in respect of those dealings are received by the Auzex Share Registry on or before
6:00 pm on the Record Date (in which case Auzex will cause such transfers to be registered
before 6:00 pm on the Record Date).
(iii)
Auzex will not recognise, for the purpose of establishing who is entitled to Scheme
Consideration, any transmission application or transfer in respect of Auzex Shares received after
that time.
Effective Date
(i)
If the Scheme is approved by the Court, Auzex must lodge a copy of the orders of the Court
approving the Scheme with ASIC. The Scheme will become Effective on the date that lodgement
occurs. This date is the Effective Date. Upon the Scheme becoming Effective it will bind Auzex
and all Scheme Shareholders, including those who do not attend the Scheme Meeting or who
do not vote at the Scheme Meeting or who vote against the Scheme at the Scheme Meeting.
(ii)
If the Scheme has not become Effective or the Scheme Conditions have not been satisfied by
the End Date, or such later date as Auzex and EXU may agree in writing, the Scheme will not be
Effective and the Merger will not occur.
Implementation Date
(i)
On the Implementation Date, subject to the provision of the Scheme Consideration, all Auzex
Shares held by Scheme Shareholders will be transferred to EXU without any further action required
by Scheme Shareholders. Auzex will enter the name of EXU into the Auzex Share Register in
respect of the Auzex Shares. Auzex will then become a wholly owned subsidiary of EXU.
(ii)
EXU will:
(iii)
70
(A)
issue the New EXU Shares required to be issued by it under the Scheme on terms such
that each such New EXU Share will rank equally in all respects with each existing EXU
Share;
(B)
ensure that each New EXU Share issued as Scheme Consideration is duly issued and
is fully paid and free from any mortgage, charge, lien, encumbrance or other security
interest; and
(C)
use all reasonable endeavours to ensure that all New EXU Shares issued as Scheme
Consideration are approved for listing and trading on ASX and, to the extent permitted
by ASX respectively, that trading in them commences as soon as practicable after the
Effective Date and on a normal settlement basis no later than the second Business Day
after the Implementation Date.
As from the time at which the Scheme Consideration is provided, all share certificates and
holding statements for the Scheme Shares will cease to have any effect other than as evidence
of entitlement to Scheme Consideration, other than for EXU and its Related Bodies Corporate.
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(e)
Commencement of trading of New EXU Shares comprising Scheme Consideration
It is expected that the New EXU Shares comprising the Scheme Consideration will commence trading on
ASX on or about 25 September 2015.
(f)
Payments to Ineligible Overseas Shareholders
(i)
New EXU Shares to which the Ineligible Overseas Shareholders would otherwise be entitled
will be sold by the Sale Nominee as soon as practicable (and in any event not more than 15
Business Days after the Implementation Date) and the Cash Proceeds shall be promptly remitted
to the relevant Ineligible Overseas Shareholders.
(ii)
For more information see section 4.11 of this Booklet.
9.8 Warranties by Scheme Shareholders under the Scheme
Pursuant to section 7.6(b) of the Scheme all Scheme Shareholders, including those who vote against the Scheme
and those who do not vote, are deemed to have warranted to EXU that their Auzex Shares are not subject to any of
the encumbrances specified in the Scheme. The Scheme is attached at Annexure B to this Booklet.
9.9 New EXU Shares
(a)
Under the terms of the Scheme all Scheme Shareholders who receive New EXU Shares will have their
names and addresses entered on the EXU Share Register on the Implementation Date.
(b)
For a discussion of the rights attaching to EXU Shares see section 6.10 of this Booklet.
(c)
Each holder of EXU Shares is responsible for confirming their holding before selling their EXU Shares on
a deferred settlement basis. Any sale of New EXU Shares before receipt of a holding statement is at the
risk of the holder of those securities. To the extent permitted by law, Auzex, EXU and Computershare
Investor Services Pty Limited disclaim all liability, whether in negligence or otherwise, to persons
who sell their New EXU Shares before receiving their holding statement, whether on the basis of a
confirmation of allocation provided by Auzex, EXU, Computershare Investor Services Pty Limited, a
broker or otherwise.
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10 AUSTRALIAN TAXATION IMPLICATIONS
For personal use only
10.1Introduction
(a)
This section provides general comments only regarding the Australian income tax implications for Auzex
Shareholders arising from the disposal of their Auzex Shares under the Scheme.
(b)
The Australian tax consequences of the Scheme for Auzex Shareholders will depend on a number of
factors, including:
(i)
the tax residence of the Auzex Shareholder;
(ii)
whether the Auzex Shareholder holds their Auzex Shares on capital account or revenue account;
and
(iii)
the nature of the Auzex Shareholder – that is, whether they are an individual, company, trust or
other entity.
(c)
The comments below identify the general Australian tax implications of the Scheme for Australian
resident and non-Australian resident Auzex Shareholders who hold their Auzex Shares on capital and
revenue account. The taxation consequences for an individual Auzex Shareholder may differ from those
outlined below depending on the Auzex Shareholder’s particular circumstances.
(d)
Accordingly, Auzex Shareholders should not rely on the summary below as a substitute for professional
advice. Auzex Shareholders should obtain, and rely only on, their own professional tax advice about the
consequences of the disposal of Auzex Shares for EXU Shares pursuant to the Scheme.
(e)
It is also recommended that all non-Australian resident Auzex Shareholders separately confirm the
taxation implications associated with the Scheme in their country of residence.
(f)
The comments below are based on the Income Tax Assessment Act 1936 and the Income Tax
Assessment Act 1997 (collectively referred to as the Tax Act) and relevant Australian Taxation Office
pronouncements at the date of this Booklet, except as otherwise indicated.
10.2 Australian Resident Auzex Shareholders
(a)
72
Capital account
(i)
Australian resident Auzex Shareholders who hold their shares with a view to generating long term capital
growth and dividend income will generally be considered to hold their shares on capital account.
(ii)
The Australian income tax implications to such Auzex Shareholders as a result of the Scheme
may be summarised as follows:
(A)
A capital gains tax (CGT) event will occur when Auzex Shareholders exchange their
Auzex shares for EXU Shares. Subject to the availability of scrip for scrip rollover relief
(see section 10.2(b) below), a capital gain will arise where the market value of the EXU
Shares at the time of exchange is greater than the Auzex Shareholder’s CGT cost base
held in the existing Auzex Shares. Certain Auzex Shareholders may be eligible for a CGT
discount (see paragraph (D) below). Where the market value of the EXU New Shares is
less than the CGT cost base of the Auzex Shares held, a capital loss will arise.
(B)
Subject to certain conditions being met, scrip for scrip rollover relief should be available
for Australian resident Auzex Shareholders in relation to the exchange of Auzex Shares
for EXU Shares. The result of Auzex Shareholders electing for the rollover rules to apply
should be as follows:
(i)
any capital gain which would otherwise have been realised on the exchange
should be disregarded; and
(ii)
the cost base of the EXU Shares received is determined by attributing the
particular shareholder’s cost base of their Auzex Shares to their EXU Shares.
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(b)
(C)
Scrip for scrip rollover relief will not be available to Auzex Shareholders who would
otherwise realise a capital loss as a result of the Scheme.
(D)
Auzex Shareholders who are individuals or trusts and do not elect for rollover relief, or
who are not eligible for rollover relief, may be eligible for a 50% discount on any capital
gain that would arise, provided that they have held their shares in Auzex for at least 12
months prior to the exchange of Auzex Shares. Similarly, complying superannuation
funds that do not elect for rollover relief or are not eligible for rollover relief, may be
eligible for a 33 % discount on any capital gain that would arise, provided that they
have held their shares in Auzex for at least 12 months prior to the exchange. No such
discount arises with respect to shares held by companies.
Availability of scrip for scrip capital gains tax rollover relief
(i)
In order for Auzex Shareholders to be able to obtain scrip for scrip rollover relief, all of the
following conditions need to be satisfied:
(A)
the Auzex Shareholder exchanges their Auzex Shares for EXU Shares;
(B)
the exchange is in consequence of a single arrangement where:
(I)
all the owners of voting shares in Auzex could participate on substantially
the same terms; and
(II)
as a result of the arrangement, EXU becomes the holder of at least 80%
of those voting shares of Auzex.
(C)
apart from the rollover, the Auzex Shareholder would make a capital gain as a result of
the exchange of their Auzex Shares under the Scheme; and
(D)
the Auzex Shareholder chooses to obtain scrip for scrip rollover relief.
(ii)
Other than the specific issue to each Auzex Shareholder of whether or not they would make
a capital gain and whether or not they elect to adopt rollover relief, all of the above conditions
should be satisfied with respect to the Scheme.
(iii)
In the case of Ineligible Overseas Shareholders, the Sale Nominee is appointed to sell the
EXU Shares to which the Auzex Shareholder is otherwise entitled and pay the proceeds to the
Ineligible Overseas Shareholder. Ineligible Overseas Shareholders will therefore receive only the
Cash Proceeds on sale, as opposed to an ongoing shareholding in EXU.
(iv)
The mechanism to provide a cash payment on sale of Auzex Shares to Ineligible Overseas
Shareholder does not prevent the Scheme being on substantially the same terms for all Auzex
Shareholders. In particular, Ineligible Overseas Shareholders receive the same economic value
as Eligible Auzex Shareholders, and the sale of Auzex Shares on their behalf is an event which
occurs subsequent to completion of the Scheme.
(v)
This is consistent with a number of Class Rulings issued by the Commissioner of Taxation
dealing with similar scrip for scrip transactions.
10.3 Revenue account
(a)
(b)
(c)
Australian resident Auzex Shareholders who hold their Auzex Shares as part of a share trading business
or with a view to making a short term profit may be viewed as holding their shares on revenue account.
In such instances any gain made by such Auzex Shareholders as a result of the Scheme will constitute
assessable income of the Shareholder. No scrip for scrip rollover relief or CGT discount will be available
with respect to this gain.
Any loss incurred by such Auzex Shareholders as a result of the Scheme may be applied against
other assessable income of the Shareholder, or alternatively carried forward to offset against future
assessable income.
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10.4 Consequences of holding EXU Shares
For personal use only
(a)
Subsequent Disposal of EXU Shares
(i)
If an Australian resident Auzex Shareholder who held their Auzex Shares on capital account sells
their EXU Shares after the Implementation Date, any gain or loss is likely to be subject to CGT on
the basis the EXU Shares have been held on capital account.
(ii)
If an Australian resident Auzex Shareholder who held their Auzex Shares on revenue account
sells their EXU Shares after the Implementation Date, any gain or loss is likely to be subject to
taxation on the basis the EXU Shares have been held on revenue account.
(b)
Dividend Income
Dividends received by Australian resident Auzex Shareholders in relation to their EXU Shares are
required to be included in their assessable income.
(c)
Other Taxes
No Goods and Services Tax or stamp duty should be payable in Australia by Auzex Shareholders in
relation to the disposal of Auzex Shares or on the receipt of EXU Shares.
10.5 Non-Australian Resident Auzex Shareholders
The following comments are general in nature and address only the Australian tax implications of the Scheme
for non-Australian resident Auzex Shareholders. Non-resident Scheme Shareholders should obtain independent
professional advice to confirm the tax implications of the Scheme in their country of residence.
(a)
Capital account
(i)
(ii)
74
Generally, any capital gain or loss realised by non-Australian resident Auzex Shareholders on the
exchange of their Auzex Shares will be disregarded unless either:
(A)
the Auzex Shares are held in connection with a business carried on by the Auzex
Shareholder through a permanent establishment in Australia; or
(B)
both of the following conditions are satisfied:
(I)
the non-Australian resident Auzex Shareholder together with their associates
hold at least 10% of the Auzex Shares either at the time of the exchange or for
at least 12 months during the 24 months before the exchange; and
(II)
at the time of the exchange, at least 50% or more of the market value of
Auzex’s assets are attributable to taxable Australian real property. Taxable
Australian real property includes mining, quarrying or prospecting rights where
the minerals, petroleum or quarry materials are situated in Australia.
In the event that a non-Australian resident Auzex Shareholder cannot disregard a capital gain or
loss, then the Australian tax implications of the Scheme will be similar to those outlined above
for Australian resident Auzex Shareholders. However, the tax implications will differ for Ineligible
Overseas Shareholders who receive cash proceeds from the sale of the EXU Shares. In this
regard:
(A)
Auzex Shareholders who only receive proceeds from the sale of the EXU Shares by
the appointed Sale Nominee will calculate their capital gain or loss based on the sale
proceeds received. No CGT discount will be available; and
(B)
other non-Australian resident Auzex Shareholders (ie New Zealand resident Auzex
Shareholders) who receive EXU Shares may be eligible for scrip for scrip rollover relief,
depending on their particular circumstances.
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(iii)
Subsequent Disposal of EXU Shares
(A)
If the EXU Shares are not considered to be Taxable Australian Property (TAP) at the
Implementation Date, non-Australian resident Auzex Shareholders should not be subject
to CGT in relation to any gains (or losses) from the disposal of their EXU Shares acquired
pursuant to the Scheme.
(B)
In broad terms, Auzex Shares may be TAP of a non-Australian resident Auzex
Shareholder if the conditions in section 10.5(a)(i)(B) above are satisfied.
(b)
Revenue account
Where non-Australian resident Auzex Shareholders hold their shares in Auzex on revenue account, then
any gain or profit on exchange of these shares may be assessed In Australia. The tax implications will
depend on a number of factors, including the provisions of any double tax agreement between Australia
and the country of residence of the Shareholder. Auzex Shareholders in this situation should seek their
own independent advice in relation to the taxation implications arising from the Scheme, both within and
outside of Australia,
(c)
Dividend Income
Non-Australian resident EXU Shareholders may be subject to Australian dividend withholding tax on
dividends received from EXU.
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11 ADDITIONAL INFORMATION
11.1Introduction
For personal use only
This section 11 sets out additional information required to be disclosed to Auzex Shareholders in relation to the
Scheme pursuant to the Corporations Act and the Corporations Regulations, together with other information that
may be of interest to Auzex Shareholders in relation to the Scheme and the Merger.
11.2 Intention of Auzex Directors regarding the business of Auzex
If the Scheme becomes Effective, it is a matter for the reconstituted EXU Board to determine its intentions as to:
(a)
the continuation of the business of Auzex;
(b)
any major changes to the business of Auzex; and
(c)
the future employment of the present employees of Auzex.
The current intentions of Auzex and EXU in relation to these matters are set out in section 7 of this Booklet.
If the Scheme does not become Effective, the current Auzex Board intends to continue the business of Auzex as
holder of its projects.
11.3 Intention of Auzex Directors concerning the Scheme
(a)
The Auzex Directors believe that, taking into account all relevant matters, including alternatives, the
Scheme is in the best interests of Auzex and Auzex Shareholders.
(b)
While you do not have to vote, the Auzex Board believes that the Scheme is important to all Auzex
Shareholders. Each Auzex Director recommends that Auzex Shareholders vote in favour of the Scheme
at the Scheme Meeting in order to effect the Merger.
(c)
Each Auzex Director intends to vote all Auzex Shares held or controlled by them in favour of the Scheme.
11.4 Interests of Auzex Directors in Auzex securities
As at the date of this Booklet, the number and description of securities of Auzex in which each of the Directors of
Auzex has a Relevant Interest are:
Name
Shares Held
Chris Baker
25,922
John Lawton
548,058
Greg Partington
81,962
Paul Frederiks
67,501
TOTAL723,443
On 30 June 2015, John Lawton acquired a Relevant Interest in:
(a) 138,650 Auzex Shares upon conversion of a convertible note; and
(b)
21,913 Auzex Shares by purchase for consideration of $0.12 per Auzex Share.
Except as stated above, the Auzex Directors had no dealings in securities of Auzex in the four months preceding
the date of this Booklet.
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11.5 Interests of Auzex and Auzex Directors in EXU securities
(a)
As at the date of this Booklet:
(i)
Auzex does not have a Relevant Interest in any EXU Shares or any other marketable securities of
EXU; and
(ii)
no Auzex Directors hold Relevant Interests in any EXU Shares or any other marketable securities
of EXU.
(b)
Except as indicated in paragraph (d) below, there has been no dealing in and no agreement to deal
has been entered into in respect of any marketable securities of EXU by any Auzex Director in the four
months preceding the date of this Booklet.
(c)
Auzex Directors who hold Auzex Shares will be entitled to vote on the Scheme and receive EXU Shares
on the same terms as all other Auzex Shareholders.
(d)
Auzex Directors will be entitled to receive EXU Creditor Options in exchange for their entitlements to
receive outstanding amounts payable to them by Auzex as at 16 May 2015. Refer to section 5.11.5 of
this Booklet.
11.6 Interests of EXU and EXU’s associates in Auzex Securities
(a)
As at the date of this Booklet EXU holds no Auzex Shares or other securities. If the Scheme is
implemented EXU will control all Auzex Shares.
(b)
No EXU Directors hold Relevant Interests in any Auzex Shares or any other marketable securities of
Auzex.
(c)
During the four months before the date of this Booklet neither EXU nor any associate of EXU has:
(i)
provided, or agreed to provide, consideration for any Auzex Shares; or
(ii)
given or offered to give or agreed to give a benefit to another person where the benefit was
likely to induce the other person, or an associate, to vote in favour of the Scheme or dispose of
Auzex Shares which benefit is not offered to all Auzex Shareholders under the Scheme.
11.7 Benefits to Auzex officers in connection with retirement from office
There is no current proposal for a payment or other benefit to be made or given to a director, secretary or
executive officer of Auzex or any Related Body Corporate of Auzex, as compensation for the loss of, or as
consideration for or in connection with his or her retirement from office in Auzex or any Related Body Corporate
of Auzex as a result of the Scheme.
11.8 Agreements or arrangements connected with or conditional on the Scheme
Except as disclosed below or elsewhere in this Booklet, there are no agreements or arrangements made
between any Auzex Director and another person in connection with, or conditional on, the outcome of the
Scheme other than in their capacity as an Auzex Shareholder.
(a)
Pursuant to the Merger Implementation Agreement each of Auzex and EXU releases the directors,
officers and employees of the other for anything done or not done in connection with the preparation or
provision of information to the extent that such director, officer or employee has acted in good faith and
has not engaged in wilful misconduct.
(b)
In accordance with the terms of the MIA, if the Merger is implemented, John Lawton and Chris Baker,
who are both current Auzex Directors, will be appointed to the EXU Board. It is anticipated that EXU
Directors will be entitled to receive an annual retainer, meeting attendance fees, reimbursement of
actual expenses from EXU and be eligible for participation in EXU stock-based compensation programs.
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(c)
The Auzex Directors have entered into services agreements with EXU, which are conditional upon the
scheme becoming Effective. The services agreements are on the same terms as their existing services
agreements with Auzex, subject to the following amendments:
Director
Salary
Notice Period
Annual Leave
John Lawton
Managing Director
$120,000 per annum (including superannuation)
3 months
4 weeks
Greg Partington
$100,000 per annum (including superannuation)
1 month
4 weeks
Chris Baker
$30,000 per annum (including superannuation)
1 month
N/A
Paul Frederiks
Company Secretary
$4,200 per month (including superannuation)
1 month
N/A
(d)
Auzex Directors will also be entitled to receive EXU Creditor Options in exchange for their entitlements to
receive outstanding amounts payable to them by Auzex as at 16 May 2015. Refer to section 5.11.5 of
this Booklet.
11.9 Auzex Directors’ interests in EXU contracts
Except as disclosed elsewhere in this Booklet, no Auzex Director has any interest in any contract entered into
with EXU, or any interest as a creditor of EXU.
11.10 Disclosure of payments and benefits to Auzex Directors, secretaries
and executive officers
Except as disclosed elsewhere in this Booklet, no Auzex Director, secretary or officer of Auzex (or any of its
Related Bodies Corporate) has agreed to receive, or is entitled to receive, any payment or benefit from EXU
which is conditional on, or is related to, the Scheme.
11.11Disclosure of interests
Except as disclosed below or elsewhere in this Booklet, no:
(a)
Auzex Director;
(b)
EXU Director;
(c)
person named in this Booklet as performing a function in a professional, advisory or other capacity in
connection with the preparation or distribution of this Booklet; or
(d)
promoter of the Merged Group,
(together Interested Persons) holds, or held at any time during the two years before the date of this Booklet
any interests in:
(e)
the formation or promotion of the Merged Group;
(f)
property acquired or proposed to be acquired by EXU in connection with the formation or promotion of
the Merged Group or the offer of New EXU Shares under the Scheme; or
(g)
the offer of EXU Shares under the Scheme.
11.12 Disclosure of fees and other benefits
Except as disclosed elsewhere in this Booklet or otherwise in accordance with usual, arms length commercial
arrangements, neither EXU nor Auzex has paid or agreed to pay any fees, or provided or agreed to provide any
benefit to a proposed director of EXU to induce them to become or qualify as a director of EXU.
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11.13 EXU capital structure
(a)
The capital structure of EXU is set out in section 6 of this Booklet. Except pursuant to the EXU capital
raising described in section 6.3 of this Booklet, no EXU Shares have been issued during the three month
period ending on the date of this Booklet other than pursuant to the EXU Scheme.
(b)
The rights attaching to EXU Shares are set out in the EXU constitution described in section 6.10 of this Booklet.
11.14 Capital raising by EXU
Except pursuant to the EXU Capital Raising as described in section 6.3, EXU has not raised any capital for the
three months prior to the date of this Booklet and, except pursuant to the Scheme, will not need to raise any
capital for the three months after that date.
11.15 Material changes in financial position
(a)
The latest published financial statements of Auzex are the financial statements for the year ended 30
June 2014. To the knowledge of the Auzex Directors, there has not been a material change in the
financial position of Auzex since 30 June 2014, except as disclosed in this Booklet.
(b)
Auzex will provide, free of charge, copies of the financial statements to anyone who requests them.
11.16 Creditors of Auzex
(a)
The Scheme, if implemented, is not expected to materially prejudice Auzex’s ability to pay its creditors
because it involves an acquisition of Auzex Shares by a third party, rather than the acquisition of Auzex’s
underlying assets.
(b)
No material new liability (other than transaction costs) is expected to be incurred by Auzex as a
consequence of the implementation of the Scheme.
(c)
Auzex has paid and is paying all its creditors within normal terms of trade. It is solvent and is trading in
an ordinary commercial manner.
11.17 Right to inspect and obtain copies of the Auzex Share Register
An Auzex Shareholder has the right to inspect the Auzex Share Register and the Auzex Option Register, which
contain the name and address of each Auzex Shareholder and certain other prescribed details relating to Auzex
securities, without charge. An Auzex Shareholder also has the right to request a copy of the register, upon
payment of a fee (if any) up to a prescribed amount.
11.18 ASX and ASIC waivers, approvals and exemptions
ASX has indicated to EXU that:
(a)
the change in nature and scale of the EXU’s activities as a result of the Merger requires EXU in
accordance with ASX Listing Rule 11.1.2 to obtain shareholder approval and must comply with any
requirements of ASX in relation to the Notice of Meeting; and
(b)
the change in the nature and scale of EXU’s activities as a result of the Merger does not require EXU
to re-comply with the admission requirements set out in Chapters 1 and 2 of the ASX Listing Rules in
accordance with ASX Listing Rule 11.1.3.
11.19 No relevant restrictions in the Auzex constitution
There are no restrictions on the right to transfer Auzex Shares in the Auzex constitution.
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11.20 Sale of Auzex Shares in the six months ended 21 June 2015
For personal use only
So far as Auzex is aware, the only sales of Auzex Shares in the six (6) months immediately before 23 July 2015,
being the date on which this Booklet was lodged with ASIC for registration, was a purchase of 21,913 Auzex
Shares by John Lawton for consideration of $0.12 per Auzex Share, a total of $2,629.56.
11.21No unacceptable circumstances
The Auzex Directors believe that the Scheme will not involve any circumstances in relation to the affairs of Auzex
that could reasonably be characterised as constituting ‘unacceptable circumstances’ for the purposes of section
657A of the Corporations Act.
11.22 Auzex Shareholders in jurisdictions outside Australia
(a)
This Booklet and the Scheme are subject to Australian disclosure requirements that may be different to
those applicable in other jurisdictions. This Booklet and the Scheme do not in any way constitute an offer
of securities in any place in which, or to any person to whom, it would not be lawful to make such an offer.
(b)
Any Auzex Shareholder whose address as shown in the Auzex Share Register at 6:00 pm on the Record
Date as a place outside Australia and its external territories and New Zealand (unless EXU is satisfied,
acting reasonably, that the laws of that Auzex Shareholder’s country of residence (as shown in the
Auzex Share Register) permit the issue and allotment of New EXU Shares, either unconditionally or after
compliance with conditions which EXU in its sole discretion regards as acceptable) will be an Ineligible
Overseas Shareholder for the purposes of the Scheme.
(c)
EXU will not issue New EXU Shares to an Ineligible Overseas Shareholder. If you are an Ineligible
Overseas Shareholder, you should refer to section 4.11 for further information.
11.23 Consents and disclaimers
80
(a)
Consents
Each of the parties named below as consenting parties:
(i)
has given and has not, before lodgement of this Booklet with ASIC, withdrawn its written
consent to be named in this Booklet in the form and context in which it is named;
(ii)
has given and has not, before the lodgement of this Booklet with ASIC, withdrawn its written
consent to the inclusion of their respective statements and reports (where applicable) noted
next to their names below, and the references to those statements and reports in the form and
context in which they are included in this Booklet; and
(iii)
does not make, or purport to make, any statement in this Booklet other than those statements
referred to below in respect of that person’s name (and as consented to by that person).
Role
Consenting Party
Independent Expert
BDO Corporate Finance (QLD) Limited
ABN 54 010 185 725,
Australian Financial Services Licence No 245513
Technical Valuer Mining Associates Limited
Financial advisor CCZ Corporate Finance Pty Ltd
Auzex Legal Adviser
Thomson Geer Lawyers
EXU Legal Adviser
Steinepreis Paganin
Sale Nominee
Merchant Capital Markets Pty Ltd
Share Registry
Computershare Investor Services Pty Limited
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(b)
Disclaimer
Each person named in this section 11.23:
(i)
does not make, or purport to make, any statement in this Booklet or any statement on which a
statement in this Booklet is based, other than their respective statements and reports noted next
to their names (where applicable) which has been included in this Booklet with the consent of
that party; and
(ii)
to the maximum extent permitted by law, expressly disclaims and takes no responsibility for
any part of this Booklet, other than their respective statements and reports noted next to their
names (where applicable) which has been included in this Booklet with the consent of that party.
11.24Regulatory and legal
(a)
Foreign exchange controls
The Reserve Bank of Australia generally does not restrict the import and export of Australian dollars.
There are currently no Australian exchange controls or other limitations, other than an applicable
withholding of Australian tax, which restrict the remittances of any dividends, interest or other payment
by EXU to non-resident holders of EXU Shares outside Australia, provided they are not resident in or a
resident of a place to which, or a person to whom, such remittances would be prohibited.
(b)
Restrictions on foreign ownership
There are no limitations, either under the laws of Australia or under the constitution of EXU, to the right
of non-residents to hold or vote EXU Shares other than the Foreign Acquisitions and Takeovers Act 1975
(Commonwealth) (FATA). FATA may affect the right of certain persons to hold or control EXU Shares.
Acquisitions of shares in Australian companies by foreign interests are subject to review and approval
by the Treasurer of the Commonwealth of Australia under FATA, which applies to any acquisition by
a foreign person or associated foreign person which would result in a holding of 15% or more of the
issued shares of, or control of 15% or more of the voting power in, an Australian company. Further, it
applies to any acquisition by non-associated foreign persons which would result in a holding by these
persons of 40% or more of the issued shares of, or control of 40% or more of the voting power in, an
Australian company.
11.25 Supplementary information
(a)
(b)
Auzex will issue a supplementary document to this Booklet if it becomes aware of any of the following
between the date of lodgement of this Booklet for registration by ASIC and the Effective Date:
(i)
a material statement in this Booklet is false or misleading;
(ii)
a material omission from this Booklet;
(iii)
a significant change affecting a matter included in this Booklet; or
(iv)
a significant new matter has arisen and it would have been required to be included in this
Booklet if it had arisen before the lodgement of this Booklet for registration by ASIC.
Depending on the nature and timing of the changed circumstances and subject to obtaining any relevant
approvals, Auzex may circulate and publish any supplementary document by:
(i)
placing an advertisement in a prominently published newspaper which is circulated generally
throughout Australia; or
(ii)
posting the supplementary document on Auzex’s website at www.auzex.com.
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11.26 Information relating to ore reserves and mineral resources
(a)
Auzex
The information in this Booklet that relates to mineral resources for Auzex is based on information
compiled by Dr Greg Partington, who is a full time employee of Auzex. Dr Partington has sufficient
experience which is relevant to the style of mineralisation and type of deposit under consideration and to
the activity which they are undertaking to qualify as Competent Persons as defined in the 2004 Edition
of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Dr
Partington consents to the inclusion in this Booklet of the matters based on this information in the form
and context in which it appears.
(b)
EXU
The information in this Booklet of a scientific or technical nature relating to the EXU properties is based
on technical reports prepared for those properties. The information in this document that relates to
Exploration Results, Mineral Resources and Ore Reserves as each item is identified in the JORC Code is
based on information compiled by Mr Mark Calderwood who is a full-time employee of EXU and Member
of The Australasian Institute of Mining and Metallurgy. He is Qualified as a Competent Person as defined
in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves’. He consents to the inclusion in this Booklet of the matters based on this information
in the form and context in which it appears.
11.27 Effects of rounding
A number of figures, amounts, percentages, prices, estimates, calculations of value and fractions in this Booklet
(including but not limited to those in respect of the Scheme Consideration), are subject to the effect of rounding.
Accordingly, the actual calculations of these figures may differ from the figures set out in this Booklet.
11.28 Data in charts, graphs and tables
Unless otherwise stated, all data contained in charts, graphs and tables is based on information available at the
latest reasonably practicable date before the date of this Booklet. Any discrepancies in any chart, graph or table
between totals and sums of amounts presented or listed therein or to previously published financial figures are
due to rounding.
11.29 No other material information
Other than as set out in this Booklet, there is no information material to the making of a decision in relation
to the Scheme or a decision by an Auzex Shareholder whether or not to vote in favour of the Scheme, being
information that is within the knowledge of any Auzex Directors or of a Related Body Corporate of Auzex and
which has not previously been disclosed to Auzex Shareholders.
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12 DEFINITIONS AND INTERPRETATION
For personal use only
12.1Definitions
In this Booklet the following words have these meanings unless the contrary intention appears or the context
otherwise requires:
AEST
Australian Eastern Standard Time
Annexure
an annexure to this Booklet
ASIC
Australian Securities and Investments Commission
Associate
has the meaning given to that term in section 9 of the Corporations Act
ASX
ASX Limited or the financial market which it operates, as the context
requires
ASX Listing Rules or
Listing Rules
the official listing rules of the ASX
Auzex
Auzex Exploration Limited ACN 153 608 596
Auzex Board
the board of Auzex Directors
Auzex Directors
the directors of Auzex
Auzex Information Line
the Auzex information line established by Auzex for the purpose of the
Merger
Auzex Share
a fully paid ordinary share issued in the capital of Auzex
Auzex Shareholder
a person who is registered in the Auzex Share Register as the holder of
one or more Auzex Shares from time to time
Auzex Share Register
the register of Auzex Shareholders maintained in accordance with
section 169 of the Corporations Act
Auzex Share Registry
Computershare Investor Services Pty Limited ABN 48 078 279 277
Booklet
this booklet containing the explanatory statement relating to the
Scheme as required by Part 5.1 of the Corporations Act, the notice of
meeting in relation to the Scheme, and other information (including any
supplementary information) relating to any of the above matters and
distributed to Auzex Shareholders
Business Day
a day that is both a Business Day within the meaning given in the ASX
Listing Rules and a day that banks in Perth, Western Australia and
Brisbane, Queensland, are open for business
Cash Proceeds
the sale proceeds of New EXU Shares sold by the Sale Nominee in
respect of Ineligible Overseas Shareholders, converted into Australian
dollars and less any applicable brokerage, stamp duty and other selling
costs, taxes and charges
CGT
capital gains tax
CHESS
the Clearing House Electronic Subregister System operated by ASX
Settlement Pty Ltd, a wholly owned subsidiary of ASX
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Consolidation
the consolidation of the issued capital of EXU on the basis of one (1)
EXU Share for every 10 EXU Shares on issue and one (1) EXU Option for
every 10 EXU Options on issue, as approved by EXU Shareholders at the
EXU General Meeting held on 26 June 2015.
Corporations Act
the Corporations Act 2001 (Cth)
Competing Proposal
in respect of Auzex or EXU (each a Body), a transaction or arrangement
pursuant to which (other than as contemplated by the Scheme a Third
Party will, if the proposed transaction or arrangement is entered into or
completed substantially in accordance with its terms:
(a) directly or indirectly acquire, have a right to acquire or
otherwise acquire an economic interest in, all or a majority of
the business of the Body;
(b) acquire a Relevant Interest in any of the shares of the Body, as
a result of which the Third Party will have a Relevant Interest in
50% or more of the shares of the Body;
(c) otherwise acquire control of the Body within the meaning of
section 50AA of the Corporations Act; or
(d) otherwise directly or indirectly acquire, merge with, or acquire
a significant shareholding or economic interest in the Body
or its businesses, whether by way of takeover offer, scheme
of arrangement, shareholder approved acquisition, capital
reduction, share buy-back, sale or purchase of assets, joint
venture, reverse takeover, dual-listed company structure,
recapitalisation, establishment of a new holding company for
the Body or other synthetic merger or any other transaction or
arrangement,
which, if completed, would require either Auzex or EXU to abandon, or
otherwise fail to proceed with, the Scheme.
84
Court
the Supreme Court of Queensland
Deed Poll
the deed poll dated 16 July 2015 executed by EXU whereby, among
other things, EXU covenants to carry out its obligations under the
Scheme, as set out in Annexure C
Effective
in respect of the Scheme, the coming into effect, under section 411(10)
of the Corporations Act of the order of the Court made under sections
411(4)(b) (and if applicable, section 411(6)) in relation to the Scheme
Effective Date
the date on which the Scheme becomes Effective
Eligible Scheme
Shareholder
a Scheme Shareholder who is not an Ineligible Overseas Shareholder
End Date
30 September 2015 or such later date as may be agreed by Auzex and
EXU in writing
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EXU
Explaurum Limited ACN 114 175 138
EXU Board
the board of EXU Directors
EXU Creditor Option
an EXU Option to acquire an EXU Share at and exercise price of $0.03
per EXU Share, exercisable at any time until 31 August 2018 provided
that the volume weighted average price of EXU Shares for five (5)
consecutive trading days prior to the date of exercise is at least $0.05.
The EXU Creditor Options will not be quoted on ASX, but comply with
the requirements of the ASX Listing Rules.
EXU Directors
the directors of EXU
EXU Option
an option to subscribe for EXU Shares
EXU Share
a fully paid ordinary share issued in the capital of EXU
EXU Shareholder
a holder of an EXU Share
EXU Share Register
the register of EXU shareholders maintained in accordance with section
169 of the Corporations Act
IFRS
International Financial Reporting Standards
Implementation Date
21 September 2015 or such other date as Auzex and EXU may agree in
writing
Independent Expert
BDO Corporate Finance (QLD) Limited ABN 54 010 185 725,
Australian Financial Services Licence No 245513
Independent Expert’s
Report
the report of the Independent Expert, a copy of which is Annexure A of
this Booklet
Ineligible Overseas
Shareholder
any Scheme Shareholder whose address as shown in the Auzex Share
Register at 5:00 pm on the Record Date is a place outside Australia
and its external territories and New Zealand unless EXU and Auzex
are satisfied, acting reasonably, that the laws of a particular Auzex
Shareholder’s country of residence (as shown in the Auzex Share
Register) permit the issue and allotment of EXU Shares to that Scheme
Shareholder either unconditionally or after compliance with conditions
which EXU regards in its sole discretion as acceptable
JORC Code
the Australasian Code of Reporting of Exploration Results, Mineral
Resources and Ore Reserves prepared by the Joint Ore Reserves
Committee of the Australasian Institute of Mining and Metallurgy and
the Australasian Institute of Geoscientists and Minerals Council of
Australia, 2012 edition
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Material Adverse Change
in respect of Auzex or EXU (each a Body), any one or more events,
occurrences or matters which individually or when aggregated with all
such events, occurrences or matters of a like kind or category, has (or
would be likely to have) a material adverse effect on:
(a)
the business, properties, financial condition, results, operations
or prospects of that Body, taken as a whole; or
(b)
that Body’s consolidated net assets,
other than:
86
(c)
an event, occurrence or matter required to be undertaken or
procured pursuant to the Scheme;
(d)
to the extent that an event, occurrence or matter was
announced to the ASX or otherwise fairly disclosed;
(e)
as a result of the release of the announcement of the Scheme;
(f)
any change (excluding changes to taxation laws or policies) in
accounting standards, law, regulation or policy;
(g)
a change in the price of gold, or any other event, occurrence or
matter affecting the gold mining industry generally;
(h)
general economic, financial, currency exchange, securities or
commodity market conditions;
(i)
any outbreak or escalation of hostilities or armed conflict;
(j)
any change in the market price of Auzex Shares or EXU Shares
(provided that the causes underlying such change may be taken
into account when determining whether a material adverse
effect has occurred); or
(k)
an event that affects the other party in a substantially consistent
and proportionate manner.
Merged Group
EXU and its controlled entities after the Merger
Merged Group Shares
EXU Shares after the Implementation Date
Merger
the proposed merger between Auzex and EXU to be implemented
through the Scheme
Merger Implementation
Agreement or MIA
the merger implementation agreement dated 16 May 2015 between
Auzex and EXU relating to the Merger
New EXU Shares
such EXU Shares as are issued by EXU (credited as fully paid) pursuant
to the EXU Scheme and which will rank pari passu in all respects with
existing EXU Shares
Project
a project of either Auzex or EXU
Proxy Form
the proxy form for the Scheme Meeting which is enclosed with this Booklet
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Record Date
6:00 pm on 14 September 2015, or any other date agreed by Auzex
and EXU in writing to be the record date to determine entitlements to
receive the Scheme Consideration under the Scheme
Regulated Event
Other than as required or contemplated by the Scheme or the Merger, the
occurrence of any of the following in relation to Auzex or EXU (each a Body):
(a)
the Body or any of its Subsidiaries converts all or any of its
securities into a larger or smaller number of securities;
(b)
the Body or any of its Subsidiaries resolves to reduce its capital in
any way;
(c)
the Body or any of its Subsidiaries:
(d)
(i)
enters into a buy-back agreement; or
(ii)
resolves to approve the terms of a buy-back agreement
under section 257C(1) or section 257D(1) of the
Corporations Act;
the Body or any of its Subsidiaries issues securities, or grants
an option over or to subscribe for its securities, or agrees to
make such an issue or grant such an option, other than:
(i)
to a wholly-owned Subsidiary of the Body; or
(ii)
pursuant to the conversion of the Auzex Convertible
Notes;
(e)
the Body or any of its Subsidiaries issues, or agrees to issue,
convertible notes or any other security convertible into shares,
other than to a wholly-owned Subsidiary of the Body;
(f)
the Body or any of its Subsidiaries agrees to pay, declares
or pays a dividend or any other form of distribution of profit
or capital, other than the declaration and payment by any
Subsidiary of the Body of a dividend where the recipient of that
dividend is the Body or a wholly-owned Subsidiary of the Body;
(g)
the Body makes any change to its constitution;
(h)
the Body or any of its Subsidiaries acquires or agrees to acquire
any assets, properties or businesses, or incurs, agrees to
incur or enters into a commitment or a series of commitments
involving capital expenditure by the Body, whether in one
or more transactions, where the amounts or value involved
in such transaction, transactions, commitments or series of
commitments exceeds $250,000 in aggregate;
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88
(i)
the Body or any of its Subsidiaries disposes of, or agrees to
dispose of, any assets, properties or businesses, whether in
one transaction or a number of such transactions, where the
amount or value involved in such transaction or transactions
exceeds $250,000 in aggregate;
(j)
the Body or any of its Subsidiaries creates, or agrees to create,
any mortgage, charge, lien or other encumbrance over its
business or any part of its property other than in the ordinary
course of its business;
(k)
other than as contemplated by this deed or the Loan
Agreement, the Body or any of its Subsidiaries incurs any
financial indebtedness or issues any debt securities, other than
in the ordinary course of business or pursuant to advances
under its credit facilities in existence as at the date of this deed
where the funds drawn pursuant to those advances are used in
the ordinary course of business or in connection with a purpose
that is contemplated and permitted in paragraph (h) above;
(l)
other than as contemplated by this deed, the Body or any of its
Subsidiaries makes any loans, advances or capital contributions
to, or investments in, any other person (other than to or in
the Body or any wholly-owned Subsidiary of the Body in the
ordinary course of business), other than in the ordinary course
of business;
(m)
the Body or any of its Subsidiaries resolves that it be wound
up or an application or order is made for the winding up or
dissolution of the Body or any of its Subsidiaries other than
where the application or order (as the case may be) is set aside
within 14 days;
(n)
a liquidator or provisional liquidator of the Body or any of its
Subsidiaries is appointed;
(o)
a court makes an order for the winding up of the Body or any of
its Subsidiaries;
(p)
an administrator of the Body or of any of its Subsidiaries
is appointed under sections 436A, 436B or 436C of the
Corporations Act;
(q)
the Body or any of its Subsidiaries ceases, or threatens to
cease, to carry on business;
(r)
the Body or any of its Subsidiaries executes a deed of company
arrangement;
(s)
a receiver, or a receiver and manager, is appointed in relation to
the whole, or a substantial part, of the property of the Body or
any of its Subsidiaries;
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(t)
the Body or any of its Subsidiaries is deregistered as a company
or otherwise dissolved;
(u)
the Body or any of its Subsidiaries is or becomes unable to pay
its debts when they fall due;
(v)
the Body or any of its Subsidiaries enters into any arrangement,
commitment or agreement with a related party (as that term is
defined in section 228 of the Corporations Act), other than in
the ordinary course of business;
(w)
the Body or any of its Subsidiaries makes or amends any tax
election, changes any method of tax accounting, settles or
compromises any tax liability, files any material amended tax
return, enters into a closing agreement, surrenders any right
to claim a material tax refund or consents to the extension
or waiver of the limitation period applicable to any material
tax claim or assessment, other than in the ordinary course of
business;
(x)
the Body or any of its Subsidiaries pays, discharges, settles,
satisfies, compromises, waives, assigns or releases any claims,
liabilities or obligations other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with
past practice, of liabilities reflected or reserved against in the
Body’s financial statements or incurred in the ordinary course of
business consistent with past practice;
(y)
the Body or any of its Subsidiaries authorises, recommends or
proposes any release or relinquishment of any contractual right,
except in the ordinary course of business consistent with past
practice; or
(z)
the Body or any of its Subsidiaries enters into or renews any
agreement, contract, lease, licence or other binding obligation
containing:
(i)
any limitation or restriction on the ability of the Body or
any of its Subsidiaries or, following completion of the
transactions contemplated by this deed, the ability of
EXU, to engage in any type of activity or business;
(ii)
any limitation or restriction on the manner in which, or
the localities in which, all or any portion of the business
of the Body or, following completion of the transactions
contemplated by this deed, all or any portion of
the business of the Merged Group, is or would be
conducted; or
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(iii)
any limit or restriction on the ability of the Body or
any of its Subsidiaries or, following completion of the
transactions contemplated by this deed, the ability of
EXU, to solicit customers or employees,
or that would reasonably be expected to materially
delay or prevent the completion of the transactions
contemplated by the Scheme, other than in the ordinary
course of business,
provided that a Regulated Event will not include a matter:
(aa)
required to be done or procured by the Body pursuant to this
deed or the Scheme;
(bb)
which the Body is permitted to do, or not to do, as an exception
to the exclusivity provisions of the MIA;
(cc)
fairly disclosed by the Body in writing prior to the date of the
MIA; or
(dd)
in relation to which the other Body has expressly consented in
writing.
Regulatory
Approvals
Regulatory
Authority
90
ASX and any other Regulatory Authority consents, approvals,
clearances, decisions or determinations or other acts necessary
or desirable to implement the Merger
(a)
any government, semi-government or local authority and any
department, minister or agency of any government; and
(b)
any other authority, agency, commission, administrative, fiscal
or judicial body (including the Court), tribunal or similar entity
having powers or jurisdiction under any law or regulation or the
listing rules of any recognised stock or securities exchange,
including without limitation the ASX.
Related Entity
the meaning given to that term in section 9 of the
Corporations Act
Related Party
the meaning given to that term in section 9 of the
Corporations Act
Relevant Interest
the meaning given to that term in sections 608 and 609 of the
Corporations Act
Requisite Majority
in respect of the Scheme, approval by:
(a)
a majority in number (more than 50%) of Scheme Shareholders
present and voting at the Scheme Meeting (in person, by proxy,
by attorney or, in the case of corporate Scheme Shareholders,
by corporate representative); and
(b)
at least 75% of the total number of votes cast by Scheme
Shareholders at the Scheme Meeting
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Resource
the meaning in the JORC Code
Sale Facility
the facility in accordance with an agreement between EXU and
the Sale Nominee, under which the EXU shares of Ineligible
Overseas Shareholders will be sold, as described in section
4.11 of this Booklet
Sale Nominee
Merchant Capital Markets Pty Ltd (ACN 154 848 469), or its
nominee, being the person that EXU intends to appoint prior to the
Implementation Date to sell the New EXU Shares referable to Ineligible
Overseas Shareholders.
Merchant Capital Markets Pty Ltd is an authorised representative
(representative number 415728) of Draupner Investment Management
Pty Ltd (ACN 112 894 845), holder of Australian Financial Services
License 303566.
Scheme
the scheme of arrangement pursuant to Part 5.1 of the
Corporations Act between Auzex and the Scheme Shareholders
contained in Annexure B of this Booklet, subject to any
alteration or condition made or required by the Court pursuant
to section 411(6) of the Corporations Act
Scheme Conditions
means the conditions to the Scheme as set out in section 4.8 of
this Booklet
Scheme Consideration
means the consideration to be provided to Scheme
Shareholders under the terms of the Scheme for the transfer to
EXU of their Auzex Shares
Scheme Meeting
the meeting of Auzex Shareholders ordered by the Court to be
held to consider the resolution set out in the notice of meeting
contained in pages immediately after the letters from the
chairmen of Auzex and EXU at the beginning of this Booklet to be
held on Monday 24 August 2015 at 10:00 am (Brisbane time) at
15 Ivory Lane, Brisbane
Scheme Share
an Auzex Share
Scheme Shareholder
a person who is an Auzex Shareholder as at the Record Date
Second Court Date
the date of the Second Court Hearing
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92
Second Court Hearing
the hearing of the application made to the Court for an order
under section 411(4)(b) of the Corporations Act approving the
Scheme
Share Scheme Ratio
four (4) New EXU Shares for each Scheme Share
Superior Proposal
In relation to Auzex or EXU (each a Body) a Competing Proposal
in respect of the Body which:
(a)
in the determination of the Board of Directors of the
Body acting in good faith, is reasonably capable of being
completed without undue delay, taking into account both
the nature of the Competing Proposal and the person or
persons making it; and
(b)
in the determination of the Board of Directors of the
Body acting in good faith, after receiving the advice of its
external legal and financial advisers, would, if completed
substantially in accordance with its terms, result in a
transaction more favourable to the shareholders of the
Body than the Scheme.
Third Party
a person who is neither a party to this deed, nor any Related Body
Corporate of a party to this deed, including without limitation any
individual, corporation, partnership, party, trust, fund, association
and or other organised group of persons or combination
of persons acting in concert by virtue of an agreement,
arrangement, commitment or understanding which is not a party
to this deed.
VWAP
volume weighted average price
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12.2 General Interpretation
The following rules of interpretation apply unless the contrary intention appears or the context requires
otherwise:
(a)
a reference to time is a reference to Brisbane time;
(b)
headings are for convenience only and do not affect interpretation;
(c)
the singular includes the plural and conversely;
(d)
a reference to a section is to a section of this Booklet;
(e)
a gender includes all genders;
(f)
where a word or phrase is defined, its other grammatical forms have a corresponding meaning;
(g)
$, dollar or cents is a reference to the lawful currency in Australia, unless otherwise stated;
(h)
a reference to a person includes a body corporate, an unincorporated body or other entity and
conversely;
(i)
a reference to a person includes a reference to the person’s executors, administrators, successors,
substitutes (including persons taking by novation) and assigns;
(j)
a reference to any legislation or to any provision of any legislation includes any modification or reenactment of it, any legislative provision substituted for it and all regulations and statutory instruments
issued under it;
(k)
a reference to any instrument or document includes any variation or replacement of it;
(l)
a term not specifically defined in this Booklet has the meaning given to it (if any) in the Corporations Act
or the ASX Settlement Operating Rules, as the case may be;
(m)
a reference to a right or obligation of any two or more persons confers that right, or imposes that
obligation, as the case may be, jointly and individually; and
(n)
the words ‘include’, ‘including’, ‘for example’ or ‘such as’ are not used as, nor are they to be interpreted
as, words of limitation, and, when introducing an example, do not limit the meaning of the words to
which the example relates to that example or examples of a similar kind.
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13 CORPORATE INFORMATION
Directors
Mr Chris Baker
Mr John Lawton
Dr Greg Partington
Mr Paul Frederiks
Registered Office
C/- Level 16
Waterfront Place
1 Eagle Street
Brisbane QLD 4000
Company Secretary
Mr Paul Frederiks
Website
http://www.auzex.com
Share Registry
Computershare Investor Services Pty Limited
117 Victoria Street
West End QLD 4101
Legal Advisor to Auzex
Thomson Geer
Level 16 Waterfront Place
1 Eagle Street
Brisbane QLD 4000
Corporate Advisor
CCZ Corporate Finance Pty Ltd
Level 4, 410 Collins Street
Melbourne VIC 3000
Independent Expert
BDO Corporate Finance (QLD) Ltd
Level 10
12 Creek Street
Brisbane QLD 4000
94
• SCHEME BOOKLET | Merger with Explaurum Limited
Legal Advisor to EXU
Steinepreis Paganin
Level 4, 16 Milligan Street
Perth WA 6000
Technical Expert
Mining Associates Limited
67 St Paul’s Terrace
Spring Hill Queensland 4004
For personal use only
23 July 2015
Independent Expert’s Report
AUZEX EXPLORATION LIMITED
Independent Expert’s Report
|
23 July 2015
ANNEXURE A
AUZEX EXPLORATION LIMITED
Independent Expert’s Report
For personal use only
Table of Contents
1.0
INTRODUCTION ...................................................................................................... 1
2.0
SUMMARY OF OPINION ............................................................................................. 2
3.0
DESCRIPTION OF THE PROPOSED TRANSACTION ............................................................ 4
4.0
SCOPE OF REPORT AND METHODOLOGY FOR ASSESSMENT ............................................... 6
5.0
OVERVIEW OF AUZEX EXPLORATION LIMITED ................................................................ 9
6.0
OVERVIEW OF EXPLAURUM LIMITED ........................................................................... 15
7.0
OVERVIEW OF THE MERGED GROUP ........................................................................... 23
8.0
VALUE OF AUZEX ON A MINORITY INTEREST BASIS PRIOR TO THE PROPOSED TRANSACTION .... 23
9.0
VALUE OF THE MERGED GROUP FOLLOWING THE PROPOSED TRANSACTION ........................ 29
10.0
FAIRNESS OF THE PROPOSED TRANSACTION .............................................................. 34
11.0
REASONABLENESS OF THE PROPOSED TRANSACTION ................................................... 35
12.0
EXPERT’S OPINION ON THE PROPOSED TRANSACTION .................................................. 39
13.0
SOURCES OF INFORMATION ................................................................................... 39
14.0
REPRESENTATIONS, INDEMNITIES AND WARRANTIES .................................................... 40
15.0
EXPERIENCE, DISCLAIMERS AND QUALIFICATIONS ....................................................... 41
APPENDIX A: INDUSTRY OVERVIEW: GOLD MINING IN AUSTRALIA ............................................. 42
APPENDIX B: COMMON VALUATION METHODOLOGIES............................................................ 44
APPENDIX C: CONTROL PREMIUM ANALYSIS ........................................................................ 46
APPENDIX D: TECHNICAL EXPERT’S REPORT: AUZEX EXPLORATION LIMITED ............................... 46
ii
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Financial Services Guide
The Financial Services Guide (‘FSG’) is provided to comply with the legal requirements imposed by the Corporations
Act 2001 and includes important information regarding the general financial product advice contained in this report
(‘this Report’). The FSG also includes general information about BDO Corporate Finance (QLD) Ltd (‘BDO CFQ’ or
‘we’, ‘us’ or ‘our’), including the financial services we are authorised to provide, our remuneration and our dispute
resolution.
For personal use only
BDO CFQ holds an Australian Financial Services Licence to provide the following services:
(a) financial product advice in relation to deposit and payment products (limited to basic deposit products and
deposit products other than basic deposit products), securities, derivatives, managed investments schemes,
superannuation, and government debentures, stocks and bonds; and
(b) arranging to deal in financial products mentioned in a) above, with the exception of derivatives.
General Financial Product Advice
This Report sets out what is described as general financial product advice. This Report does not consider personal
objectives, individual financial position or needs and therefore does not represent personal financial product advice.
Consequently any person using this Report must consider their own objectives, financial situation and needs. They
may wish to obtain professional advice to assist in this assessment.
The Assignment
BDO Corporate Finance (QLD) Ltd ABN 54 010 185 725, Australian Financial Services Licence No. 245513 has been
engaged to provide general financial product advice in the form of a report in relation to a financial product.
Specifically, BDO CFQ has been engaged to provide an independent expert’s report to the shareholders of Auzex
Exploration Limited (‘Auzex’) in relation to the proposed merger between Auzex and Explaurum Limited (‘the
Proposed Transaction’). The Proposed Transaction will be implemented by way of an Australian scheme of
arrangement.
Further details of the Proposed Transaction are set out in Section 3.0. The scope of this Report is set out in detail in
Section 4.0. This Report provides an opinion on whether or not the Proposed Transaction is in the best interests of
Auzex shareholders.
This Report cannot be relied upon for any purpose other than the purpose mentioned above and cannot be relied
upon by any person or entity other than those mentioned above, unless we have provided our express consent in
writing to do so. A shareholder’s decision to vote in favour of or against the Proposed Transaction is likely to be
influenced by their particular circumstances, for example, their taxation considerations and risk profile. Each
shareholder should obtain their own professional advice in relation to their own circumstances.
Fees, commissions and other benefits we may receive
We charge a fee for providing reports. The fees are negotiated with the party who engages us to provide a report.
We estimate the fee for the preparation of this Report will be approximately $40,000 plus GST. Fees are usually
charged as a fixed amount or on an hourly basis depending on the terms of the agreement with the engaging party.
Our fees for this Report are not contingent on the outcome of the Proposed Transaction.
Except for the fees referred to above, neither BDO CFQ, nor any of its directors, employees or related entities,
receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of this
Report.
Directors of BDO CFQ may receive a share in the profits of BDO Group Holdings (QLD) Pty Ltd, a parent entity of BDO
CFQ. All directors and employees of BDO Group Holdings (QLD) Pty Ltd and its subsidiaries (including BDO CFQ) are
entitled to receive a salary. Where a director of BDO CFQ is a shareholder of BDO Group Holdings (QLD) Pty Ltd, the
person is entitled to share in the profits of BDO Group Holdings (QLD) Pty Ltd.
iii
23 July 2015
Independent Expert’s Report | Auzex Exploration Limited
Associations and relationships
From time to time BDO CFQ or its related entities may provide professional services to issuers of financial products
in the ordinary course of its business. These services may include audit, tax and business advisory services. BDO
CFQ has previously been engaged by Auzex to prepare an independent accountant’s report. BDO CFQ also prepared
an independent expert’s report in relation to the transaction that established Auzex through the demerger of Auzex
Resources Limited’s non-Bullabulling assets.
For personal use only
The signatory to the Report does not hold any shares in Auzex or Explaurum and no such shares have ever been held
by the signatory.
To prepare our reports, including this Report, we may use researched information provided by research facilities to
which we subscribe or which is publicly available. Reference has been made to the sources of information in this
Report, where applicable. Research fees are not included in the fee details provided in this Report.
Complaints
We are members of the Financial Ombudsman Service. Any complaint about our service should be in writing and sent
to BDO Corporate Finance (QLD) Ltd, GPO Box 457, Brisbane QLD 4001.
We will endeavour to resolve the complaint quickly and fairly. If the complaint cannot be satisfactorily resolved
within 45 days of written notification, there is a right to lodge a complaint with the Financial Ombudsman Service.
They can be contacted on 1300 780 808. This service is provided free of charge.
If the complaint involves ethical conduct, a complaint may be lodged in writing with the Institute of Chartered
Accountants, Queensland Branch, GPO Box 2054, Brisbane QLD 4001. The Australian Securities and Investment
Commission (‘ASIC’) also has an Infoline on 1300 300 630 which can be used to make a complaint and obtain
information about investor rights.
Contact Details
BDO Corporate Finance (QLD) Ltd
Location Address:
Postal Address:
Level 10
12 Creek Street
BRISBANE QLD 4000
GPO Box 457
BRISBANE QLD 4001
Phone: (07) 3237 5999
Email: [email protected]
Fax: (07) 3221 9227
iv
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Glossary
v
Reference
Definition
ABV
Asset-based valuation
Auzex
Auzex Exploration Limited
ASIC
Australian Securities and Investment Commission
ASX
Australian Securities Exchange
AUD or $
Australian dollars
AZX
Auzex Resources Limited
BDO CFQ
BDO Corporate Finance (QLD) Ltd
BDO Persons
BDO CFQ, BDO (QLD) or any of its partners, directors, agents or associates
Capital Raising,
the
Explaurum’s capital raising of $1.3 million completed on 29 June 2015
CME
Capitalisation of maintainable earnings
Company, the
Auzex Exploration Limited
Corporations Act,
the
The Corporations Act 2001
DCF
Discounted cash flow
Explaurum
Explaurum Limited before the Proposed Transaction
FSG
Financial Services Guide
IPO
Initial Public Offering
km
Kilometres
MA Report, the
Technical valuation report of the mineral exploration assets held by Auzex prepared by Mining
Associates dated 24 June 2015
MBV
Market-based valuation
Merged Group,
the
Explaurum after the Proposed Transaction
oz
Ounces
Proposed IPO,
the
Auzex’s planned IPO and ASX listing in December 2014
Proposed
Transaction, the
The proposed merger of Auzex and Explaurum (as further defined in Section 3.1)
Regulations, the
The Corporation Regulations 2001
Report, this
This independent expert's report prepared by BDO CFQ dated 23 July 2015
RG 111
Regulatory Guide 111: Content of Expert Report
RGs
Regulatory guides published by ASIC
Scheme Booklet,
the
The Scheme Booklet prepared by Auzex in relation to the Proposed Transaction dated 23 July
2015
23 July 2015
Independent Expert’s Report | Auzex Exploration Limited
For personal use only
vi
Reference
Definition
Share
consolidation
Consolidation of the issued capital of Explaurum on the basis of 1 Explaurum share for every
10 Explaurum shares on issue and 1 Explaurum option for every 10 Explaurum options on issue
t
Tonnes
Tampiagold
Parties, the
Tampiagold Pty Ltd and Goldoro Pty Ltd, Auzex’s joint venture partners in the Tampia Gold
Project
Tranche 1
Capital Raising
64,003,420 shares (on a pre-consolidation basis) issued by Explaurum on 7 May 2015 at an
issue price of $0.003 with 1,600,103 attaching options (on a post-consolidation basis)
Tranche 2
Capital Raising
36,933,028 shares issued by Explaurum at an issue price of $0.03 with 9,233,275 attaching
options (each on a post-consolidation basis)
VWAP
Volume weighted average price
We, us, our
BDO Corporate Finance (QLD) Ltd
23 July 2015
Independent Expert’s Report | Auzex Exploration Limited
For personal use only
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek Street
Brisbane, QLD 4000
GPO Box 457, Brisbane QLD 4001
AUSTRALIA
The Shareholders
C/- The Directors
Auzex Exploration Limited
GPO Box 3249
BRISBANE QLD 4001
23 July 2015
Dear Shareholders,
Independent Expert’s Report
1.0
Introduction
BDO Corporate Finance (QLD) Ltd (‘BDO CFQ’, ‘we’, ‘us’ or ‘our’) has been engaged to provide an independent
expert’s report (‘this Report’) to the shareholders of Auzex Exploration Limited (‘Auzex’ or ‘the Company’) in
relation to the proposed merger (‘the Proposed Transaction’) of Auzex and Explaurum Limited (‘Explaurum’).
Under the terms of the Proposed Transaction, Explaurum will acquire 100% of the shares outstanding in Auzex via a
scheme of arrangement pursuant to Part 5.1 of the Corporations Act 2001. Auzex shareholders will receive 4
Explaurum shares for each Auzex share held. Immediately following the Proposed Transaction, Auzex shareholders
will collectively hold approximately 49.3% of the total outstanding shares in the Merged Group.
To differentiate between Explaurum prior to the Proposed Transaction and Explaurum post the Proposed
Transaction, in this Report we refer to the pre-transaction entity as Explaurum and the post-transaction entity as
'the Merged Group'. We note that the Merged Group as referred to in this Report will not be a ‘new entity’ as such,
but rather Explaurum following the Proposed Transaction. The Merged Group will continue to be called Explaurum
Limited following the Proposed Transaction and will remain listed on the ASX.
A more detailed description of the Proposed Transaction is set out in Section 3.0 of this Report.
In this Report, BDO CFQ has expressed an opinion as to whether or not the Proposed Transaction is ‘fair and
reasonable’ and in the ‘best interests’ of Auzex shareholders.
This Report has been prepared solely for use by the Auzex shareholders prior to the scheme meeting to provide them
with information relating to the Proposed Transaction.
We understand that this Report will be provided to Auzex shareholders to assist them to make an informed decision
on whether to vote in favour of or against the Proposed Transaction. Apart from the purpose stated directly above,
this Report cannot be used or relied on for any other purpose or by any other person or entity.
This Report should be read in full, including the assumptions underpinning our work together with the other
information provided to Auzex shareholders in conjunction with this Report, including the Scheme Booklet prepared
by Auzex in relation to the Proposed Transaction dated 23 July 2015 (‘the Scheme Booklet’).
This Report does not address circumstances specific to individual Auzex shareholders. An Auzex shareholder’s
decision to vote in favour of or against the Proposed Transaction is likely to be influenced by their own particular
circumstances including, for example, their taxation considerations and risk profile. Auzex shareholders should
obtain their own professional advice in relation to their own circumstances.
1
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International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme
approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
2.0
Summary of Opinion
This section is a summary of our opinion only and cannot substitute for a complete reading of this Report.
2.1
Fairness of the Proposed Transaction
For personal use only
In accordance with Regulatory Guide 111: Content of Expert’s Reports (‘RG 111’), a transaction is considered fair if
the value of the consideration offered is equal to or greater than the value of the securities subject of the
transaction. To assess the fairness of the Proposed Transaction, we have:
(a) Calculated the value of the consideration offered to Auzex shareholders under the Proposed Transaction,
being the value of 4 shares in the Merged Group immediately following the Proposed Transaction on a
minority interest basis; and
(b) Compared the value of the consideration offered as determined in (a) above with the value of a share in
Auzex immediately prior to the Proposed Transaction on minority interest basis.
We have completed the value comparison on an equivalent basis (i.e. minority interest in Auzex and a minority
interest in the Merged Group) for the reasons set out in Section 4.2.1 of this Report.
Table 2.1 below summarises our assessment of the fairness of the Proposed Transaction. For a more detailed
assessment of the Proposed Transaction, refer to Section 10.0 of this Report.
Table 2.1: Fairness of the Proposed Transaction
Low
($)
Preferred
($)
High
($)
Value of the consideration offered per Auzex share under the Proposed
Transaction
0.074
0.093
0.180
Value per Auzex share immediately prior to the Proposed Transaction
0.000
0.036
0.232
Source:
BDO CFQ analysis
Having regard to the values set out in Table 2.1 above, it is our view that the value of the consideration offered to
Auzex shareholders under the Proposed Transaction is within the range of value of an Auzex share immediately prior
to the Proposed Transaction. After considering the information summarised above and set out in more detail in
Section 10.0 of this Report, in our view, the Proposed Transaction is Fair to Auzex shareholders as at the date of this
Report.
2.2
Reasonableness of the Proposed Transaction
Table 2.2 below summarises the advantages and disadvantages of the Proposed Transaction. For a more detailed
assessment of the Proposed Transaction, refer to Section 11.0 of this Report.
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Table 2.2: Advantages and Disadvantages of the Proposed Transaction
Advantage

The Proposed Transaction is fair


The primary business activities of the Merged
Group will continue to be consistent with the
current business activity of Auzex
Auzex shareholders interest in the Tampia Project
will be diluted

The Merged Group will have more cash, relative to
Auzex prior to the Proposed Transaction, to fund
its operations
Auzex shareholders will be issued new shares in the
Merged Group and have exposure to a company with
a different non-systematic risk profile

Implementation and other one-off costs of the
Proposed Transaction may be substantial or greater
than anticipated

For personal use only
Disadvantage

Auzex shareholders will be issued with shares in
the Merged Group which will be listed on the ASX

The Merged Group may realise cost synergies

The Proposed Transaction may increase board
capabilities and technical expertise

The Merged Group may have an improved position
in capital markets which may assist to reduce
financing risk
Source:
BDO CFQ analysis
After considering the advantages and disadvantages of the Proposed Transaction summarised above and set out in
more detail in Section 11.0 of this Report, in our view the Proposed Transaction is Reasonable to Auzex shareholders
as at the date of this Report.
2.3
Expert’s Opinion on the Proposed Transaction
In our opinion, the Proposed Transaction is fair and reasonable to Auzex shareholders. On this basis, in the absence
of any other information or a superior offer, it is our view that the Proposed Transaction is in the Best Interests of
Auzex shareholders as at the date of this Report.
Notwithstanding our view that the Proposed Transaction is in the best interests of Auzex shareholders, we strongly
recommend that Auzex shareholders also have regard to the information set out in the balance of this Report.
2.4
Other Considerations for Auzex Shareholders
Before forming a view on whether to vote in favour of or against the Proposed Transaction, we strongly recommend
that Auzex shareholders:

Consult their own professional advisers;

Carefully read all relevant documentation provided to them, including this Report and the Scheme Booklet; and

Consider their own specific circumstances.
The analysis set out in this Report has relied on certain economic, market and other conditions prevailing as at the
date of this Report. We note that changes in these conditions may have a material impact on the information
presented in this Report. BDO CFQ is not responsible for updating this Report in the event that these circumstances
change.
Notwithstanding our view above, we note that both Auzex and Explaurum are companies that are engaged in the
early stages of exploration of mineral assets. In our view, the value of such companies may increase or decrease
materially over short time periods depending upon the outcome of exploration and development activities and
changes in economic circumstances.
The decision to vote in favour of or against the Proposed Transaction is a separate decision to the investment
decision to hold or divest shares in the Merged Group in the event the Proposed Transaction is approved. We
recommend shareholders consult their own professional advisers in relation to the decision on whether to hold or
divest shares in the Merged Group following the Proposed Transaction.
Auzex shareholders should refer to Section 11.5 of this Report for a more detailed discussion of the position of Auzex
shareholders in the event that the Proposed Transaction is not approved and implemented.
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For personal use only
3.0
Description of the Proposed Transaction
3.1
Description of the Proposed Transaction
3.1.1
Overview
On 30 April 2015, Auzex announced that it had entered into a Heads of Agreement with Explaurum whereby
Explaurum would acquire 100% of the shares in Auzex via a scheme of arrangement pursuant to Part 5.1 of the
Corporations Act 2001. As consideration for 100% of the shares outstanding in Auzex, Explaurum will issue to Auzex
shareholders a total of 67,205,796 new ordinary shares (on a post-consolidation basis). Pursuant to the terms of the
Proposed Transaction, each Auzex shareholder will receive 4 Explaurum shares for each Auzex share held.
Following the Proposed Transaction, it is expected that the Merged Group will have 136.2 million ordinary shares
and 22.8 million share options outstanding. The 22.8 million share options will comprise 10.8 million share options
issued to Explaurum shareholders as part of a capital raising prior to the Proposed Transaction (‘the Capital Raising’)
and 12.0 million share options will be issued to directors of Auzex as consideration for the settlement of amounts
owing to them. Further information in relation to the share options are set out in Sections 3.1.2 and 3.1.4 below.
Auzex shareholders will collectively hold approximately 49.3% of the total ordinary shares outstanding in the Merged
Group, on an undiluted basis (i.e. if none of the 22.8 million outstanding share options are exercised), and
approximately 49.8% of the total ordinary shares outstanding in the Merged Group on a fully diluted basis (i.e. if all
of the 22.8 million outstanding share options are exercised).
Upon completion of the Proposed Transaction, the board of the Merged Group will consist of two current directors of
Auzex and two directors of Explaurum.
On 26 June 2015 (prior to the Proposed Transaction), Explaurum shareholders passed the resolution for a 1 for 10
share consolidation (‘the Share Consolidation’) and to conduct the Capital Raising as per the terms set out in Section
3.1.2 below. Following the Share Consolidation and the Capital Raising, but prior to the Proposed Transaction,
Explaurum has approximately 69.0 million ordinary shares and 10.8 million share options outstanding.
Key terms of the Scheme are set out in the balance of this section.
3.1.2
Explaurum Capital Raising
On 30 April 2015, Explaurum announced that it has secured commitments for $1.3 million via the issue of up to
433,333,333 fully paid ordinary shares at $0.003 per share, together with 108,333,333 attaching options (on a preconsolidation basis). The proceeds from the Capital Raising will be used to advance Explaurum’s Lyons Gold Project,
fund exploration at Auzex’s Tampia Gold Project, investigate further project acquisitions and meet working capital
needs.
The issue consists of two tranches:

64.0 million shares (on a pre-consolidation basis) issued on 7 May 2015 (‘Tranche 1 Capital Raising’). This
equates to 6.4 million shares on a post-consolidation basis;

1.6 million attaching options (on a post-consolidation basis) issued to the participants of the Tranche 1
placement on 29 June 2015; and

36.9 million shares and 9.2 million attaching options (on a post-consolidation basis) issued on 29 June 2015
(‘Tranche 2 Capital Raising’).
The Capital Raising is expected to cost $78,000.
Refer to section 6.3 of the Scheme Booklet for additional information in relation to the Capital Raising.
3.1.3
Explaurum Loan
On 23 April 2015 Explaurum entered into a loan agreement with Auzex to a loan of $600,000 to Auzex. As at 15 May
2015, Auzex had drawn down a sum of $200,000 under the loan agreement with $100,000 of this amount being
drawn down in April 2015. The loan agreement was subsequently amended on 19 May 2015 for the total loan amount
to increase from $600,000 to $800,000.
The final $600,000 was advanced to Auzex within one business day of Explaurum issuing the shares and options
under Tranche 2 Capital Raising.
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Refer to section 5.11.1 of the Scheme Booklet for additional information in relation to the loan agreement between
Explaurum and Auzex.
3.1.4
Auzex Related Party Creditors
For personal use only
Auzex has payables of $883,150 in relation to salaries and fees and $105,205 in relation to annual leave entitlements
owing to the directors of Auzex. As a condition of the Scheme, Explaurum will issue 12,000,000 creditor options (on
a post-consolidation basis) to the directors of Auzex as consideration for the settlement of amounts owing to them.
3.1.5
Ineligible Foreign Shareholders
Ineligible foreign shareholders are Auzex shareholders whose address as shown in the Auzex Share Register at 5.00
pm on the Record Date is a place outside Australia and its external territories and New Zealand.
Explaurum will not issue shares to any ineligible foreign shareholders as part of the Proposed Transaction. New
Explaurum shares that would have been issued to ineligible foreign shareholders will be issued to a sale agent, who
will sell the shares on ASX and pay to each ineligible foreign shareholder their proportion of the cash proceeds.
Refer to section 4.11 of the Scheme Booklet for additional information in relation to ineligible foreign shareholders.
3.1.6
Implementation
Auzex shareholders should refer to section 9 of the Scheme Booklet for further information in relation to the merger
and its implementation.
3.1.7
Indicative Timetable
Auzex shareholders should refer to the ‘Important Dates’ section at the front of the Scheme Booklet for the key
dates relating to the Proposed Transaction.
3.2
Conditions Precedent
On 18 May 2015, Explaurum announced that it has executed a Merger Implementation Deed with Auzex, which sets
out conditions to the Scheme being proposed and becoming effective in sections 3 and 4. These conditions
precedent, which are also set out in section 4.3 of the Scheme Booklet, include the following:

Auzex and Explaurum completing their financial, commercial and legal due diligence to their sole and absolute
discretion;

Auzex and Explaurum obtaining all necessary shareholder approvals in relation to the Proposed Transaction;

Explaurum issuing 12 million options (on a post-consolidation basis) at an exercise price of $0.03 per Explaurum
share (provided that the volume weighted average price of Explaurum shares for five consecutive trading days
prior to the date of exercise is at least $0.05) and expiring three years from the date of issue to related party
creditors of Auzex as consideration for the settlement of outstanding amounts owing to those parties;

Convertible notes issued by Auzex being converted into 3 million Auzex shares;

All Auzex staff, contractors and directors to whom Explaurum wishes to offer employment entering into
replacement services agreements with Explaurum;

Auzex procuring an Independent Expert’s Report which concludes that the Proposed Transaction is in the best
interests of Auzex shareholders;

No material adverse change in respect of Auzex and Explaurum occurring or becoming known to the other party
in the Proposed Transaction;

No Auzex or Explaurum regulated event occurring or becoming known to the other party in the Proposed
Transaction, where regulated event is any of the events set out in Schedule 3 and 5 of the Merger
Implementation Deed;

The court approving the Proposed Transaction in accordance with section 411(4)(b) of the Corporations Act;

ASIC issuing or providing consents, waivers or approvals necessary to implement the Proposed Transaction; and
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
No regulatory authority prohibiting the completion of the Proposed Transaction or declining to issue an order,
decree, ruling, notification or communication required for the Proposed Transaction to be implemented.
3.3
Strategic Rationale for the Proposed Transaction
For personal use only
The Proposed Transaction represents a realisation of Auzex’s company strategy to:

gain access to funds and experience to assist in exploring and developing the Tampia Gold Project; and

list shares on the ASX to provide shareholders with a more liquid market for transacting in their shares.
4.0
Scope of Report and Methodology for Assessment
4.1
Scope of Report
An independent expert, in certain circumstances, must be appointed to meet requirements set out in the
Corporations Act 2001 (‘the Corporations Act’), the Corporation Regulations 2001 (‘the Regulations’), the regulatory
guides (‘RGs’) published by the Australian Securities and Investments Commission (‘ASIC’) and the listing
requirements of the stock exchanges on which a company is listed. We have summarised the requirements of the
Corporations Act and the Regulations, and the ASX listing requirements in sections 4.1.1 and 4.1.2 below. We have
summarised the guidance provided by the RGs in section 4.2 below.
Auzex has engaged BDO CFQ to provide an opinion on whether the Proposed Transaction is ‘fair and reasonable’ and
‘in the best interests’ of Auzex shareholders. This Report cannot be used by any other person for any other reason or
for any other purpose. We understand that this Report will be distributed to Auzex shareholders together with the
Scheme Booklet.
This Report is general financial product advice only and has been prepared without taking into account the
objectives, risk profile, financial situation or needs of individual Auzex shareholders. Before deciding whether to
vote in favour of or against the Proposed Transaction, individual Auzex shareholders should consider the
appropriateness of the advice having regard to their own objectives, financial situation or needs, including their own
taxation consequences. Auzex shareholders should read in full the Scheme Booklet in relation to the Proposed
Transaction.
Whether to vote in favour of or against the Proposed Transaction is a matter for individual Auzex shareholders based
on their expectations as to value and future market conditions, and their own particular circumstances including risk
profile, liquidity preference, investment strategy, portfolio structure and tax position. Auzex shareholders who are
in doubt as to the action they should take in relation to the Proposed Transaction should consult their own
professional advisers.
4.1.1
Requirements of the Corporations Act and Regulations
Section 411 of the Corporations Act relates to Australian schemes of arrangement. Under section 411, in order for an
Australian scheme of arrangement to be approved, no less than 75% of the votes cast at the scheme meeting must
vote in favour of the scheme and no less than 50% by number of the shareholders present at the meeting must vote
in favour of the scheme.
Part 3 of schedule 8 of the Regulations details the prescribed information relating to schemes of arrangement.
Specifically, clause 8303 of schedule 8 states that an independent expert’s report stating whether, in the opinion of
the expert, the proposed scheme is in the best interests of the company’s shareholders must accompany a scheme
document if:
(a) A party to the proposed scheme has a prescribed shareholding in the company subject to the scheme; or
(b) The directors of the company are also directors of the company subject to the scheme.
As at the date of this Report, we understand that the above conditions do not apply and neither the Corporations
Act nor the Regulations specifically require that an independent expert’s report be provided to Auzex shareholders
in relation to the Proposed Transaction. While this Report is not required to be provided for the purpose of
complying with any specific provisions of the Corporations Act or the Regulations, we have been requested by the
directors of Auzex to prepare this Report to accompany the Scheme Booklet.
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4.1.2
Requirements of the ASX Listing Rules
We have been instructed that Auzex will not be using this Report or our assessment of the Proposed Transaction for
the purpose of complying with the listing requirements of the ASX or any other stock exchange.
For personal use only
4.2
Methodology for Assessment
ASIC have issued Regulatory Guide 111: Content of Expert Report (‘RG 111’), which provides guidance in relation to
independent expert’s reports. RG 111 relates to the provision of independent expert’s reports in a range of
circumstances, including those where the expert is required to provide an opinion in relation to a proposed merger.
RG 111 states that the independent expert’s report should explain the particulars of how the proposed merger was
examined and evaluated as well as the results of the examination and evaluation.
RG 111 specifically differentiates between control and non-control transactions in providing guidance on the type of
analysis to complete. Where a control transaction is to occur by way of a scheme of arrangement, RG 111 states
that the independent expert should have regard to whether the transaction is ‘fair’ and ‘reasonable’ to
shareholders. As per the opinion required under part 3 of schedule 8 of the Regulations, an offer that is ‘fair and
reasonable’ or ‘not fair but reasonable’ would be ‘in the best interests’ of Auzex shareholders.
To meet the ASIC requirements, an expert seeking to determine whether a proposal is ‘fair’ and ‘reasonable’, and
therefore in the ‘best interests’ of shareholders, should complete the steps set out below.
4.2.1
Step 1 – Assessment of Fairness
Under RG 111, an offer will be considered ‘fair’ if the value of the consideration to be received by the shareholders
is equal to or greater than the value of the shares that are the subject of the offer. Fairness in a control transaction
is to be assessed by comparing the value of the consideration offered with the full underlying value of the target
assuming 100% of the target was available to be acquired. Where the consideration offered comprises scrip in the
acquirer, the consideration value is to be assessed as the expected market price of those securities on a minority
interest basis immediately following the proposed transaction.
In certain circumstances, RG 111 provides for some flexibility in the basis of the assessment. RG 111.31 states that
a different approach may be appropriate where there is a merger of entities of equivalent value when control of the
merged entity will be shared between the bidder and target (‘merger of equals’). In these circumstances, the
expert may be justified in using an equivalent approach to valuing the securities of the bidder and target.
In our view, the Proposed Transaction represents a merger of equals for the following reasons:

Auzex shareholders in aggregate will hold approximately 49.3% of the Merged Group on an undiluted basis and
approximately 49.8% on a fully diluted basis;

No individual shareholder in the Merged Group, or group of associated shareholders in the Merged Group, will
have a shareholding in excess of 20% (the threshold generally accepted as the ability to exert significant
influence over a company);

The Board of the Merged Group will be equally represented. The anticipated Board will consist of two directors
from Auzex and two directors from Explaurum;

The intention of both Auzex and Explaurum directors at the time of negotiating the Proposed Transaction was a
merger rather than a control transaction; and

Explaurum’s proposed takeover of Auzex will not reduce the opportunity for shareholders in the Merged Group to
attract a takeover offer and may even increase the opportunity for Auzex shareholders to attract a takeover
offer and obtain a control premium.
Having regard to the above, in our view, to assess whether the Proposed Transaction is ‘fair’ it is appropriate to:
(a) Determine the value of a share in Auzex immediately prior to the Proposed Transaction on a minority
interest basis. We have valued Auzex on a minority basis to ensure an 'equivalent approach' is used to
valuing the bidder and the target given our view that the Proposed Transaction represents a merger of
equals; and
(b) Compare the value determined in (a) above with the value of a share in the Merged Group immediately
following the Proposed Transaction, on a minority interest basis.
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Under RG 111 the Proposed Transaction will be considered ‘fair’ to Auzex shareholders if the value of a share in the
Merged Group determined in (b) above is equal to or greater than the value of a share in Auzex determined in (a)
above.
For personal use only
4.2.2
Step 2 – Assessment of Reasonableness
To assess whether the Proposed Transaction is ‘reasonable’ it is appropriate to examine other significant factors to
which Auzex shareholders may give consideration prior to forming a view on whether to vote for or against the
Proposed Transaction. This includes comparing the likely advantages and disadvantages of approving the Proposed
Transaction with the position of an Auzex shareholder if the Proposed Transaction is not approved, as well as a
consideration of other significant factors.
There is no explicit legal definition of what constitutes an advantage or disadvantage, nor is there a definitive legal
or regulatory definition for the methodology to be adopted to weight each advantage and disadvantage relative to
each other. The requirements involve judgement on the part of the expert as to the overall commercial effect of
the proposal. The expert must weigh up the advantages and disadvantages of the proposal and form an overall view
as to whether the advantages of the proposal outweigh the disadvantages.
Our assessment of the reasonableness of the Proposed Transaction is set out in Section 11.0 below.
4.2.3
Step 3 – Expert’s Opinion
Upon completion of steps 1 and 2, it may be possible to conclude that the Proposed Transaction is ‘reasonable’ if
there are valid reasons for the approval, notwithstanding that the Proposed Transaction may not be regarded as
‘fair’ to the shareholders. Generally speaking, an offer is ‘reasonable’ if it is ‘fair’. It may also be ‘reasonable’,
despite not being ‘fair’, if after considering other significant factors the interests of the shareholders are reasonably
balanced.
Our report will provide our opinion as to whether or not the Proposed Transaction is ‘fair’ and ‘reasonable’. While
all issues need to be considered before drawing an overall conclusion, we will assess the ‘fairness’ and
‘reasonableness’ issues separately for clarity.
If our opinion of the Proposed Transaction is that it is ‘fair and reasonable’ then we will also be able to conclude
that the Proposed Transaction is ‘in the best interests of the shareholders of Auzex’. If our opinion of the Proposed
Transaction is that it is ‘not fair but reasonable’, we may still conclude that the Proposed Transaction is ‘in the best
interests of the shareholders of Auzex’. In this circumstance, we will clearly state that the consideration is not
equal to or greater than the value of an Auzex share, but there are sufficient reasons for Auzex shareholders to vote
in favour of the Proposed Transaction in the absence of a superior proposal. If our opinion of the Proposed
Transaction is that it is ‘not fair and not reasonable’, then we will conclude that the Proposed Transaction is ‘not in
the best interests of the shareholders of Auzex’.
Our conclusion in relation to whether or not the Proposed Transaction is in the best interests of the shareholders of
Auzex is set out in Section 12.0 of this Report.
In this Report we have not provided any taxation, legal or other advice of a similar nature in relation to the
Proposed Transaction. Other advisers have provided advice in relation to those matters to Auzex in relation to the
Proposed Transaction.
In the process of assessing the Proposed Transaction, we have:

relied on certain economic, market and other conditions prevailing as at the date of this Report. We note that
changes in these conditions may have a material impact in the results presented in this Report. BDO CFQ is not
responsible for updating this Report in the event that these circumstances change; and

made certain assumptions. Where these assumptions are material to our work, we have set them out in this
Report.
This Report has been prepared in accordance with professional standard APES 225: Valuation Services issued by the
Accounting Professional and Ethical Standards Board.
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5.0
Overview of Auzex Exploration Limited
5.1
Description of Auzex
For personal use only
Auzex is an unlisted public company limited by shares that was incorporated in October 2011 to assist in enabling
the demerger of the non-Bullabulling Gold Project assets of Auzex Resources Limited (‘AZX’) in December 2011.
Assets acquired by Auzex at the time of the demerger included:

Khartoum tin-tungsten project in north Queensland (100%);

Running Brook gold-copper project in north Queensland (100%);

Galala Range gold-tungsten-molybdenum project in north Queensland (100%);

Kingsgate molybdenum- bismuth project in northern New South Wales (100%);

Klondyke/Seven Hills gold project in northern New South Wales (100%);

Lyell gold project on the south island of New Zealand (73%);

$2.0 million cash; and

7,022,472 shares in the merged entity Bullabulling Gold Limited (ASX: BAB).
Following the demerger, Auzex acquired an 80% interest in the Tampia Gold Project in February 2012. Auzex’s Lyell
Gold Project and its Seven Hills Gold Project have been surrendered, while the Galala Range Gold-tungstenmolybdenum Project is also in the process of being surrendered.
An overview of Auzex’s current projects is set out in Section 5.1.1 below.
5.1.1
Overview of Auzex Projects
Tampia Gold Project (Auzex 90%)
The Tampia Gold Project was acquired by Auzex in February 2012 for a $500,000 cash payment to Tampiagold Pty
Ltd and Goldoro Pty Ltd (‘the Tampiagold Parties’) in consideration for an 80% interest in the project. Tampia Gold
Project is located 300 kilometres (‘km’) east of Perth in the Wheat Belt of Western Australia and consists of eight
exploration licences, three prospecting licences and two mining leases.
Exploration within the Tampia Gold Project is considered to be within its early stages, and modern exploration
methods and modelling have yet to be extensively applied. A public release from Explaurum dated 30 April 2015
reported inferred mineral resources at the Tampia Gold Project of 4,700,000 tonnes at an average grade of 2.0g/t
Au for 310,000 ounces (‘oz’) of gold, in accordance with the guidelines of JORC 2012 code. The deposits are
contained within a zone named the Gault prospect. We understand that Auzex has a target to add 550,000 to
700,000 oz of gold to the current resource within the twelve month period commencing February 2015.
Under the terms of the joint venture agreement between Auzex and the Tampiagold Parties, the Tampiagold Parties
may convert their participating interest in Tampia Gold Project into a similar percentage of Auzex shares under
certain conditions (i.e. a 20% interest in the joint venture would convert into a 20% interest in Auzex shares). In the
event of conversion of the Tampiagold Parties’ interests, Auzex will have to pay a royalty to the Tampiagold Parties
equal to 2% of the gross proceeds received by Auzex after the conversion date, semi-annually in arrears. In addition,
Auzex will contribute cash calls to meet all joint venture expenditure during the free carry period, which
commences on 17 February 2012 and ends at the completion of the project’s feasibility study.
Auzex advanced a $120,000 loan to Tampiagold Pty Ltd in February 2013. As at 30 April 2015, the outstanding
amount owing to Auzex was $187,501, which includes accrued interest of $67,501. This loan will be converted on 30
June 2015 into an additional 10% interest in the Tampia Gold Project, resulting in an increase in Auzex’s interest in
the project from 80% to 90%.
Refer to section 4.0 of the technical expert’s report for more detailed discussion of the Tampia Gold Project and
section 5.11.2 of the Scheme Booklet for more detailed discussion of the joint venture agreement between Auzex
and the Tampiagold Parties.
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For personal use only
Figure 5.1: Tampia Gold Projects
Source:
Auzex Management
Khartoum, Tin and Tungsten Project (Auzex 100%)
The tenements in the North Queensland Project area were initially acquired based on Auzex’s prospectivity models
for intrusion related tin mineralisation similar to the porphyry style tin and tungsten mineralisation of the mines of
the Bolivian tin belt. We understand four new tenements have accordingly been targeted for high grade tin vein
mineralisation in the exo-contact of tin rich granites and low grade high tonnage tin mineralisation within the tin
granites.
The Khartoum tenement is located approximately 100km south-west of Cairns in North Queensland and contains over
50 tin, tungsten, molybdenum and gold occurrences. Historic production is estimated to be 15,000 tonnes (‘t’) tin.
Outcropping tin mineralisation is associated with 107 recognised greisen zones covering an aggregate area exceeding
50km2.
Refer to section 5.0 of the technical expert’s report for more detailed discussion of the Khartoum Project.
Running Brook, Copper and Gold Project (Auzex 100%)
The Running Brook Project area was originally highlighted by the prospectivity modelling studies of Auzex for granite
related gold mineralisation and is located in North Queensland, 150km south-west of Cairns. This project was
modelled on the prolific Kidston Gold Mine (3.5 Million ounces between 1985 and 2001) located approximately
120km south of Running Brook.
We understand that AEL has an objective to develop a 3D prospectivity model for the Running Brook prospect that
will be used to produce prioritised drill targets to test the source of gold and copper mineralisation found to date.
Drilling will be carried out to test all targets, especially the granite contacts to the east and at depth. This is due to
be carried out immediately once Auzex has successfully secured alternative funding for the project.
Refer to section 5.0 of the technical expert’s report for more detailed discussion of the Running Brook Project.
Kingsgate, Molybdenum and Bismuth Project (Auzex 100%)
The Kingsgate project was acquired after prospectivity modelling for granite related gold mineralisation over
Eastern Australia and the West coast of New Zealand identified the granites in the Kingsgate region as having the
potential to host intrusion related gold mineralisation. Located 20km east of Glen Innes, the Kingsgate Mine was the
second largest producer of molybdenum in Australia.
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We understand that the preferred option for Auzex is the injection of development capital for project equity, and a
contribution to development and operational management. Subject to a suitable outcome regarding financing of the
project, the approvals path (culminating in the grant of a Mining Lease and the right to commence operation), could
commence immediately and is estimated to take six to twelve months.
Refer to section 6.0 of the technical expert’s report for more detailed discussion of the Kingsgate Project.
For personal use only
5.2
Equity Structure of Auzex
As at 31 May 2015, Auzex had 13,801,449 ordinary shares on issue and 6 convertible notes on issue. After conversion
of the 6 convertible notes into 3,000,000 fully paid ordinary Auzex shares on 30 June 2015, Auzex has 16,801,449
ordinary shares on issue.
5.2.1
Top 10 Shareholders of Auzex Ordinary Shares
The top 10 shareholders of Auzex ordinary shares as at the date of this Report are set out in Table 5.1 below. Table
5.1 does not consider the impacts of any changes in shareholding arising from the Proposed Transaction.
Table 5.1: Top 10 Auzex Shareholders as at 23 July 2015
Percentage of
Total Shares
(%)
Shareholder
Number of Shares
1
EPOCC XT LLC
2,861,350
17.03
2
Misty Grange Pty Ltd
1,211,123
7.21
3
HSBC Custody Nominees (Australia) Limited
1,037,581
6.18
4
National Nominees Limited
933,273
5.55
5
John Andrew Rodgers
600,000
3.57
6
Bullabulling Gold (UK) Limited
570,371
3.39
7
JP Morgan Nominees Australia Limited
565,943
3.37
8
Peninsula Goldfields Pty Ltd
546,669
3.25
9
Jervois Mining Limited
515,000
3.07
10 CRM Holdings Pty Ltd
Other shareholders
Total Shares on Issue
500,000
2.98
7,460,139
44.40
16,801,449
100.00
Source: Auzex Management
5.3
Auzex Historical Financial Information
This section of this Report sets out the historical financial information of Auzex. As this Report contains only
summarised historical financial information, we recommend that any user of this Report read and understand the
additional notes and financial information contained in Auzex’s annual reports which include the full statements of
comprehensive income, statements of financial position and statements of cash flows.
Auzex’s accounts were audited by Ernst and Young. BDO CFQ has not performed any audit or review of any type on
the historical financial information of Auzex. We make no statement as to the accuracy of the information provided.
However, we have no reason to believe that the information is misleading.
5.3.1
Comprehensive Income
The consolidated statements of comprehensive income of Auzex for the 12 months ended 30 June 2012, 2013 and
2014 and for the 6 month period ended 31 December 2014 are summarised in Table 5.2 below.
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Table 5.2: Summarised Auzex Statements of Comprehensive Income
For personal use only
12 Months Ended
30-Jun-12
Audited
($)
12 Months Ended
30-Jun-13
Audited
($)
12 Months Ended
30-Jun-14
Audited
($)
6 Months Ended
31-Dec-14
Unaudited
($)
Other income on expiry of an
option for the disposal of noncurrent assets
-
-
30,714
-
Profit on disposal of non-current
assets
-
-
413,804
-
32,710
20,064
43,373
20,112
32,710
20,064
487,891
20,112
(277)
(3,872,788)
(774,771)
(14,524)
(45,924)
(1,196,204)
-
-
(277,765)
(946,941)
(505,385)
(647,719)
-
-
(22,603)
-
Total expenses from continuing
operations
(323,966)
(6,015,933)
(1,302,759)
(662,243)
Profit/(Loss) from continuing
operations before tax
(291,256)
(5,995,869)
(814,868)
(642,131)
-
-
-
-
(291,256)
(5,995,869)
(814,868)
(642,131)
-
-
(24,958)
-
Net gain/(loss) on foreign
currency translation reserve
taken to equity
16,941
8,017
-
-
Total comprehensive income
(274,315)
(5,987,852)
(839,826)
(642,131)
Interest Income
Total income from continuing
operations
Impairment / write-off of
exploration expenses
Impairment of available for sale
asset
General & administrative
expenses
Finance costs
Income tax benefit attributable
to operating loss
Profit/(Loss) from continuing
operations after tax
Net gain/(loss) on foreign
currency taken to profit and loss
Source: Auzex 2012-14 Annual Reports, Auzex 2015 Half Year Management Accounts
In relation to the financial performance of Auzex set out in Table 5.2 above we note the following:

Aside from interest income, Auzex has no consistent operating revenues for the periods set out in Table 5.2
above;

In FY2014, Auzex recognised profit on disposal of its shares held in Bullabulling Gold Limited and Jervois Mining
Limited. These assets were disposed as a result of Auzex implementing its objective to divest non-core mining
exploration projects;

Auzex impaired approximately $3.9 million and $0.8 million of previously capitalised deferred exploration costs
in FY2013 and FY2014 in relation to the Kingsgate, Klondyke/Seven Hills and Lyell tenements which were
relinquished during these years; and

Auzex impaired approximately $1.2 million of available for sale assets in FY2013 due to the decline in value of
Bullabulling Gold Limited and Jervois Mining Limited shares held by Auzex.
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5.3.2
Financial Position
The consolidated statements of financial position of Auzex as at 30 June 2012, 2013 and 2014 and as at 31 December
2014 are summarised in Table 5.3 below.
For personal use only
Table 5.3: Summarised Auzex Statements of Financial Position
As at
30-Jun-12
Audited
($)
As at
30-Jun-13
Audited
($)
As at
30-Jun-14
Audited
($)
As at
31-Dec-14
Unaudited
($)
Current assets
Cash
1,135,596
358,896
354,214
90,791
75,000
75,000
75,000
65,000
Term deposits (secured)
Other receivables
38,701
165,102
262,138
218,722
1,249,297
598,998
691,352
374,513
67,347
50,423
38,753
30,339
Deferred exploration and evaluation phase costs
6,724,517
3,987,612
3,942,662
4,398,928
Investment in available for sale asset
1,334,271
168,780
-
Total non-current assets
8,126,135
4,206,815
3,981,415
4,429,267
Total assets
9,375,432
4,805,813
4,672,767
4,803,780
-
-
525,000
525,000
Payables
79,478
516,723
577,613
831,884
Provisions for employee benefits
74,031
102,638
92,993
111,869
153,509
619,361
1,195,606
1,468,753
Provisions for rehabilitation
123,605
123,605
123,605
123,605
Total non-current liabilities
123,605
123,605
123,605
123,605
Total liabilities
277,114
742,966
1,319,211
1,592,358
9,098,318
4,062,847
3,353,556
3,211,422
9,372,633
10,325,014
10,455,549
10,955,549
16,941
24,958
-
-
(291,256)
(6,287,125)
(7,101,993)
(7,744,127)
9,098,318
4,062,847
3,353,556
3,211,422
Total current assets
Non-current assets
Property, plant and equipment
Current liabilities
Convertible notes
Total current liabilities
Non-current liabilities
Net assets
Equity
Contributed equity
Other reserves
Accumulated losses
Total equity
Source: Auzex 2012-14 Annual Reports, Auzex 2015 Half Year Management Accounts
In relation to the financial position of Auzex set out in Table 5.3 above we note the following:

Of the $6.7 million deferred exploration and evaluation phase costs as at 30 June 2012, $6.0 million was
transferred from AZX. Exploration expenditure for FY2012 totalled $0.7 million;

Auzex has a $75,000 term deposit lodged with Westpac Banking Corporation which is used as security for bank
guarantees issued to the NSW Government to secure tenement rehabilitation obligations. Bank guarantees
outstanding as at 30 June 2014 totalled $75,000;

Auzex sold its investments in Bullabulling Gold Limited and Jervois Mining Limited in FY2014 which were
classified as available for sale assets. The sale of the shares resulted in a gain of $413,804;
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
Auzex issued the following convertible notes in FY2014:
— Five convertible notes to EPOCC XT LLC each with a face value of $100,000 for a total subscription of
$500,000; and
For personal use only
— One convertible note to Peninsula Goldfields Pty Ltd with a face value of $25,000;

Auzex is required to outlay annual rentals and meet expenditure requirements to maintain current rights of its
exploration tenements. The expenditure commitments relate to Auzex’s Queensland, New South Wales and
Western Australia tenements and are based on an agreed work program with the relevant respective state
governments and can be varied by agreement or by relinquishment of the underlying tenements. The
commitments as at 30 June 2014 total $8.3 million, of which $1.6 million is payable not later than one year. It is
ordinarily expected that as work is completed and the relevant commitments are met, the value of the
exploration tenements will also increase;

Payables as at 30 June 2014 include $470,189 of accrued liabilities owing to the directors of Auzex in relation to
salaries and fees owing to them. For completeness it is noted that the accrued liability was $886,003 as at
30 June 2014 prior to the directors of Auzex resolving to forgive $415,814 of the liability; and

Contributed equity increased from $9.4 million as at 30 June 2012 to $11.0 million as at 31 December 2014 as a
result of capital raising through a series of share placements and a rights issue. The rights issue, undertaken in
October 2014, was to raise funds for a proposed listing on the ASX in November 2014. The proposed listing did
not materialise.
5.3.3
Cash Flows
The consolidated statement of cash flows of Auzex for the 12 month periods ended 30 June 2012, 2013 and 2014 and
for the 6 month period ended 31 December 2014 are summarised in Table 5.4 below.
Table 5.4: Summarised Auzex Statements of Cash Flow
12 Months
Ended
30-Jun-12
Audited
($)
12 Months
Ended
30-Jun-13
Audited
($)
12 Months
Ended
30-Jun-14
Audited
($)
6 Months
Ended
31-Dec-14
Unaudited
($)
Cash Flows from / (used in) Operating
Activities
Goods and services tax received
9,218
115,185
73,479
48,342
(212,930)
(861,215)
(511,072)
(464,334)
32,068
19,683
43,979
20,188
(171,644)
(726,347)
(393,614)
(395,804)
Proceeds from sale of fixed assets
-
2,016
-
-
Proceeds from available for sale assets
-
-
582,584
-
Redemption of short term deposits
-
-
-
-
Purchase of short term deposits
-
-
-
-
Purchase of property, plant and equipment
-
-
(5,073)
-
(692,760)
(1,004,750)
(844,113)
(367,619)
(692,760)
(1,002,734)
(266,602)
(367,619)
Payments to suppliers and employees
Interest received
Net cash flows from / (used in) operating
activities
Cash Flows from / (used in) Investing
Activities
Payment for exploration and evaluation
expenditure
Net cash flows from / (used in) investing
activities
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12 Months
Ended
30-Jun-12
Audited
($)
12 Months
Ended
30-Jun-13
Audited
($)
12 Months
Ended
30-Jun-14
Audited
($)
6 Months
Ended
31-Dec-14
Unaudited
($)
For personal use only
Cash Flows from Financing Activities
Cash from demerger from AZX
2,000,000
-
-
-
Proceeds from issue of shares
-
1,045,500
130,534
500,000
Proceeds from convertible notes
-
-
525,000
-
Share capital raising expenses
-
(93,119)
-
-
Net cash flows from financing activities
2,000,000
952,381
655,534
500,000
Net increase / (decrease) in cash held
1,135,596
(776,700)
(4,682)
(263,423)
Opening cash balance
-
1,135,596
358,896
354,214
Closing cash balance
1,135,596
358,896
354,214
90,791
Source: Auzex 2012-14 Annual Reports, Auzex 2015 Half Year Management Accounts
In relation to the cash flows of Auzex set out in Table 5.4 above we note the following:

Auzex’s net cash used in operating activities increased by $0.6 million in FY2013 largely as a result of an
increase in general and administrative expenses;

Payments in relation to exploration and evaluation expenditure increased substantially in FY2013. Exploration
effort has been focussed on the Tampia Gold Project since Auzex acquired an 80% interest in February 2013;

In FY2014, the proceeds from available for sale assets significantly increased as a result of Auzex divesting its
interests in Bullabulling Gold Limited and Jervois Mining Limited; and

Auzex’s operating and investing activities have been funded by cash from financing activities over the past three
and a half year period starting 30 June 2012.
6.0
Overview of Explaurum Limited
6.1
Description of Explaurum
Explaurum Limited, a junior exploration company, acquires and explores mineral projects primarily in Australia. The
company was formerly known as Erongo Energy Limited before changing its name to Explaurum Limited in November
2013. Explaurum is based in Subiaco, Western Australia and has been listed on the ASX since 15 July 2005.
The focal point of Explaurum operations is the discovery of significant gold and base metal deposits. It holds a 100%
interest in the Lyons Project consisting of four exploration licences and licence applications totalling 908km2 in
Western Australia. We understand that Explaurum is currently reviewing new project opportunities to complement
its existing asset portfolio.
6.1.1
Overview of Explaurum Projects
Lyons Project, Western Australia (100%)
The Lyons Project, located about 230km northwest of Meekatharra and 65km west of the Abra polymetallic deposit,
covers a highly prospective portion of the Edmund Subgroup of the Western (lower) Bangemall Basin close to the
northern margin of the Yilgarn Craton or ‘reworked’ lower Proterozoic Craton remnants. Explaurum acquired the
Lyons Project in June 2013 through the acquisition of Ninghan Exploration Pty Ltd.
Desktop studies continue and work undertaken in early 2015 focused on selecting initial target areas. Subsequently,
we understand that five target areas prospective for gold and base metals were identified for follow up exploration.
During early 2015 the three remaining exploration licence applications were approved, and following the initial
target review analysis, Explaurum completed the partial surrender of the least prospective portions of the two
larger licences. This is expected to reduce the annual work commitment and licence fees. The project now
comprises four granted exploration licences totalling 908 km2.
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Other Projects
Explaurum has continued to review new project opportunities to complement the existing asset portfolio. The
projects reviewed have been located in Australia, South America and Africa, and are prospective for a range of
precious and base metals.
For personal use only
6.2
Equity Structure of Explaurum
On 7 May 2015, Explaurum issued 64,003,420 shares through Tranche 1 of the Capital Raising. The issuance of these
shares increased the total number of shares on issue to 320,494,080.
Explaurum subsequently performed the following:

Complete a 1 for 10 share consolidation; and

Issue a further 36,933,028 shares with 9,233,275 attaching options through Tranche 2 Capital Raising as well as
1,600,103 options to Tranche 1 Capital Raising participants on 29 June 2015.
Explaurum has 68,982,491 shares on issue and 10,833,378 options on issue following the completion of the Capital
Raising and the Share Consolidation.
6.2.1
Top 10 Shareholders of Explaurum Ordinary Shares
The top 10 shareholders of Explaurum ordinary shares as at the date of this Report are set out in Table 6.1 below.
Table 6.1 does not consider the impacts of any changes in shareholding arising from the Proposed Transaction.
Table 6.1: Top 10 Explaurum Shareholders as at 23 July 2015
Shareholder
1
Pershing Australia Nominees Pty Ltd <Placement A/c>
Number of Shares
Percentage of
Total Shares
(%)
10,934,318
15.85
2
J P Morgan Nominees Australia Limited
4,410,567
6.39
3
HSBC Custody Nominees (Australia) Limited - GSCO ECA
3,144,004
4.56
4
Ajava Holdings Pty Ltd
2,840,082
4.12
5
Mark Calderwood
2,620,000
3.80
6
Redtown Enterprises Pty Ltd
2,286,611
3.31
7
BT Portfolios Services Ltd <Warrell Holdings S/F A/c>
1,666,668
2.42
8
Jervois Mining Limited
1,666,666
2.42
9
Ellamar Pty Ltd
1,600,000
2.32
10 Auralandia Pty Ltd
1,562,115
2.26
Other shareholders
36,251,460
52.55
68,982,491
100.00
Total Shares on Issue
Source: Explaurum Management
6.3
Trading of Explaurum Shares on the ASX
This section sets out our analysis of the share market performance of Explaurum by considering:

The recent price of Explaurum shares listed on the ASX; and

The liquidity of Explaurum shares.
6.3.1
Explaurum’s Share Price
Explaurum’s shares are listed on the ASX. Figure 6.1 below sets out Explaurum’s daily volume weighted average
price (‘VWAP’) and volume traded over the period from 2 June 2014 to 31 May 2015.
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Figure 6.1: Explaurum’s Daily VWAP from 2 June 2014 to 31 May 2015
$0.0100
6,000,000
$0.0090
5,000,000
$0.0080
VWAP ($)
4,000,000
(a)
$0.0060
3,000,000
$0.0050
$0.0040
Volume
For personal use only
$0.0070
2,000,000
(b)
$0.0030
(c)
(d)
$0.0020
(h)
(e)
(f)
$0.0010
Volume
VWAP ($)
(i)
(g)
1,000,000
0
Key Event
Source: Capital IQ as at 29 June 2015
Over the period graphed in Figure 6.1, the Explaurum daily VWAP shows a period low of $0.0012 on 20 March 2015
and a period high of $0.0090 on 5 September 2014.
In addition to the share price and trading data, we have also provided additional information in this Report to assist
readers to understand possible reasons for movements in Explaurum’s share price and volume of share trades over
the time period analysed. We have provided a summary of Explaurum’s announcements over the period from 2 June
2014 to 31 May 2015 in Table 6.2 below.
Table 6.2: Summary of Explaurum’s Announcements over the period from 2 June 2014 to 31 May 2015
Date
Announcement
(a)
26 September 2014
Explaurum released Annual Report for the year ended 30 June 2014. Explaurum had an
after tax loss of $629,777 for the financial year.
(b)
21 October 2014
Explaurum released a Notice of Annual General Meeting which included a proposed
resolution for issuance of ordinary shares up to 10% of its issued share capital through
placements.
(c)
27 November 2014
Explaurum released results of Annual General Meeting, including the passing of all
proposed resolutions.
(d)
30 January 2015
Explaurum released a Quarterly Activity Report which included the announcement of the
partial surrender of the least prospective portions of two licences, reducing annual work
commitment and reducing tenement holding by 38%.
(e)
23 April 2015
Explaurum announced that its securities would be placed on a trading halt at the
company’s request, pending the release of an announcement by Explaurum regarding the
acquisition of new mineral projects and capital raising plans.
(f)
27 April 2015
Explaurum announced that its securities would be suspended from official quotation
immediately at the company’s request, pending the release of an announcement
providing details of the Capital Raising.
(g)
30 April 2015
Explaurum announced the Capital Raising and proposed acquisition of a 100% interest in
Auzex.
Explaurum announced its immediate reinstatement to official quotation and released the
merger presentation for investors in relation to the proposed merger between Explaurum
and Auzex.
(h)
7 May 2015
Explaurum announced completion of first tranche of the Capital Raising for 64 million
shares at $0.003 each, totalling $192,000.
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Date
(i)
Announcement
Explaurum announced that it has executed a formal merger implementation deed in
respect of the acquisition of Auzex.
17 May 2015
In Table 6.3 below we have set out Explaurum’s VWAP for the 1 week, 1 month, 3 months, 6 months, 9 months and
12 months prior to 23 April 2015, being the date Explaurum entered into a trading halt pending the release of the
announcement of the Proposed Transaction, and 31 May 2015. We have set out Explaurum’s VWAP prior to 23 April
2015 to provide additional information regarding Explaurum’s share price performance excluding the effects of the
Proposed Transaction.
Table 6.3: Explaurum’s VWAP prior to 23 April 2015 and 31 May 2015
Period before 23 April
2015
VWAP ($)
Period before 31 May
2015
VWAP ($)
1 Week
0.0020
1 Week
0.0034
1 Month
0.0020
1 Month
0.0032
3 Months
0.0019
3 Months
0.0027
6 Months
0.0023
6 Months
0.0026
9 Months
0.0038
9 Months
0.0036
12 Months
0.0040
12 Months
0.0038
Source: Capital IQ as at 29 June 2015
The information set out it Table 6.3 above is also expressed graphically in Figure 6.2 below.
Figure 6.2: Explaurum VWAP over Specified Periods
Volume-Weighted Average Share Price ($)
For personal use only
Source: ASX Announcements
0.0045
0.0040
0.0035
0.0030
0.0025
0.0020
0.0015
0.0010
0.0005
0.0000
1 Week
1 Month
3 Months
6 Months
9 Months
12 Months
Period Included in VWAP
Period prior to 23 April 2015
Period prior to 31 May 2015
Source: Capital IQ as at 29 June 2015
6.3.2
Liquidity of Explaurum Shares
Table 6.4 below summarises the monthly liquidity of Explaurum shares from May 2014 to April 2015. Liquidity has
been summarised by considering the following:

Volume of Explaurum trades per month;

Number of trades in Explaurum shares per month;

Total value of trades per month;

Volume of Explaurum trades per month as a percentage of total Explaurum shares on issue at the end of the
month; and

Average volume of Explaurum shares per trade per month.
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For personal use only
Table 6.4: Liquidity of Explaurum Shares
Volume per
Shares
Outstanding
Monthly
VWAP
Volume
May 2015
22,872,690
77,140
306,779,060
7.46%
$0.0034
April 2015
1,221,780
3,480
256,490,660
0.48%
$0.0028
March 2015
3,479,100
6,960
256,490,660
1.36%
$0.0020
February 2015
412,500
830
256,490,660
0.16%
$0.0020
January 2015
211,000
430
256,490,660
0.08%
$0.0020
December 2014
3,660,750
10,900
256,490,660
1.43%
$0.0030
November 2014
852,500
2,570
256,490,660
0.33%
$0.0030
October 2014
2,463,700
9,950
256,490,660
0.96%
$0.0040
September 2014
9,028,970
71,040
256,490,660
3.52%
$0.0079
308,670
1,590
256,490,660
0.12%
$0.0052
2,422,700
10,880
256,490,660
0.94%
$0.0045
961,000
5,050
256,490,660
0.37%
$0.0053
200,820
1
18.37%
$0.0042
August 2014
July 2014
June 2014
Total
47,895,360
Turnover
Shares
Outstanding
Month
260,681,360
Source: Capital IQ as at 29 June 2015
1 Average number of shares outstanding.
Based on an average number of 260,681,360 Explaurum shares on issue, approximately 18.37% of Explaurum shares
on issue were traded over the period from 1 June 2014 to 31 May 2015. Given the above information, we consider
that Explaurum exhibited relatively low liquidity over the period.
6.4
Explaurum Historical Financial Information
This section of this Report sets out the historical financial information of Explaurum. As this Report contains only
summarised historical financial information, we recommend that any user of this Report read and understand the
additional notes and financial information contained Explaurum’s annual reports which include the full statements
of comprehensive income, statements of financial position and statements of cash flows.
Explaurum’s full year accounts were audited by HLB Mann Judd and its accounts for the 6 month period ending
31 December 2014 were reviewed by HLB Mann Judd. BDO CFQ has not performed any audit or review of any type
on the historical financial information of Explaurum. We make no statement as to the accuracy of the information
provided. However, we have no reason to believe that the information is misleading.
6.4.1
Comprehensive Income
The consolidated statement of comprehensive income of Explaurum for the 12 month periods ended 30 June 2012,
2013 and 2014 and for the 6 month period ended 31 December 2014 are summarised in Table 6.5 below.
Table 6.5: Summarised Explaurum Statements of Comprehensive Income
12 Months
Ended
30-Jun-12
Audited
($)
12 Months
Ended
30-Jun-13
Audited
($)
12 Months
Ended
30-Jun-14
Audited
($)
6 Months
Ended
31-Dec-14
Reviewed
($)
Interest income
57,173
6,473
13,175
3,794
Foreign exchange gain
26,962
5,007
-
8,884
Net gain on disposal of property, plant and
equipment
681
-
-
-
Total income from continuing operations
84,816
11,480
13,175
12,678
Exploration expenditure written off
(158,910)
-
(690)
-
Legal, regulatory and compliance
(138,238)
(127,902)
(123,181)
(61,601)
(21,530)
(14,438)
(13,569)
(6,675)
(550,142)
(419,793)
(76,898)
(37,777)
Advertising and promotion
Benefits expense
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12 Months
Ended
30-Jun-12
Audited
($)
Legal and other consultants
12 Months
Ended
30-Jun-14
Audited
($)
6 Months
Ended
31-Dec-14
Reviewed
($)
(21,828)
(28,587)
(930)
-
(305,834)
(169,330)
(62,494)
(33,668)
Depreciation and amortisation
(6,114)
(3,561)
(5,230)
(3,896)
Equity compensation expense
(80,997)
(52,000)
-
-
Total expenses from continuing operations
(1,283,593)
(815,611)
(282,992)
(143,617)
Profit/(Loss) from continuing operations before
tax
(1,198,777)
(804,131)
(269,817)
(130,939)
-
(5,913,692)
(359,960)
-
(1,198,777)
(6,717,823)
(629,777)
(130,939)
80,200
(1,523)
(15,004)
-
Administration
For personal use only
12 Months
Ended
30-Jun-13
Audited
($)
Loss after tax from discontinued operation
Profit/(Loss) from continuing operations after tax
Net gain/(loss) on foreign currency translation
reserve taken to equity
Disposal of Subsidiary
Total comprehensive income
-
-
(232,963)
-
(1,118,577)
(6,719,346)
(877,744)
(130,939)
Source: Explaurum 2012-2014 Annual Reports and Explaurum 2015 Half Year Statutory Accounts.
In relation to the financial performance of Explaurum set out in Table 6.5 above we note the following:

Explaurum disposed of its 60% interest in the Maniema Gold Project and its 90% interest in Erongo Energy
Namibia (Pty) Ltd in FY2014 for nominal consideration. As a result, previously written off exploration
expenditure in relation to these projects are classified as losses after tax from discontinued operation and
disposal of subsidiary, totalling $5.8 million in FY2013 and $0.6 million in FY2014; and

Explaurum has experienced net loss in total comprehensive income in all periods reported. In particular, there
was a significant loss in FY2013 as a result of the $5.8 million exploration expenditure write off in relation to the
Maniema Gold Project.
6.4.2
Financial Position
The consolidated statements of financial position of Explaurum as at 30 June 2012, 2013 and 2014 and for the
6 month period ended 31 December 2014 are summarised in Table 6.6 below.
Table 6.6: Summarised Explaurum Statements of Financial Position
As at
30-Jun-12
Audited
($)
As at
30-Jun-13
Audited
($)
As at
30-Jun-14
Audited
($)
As at
31-Dec-14
Reviewed
($)
Current assets
Cash
663,226
360,589
455,530
277,259
19,952
4,271
34
5,237
683,178
364,860
455,564
282,496
9,375
9,375
9,375
9,375
32,909
30,422
15,959
12,063
4,559,249
577,308
230,473
266,881
Total non-current assets
4,601,533
617,105
255,807
288,319
Total assets
5,284,711
981,965
711,371
570,815
541,285
-
-
-
Trade and other receivables
Total current assets
Non-current assets
Receivables
Plant and equipment
Deferred exploration expenditure
Current liabilities
Loans payable
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As at
30-Jun-12
Audited
($)
For personal use only
Trade and other payables
As at
30-Jun-13
Audited
($)
As at
30-Jun-14
Audited
($)
As at
31-Dec-14
Reviewed
($)
468,613
30,379
37,524
27,907
Total liabilities
1,009,898
30,379
37,524
27,907
Net assets
4,274,813
951,586
673,847
542,908
13,445,832
14,418,701
15,018,706
15,018,706
3,050,952
4,577,517
3,193,794
3,193,794
(12,209,780)
(16,916,622)
(17,538,653)
(17,669,592)
(12,191)
(1,128,010)
-
-
4,274,813
951,586
673,847
542,908
Equity
Issued equity
Reserves
Accumulated losses
Non-controlling interests
Total equity
Source: Explaurum 2012-2014 Annual Reports and Explaurum 2015 Half Year Statutory Accounts.
In relation to the financial position of Explaurum set out in Table 6.6 above we note the following:

The $9,375 non-current receivables figure each year represents a rental bond held by Explaurum;

Loans outstanding of $0.5 million as at 30 June 2012 relate to a loan from Afrimines, Explaurum’s joint venture
partner in the Maniema Gold Project. Explaurum drew down a further US$1.95 million in FY2013 before the total
loan outstanding was converted into equity in the Maniema Gold Project, resulting in Afrimines’ 10% increase in
interest in the Maniema Project;

Deferred exploration expenditure declined significantly in FY2013 and FY2014 due to exploration expenditure
write offs of $5.8 million and $0.6 million respectively;

Explaurum acquired all shares in Ninghan Exploration Pty Ltd, which holds 100% interest in the Lyons Project in
August 2013 for a consideration of 16 million newly issued ordinary shares and $50,000. The acquisition resulted
in an increase in capitalised exploration expenditure of $130,000 in FY2014; and

Explaurum issued 45.3 million shares worth $1.0 million and 122.9 million shares worth $0.6 million in FY2013
and FY2014 respectively as a result of the acquisition of the Lyons Project, private placements, consideration for
consulting services and exercise of share options.
6.4.3
Cash Flows
The consolidated statement of cash flows of Explaurum for the 12 month periods ended 30 June 2012, 2013 and 2014
and for the 6 month period ended 31 December 2014 are summarised in Table 6.7 below.
Table 6.7: Summarised Explaurum Statements of Cash Flow
12 Months
Ended
30-Jun-12
Audited
($)
12 Months
Ended
30-Jun-13
Audited
($)
12 Months
Ended
30-Jun-14
Audited
($)
6 Months
Ended
31-Dec-14
Reviewed
($)
Cash flows from / (used in) Operating
Activities
Payments to suppliers and employees
(1,049,963)
(865,179)
(265,992)
(154,541)
65,673
6,473
13,175
3,794
(984,290)
(858,706)
(252,817)
(150,747)
Proceeds on disposal of plant and equipment
49,764
11,301
19,228
-
Funds leaving group on disposal of subsidiary
-
-
(9,327)
-
Interest received
Net cash flows from / (used in) operating
activities
Cash flows from / (used in) Investing
Activities
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12 Months
Ended
30-Jun-12
Audited
($)
For personal use only
Payments for subsidiary
12 Months
Ended
30-Jun-13
Audited
($)
12 Months
Ended
30-Jun-14
Audited
($)
6 Months
Ended
31-Dec-14
Reviewed
($)
-
-
(50,000)
-
Payment for property, plant and equipment
(28,828)
(8,939)
(15,000)
-
Loans received from JV partner
541,285
-
-
-
(2,240,326)
(2,262,018)
(115,910)
(36,408)
(1,678,105)
(2,259,656)
(171,009)
(36,408)
1,800,500
995,357
534,357
-
-
1,872,600
-
-
Payment for exploration expenditure
Net cash flows from / (used in) investing
activities
Cash Flows from Financing Activities
Proceeds from issue of shares and options
Proceeds from shares issued to noncontrolling interests in subsidiary
Issue costs for shares and options
(115,746)
(65,488)
(14,352)
-
Net cash flows from financing activities
1,684,754
2,802,469
520,005
-
Net increase / (decrease) in cash held
(977,641)
(315,893)
96,179
(187,155)
Opening cash balance
1,592,736
663,226
360,589
455,530
48,131
13,256
(1,238)
8,884
663,226
360,589
455,530
277,259
Effects of exchange rate fluctuations on the
balances of cash held in foreign currencies
Closing cash balance
Source: Explaurum 2012-2014 Annual Reports and Explaurum 2015 Half Year Statutory Accounts.
In relation to the cash flows of Explaurum set out in Table 6.7 above we note the following:

Proceeds from shares issued to non-controlling interests in subsidiary relate to the further US$1.95 million ($1.87
million) loan drawn down from Afrimines. The full amount of outstanding loan, including the $0.5 million drawn
down in FY2012, was subsequently converted into equity in the Maniema Gold Project;

In FY2014, the payments for exploration expenditure significantly decreased as a result of Explaurum’s disposal
of its interest in the Maniema Gold Project;

Payments for subsidiary of $50,000 in FY2014 relates to the acquisition of the Lyons Project; and

Explaurum’s operating and investing activities have been funded by cash from financing activities over the three
and a half year period starting 30 June 2012.
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7.0
Overview of the Merged Group
7.1
Description of the Merged Group
For personal use only
Under the Proposed Transaction, Explaurum will obtain a 100% interest in Auzex by issuing 67.2 million Explaurum
shares (on a post-consolidation basis) and it is intended that Auzex be a wholly owned subsidiary of Explaurum. The
Merged Group is expected to have 22.8 million options on issue, of which 10.8 million relate to options attached to
shares issued in the Capital Raising and 12 million relate to options issued to Auzex directors for settlement of
amounts owing to them.
The Merged Group will be focused on developing the Tampia Gold Project, with a view to becoming a successful
mid-tier Australian gold producer. The strategic objective is to take the Tampia Gold Project through to completion
of a bankable feasibility study, and subsequently, to development and production.
The board of the Merged Group will initially comprise two directors nominated by Auzex and two directors
nominated by Explaurum. The proposed board composition of the Merged Group is set out in Table 7.1 below.
Table 7.1: Proposed Merged Group Board
Name
Board Position
Mr Patrick Flint (Explaurum)
Non-Executive Director
Mr Mark Calderwood (Explaurum)
Technical Director
Mr Chris Baker (Auzex)
Independent Non-Executive Chairman
Mr John Lawton (Auzex)
Managing Director
Source:
30 April 2015 Merger Presentation
7.2
Pro Forma Financial Position of the Merged Group
Auzex shareholders should refer to section 7.9 of the Scheme Booklet for further information in relation to the pro
forma financial position of the Merged Group.
8.0
Value of Auzex on a Minority Interest Basis Prior to the Proposed Transaction
This section of this Report sets out our valuation of Auzex on a minority interest basis prior to the Proposed
Transaction and is structured as follows:

Section 8.1 sets out our view of the most appropriate valuation methodologies to adopt for the purpose of
valuing Auzex;

Section 8.2 sets out our calculation of the value of each Auzex share using the asset based valuation
methodology;

Section 8.3 sets out our calculation of the value of each Auzex share using the market based valuation
methodology; and

Section 8.4 sets out our view of the most appropriate value to adopt for each Auzex share for the purpose of this
Report.
8.1
Valuation Approach
RG 111 outlines a number of methodologies that a valuer should consider when valuing securities or assets for the
purposes of, among other things, share buy-backs, selective capital reductions, schemes of arrangement, takeovers
and prospectuses. The valuation methodologies we have considered in this Report include the discounted cash flow
(‘DCF’), capitalisation of maintainable earnings (‘CME’), asset-based valuation (‘ABV’) and market-based valuation
(‘MBV’) methodologies. Further details on each of these valuation methodologies are set out in Appendix B of this
Report.
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RG 111 does not prescribe which methodology should be used by the expert but rather notes that the decision lies
with the expert based on the expert’s skill and judgement and after considering the unique circumstances of the
securities or assets being valued. We have considered each of the valuation methodologies outlined above and
determined, in our view, the most appropriate methodology for calculating the value of Auzex prior to the Proposed
Transaction. Table 8.1 below summarises our view of the most appropriate valuation methodology to adopt to value
Auzex in this Report.
For personal use only
Table 8.1: Summary of Possible Auzex Valuation Methodologies
Valuation Methodology
Appropriate
Explanation
The DCF methodology relies on the ability to forecast future cash
flows with a reasonable degree of certainty over a sufficiently long
period of time.
DCF Valuation
×
The future cash flows of Auzex are unable to be forecast with the
appropriate degree of accuracy as at the date of this Report. In
particular, we note that the mineral exploration assets held by Auzex
are in very early stages of development and are unlikely to generate
any positive cash flows in the near term.
In our view, a DCF methodology is not appropriate for the purposes of
valuing Auzex shares in this Report.
The assets owned by Auzex do not currently generate an earnings
stream that is suitable for use in a CME valuation methodology.
CME Valuation
×
In our view, a CME valuation methodology is not appropriate for the
purposes of valuing Auzex shares in this Report.
In our view, it is appropriate to have regard to an asset based
valuation methodology for the purposes of valuing Auzex shares in this
Report. The assets and liabilities of Auzex can be identified and it is
possible to determine the fair value of this identifiable assets and
liabilities with a reasonable degree of accuracy.
Asset Based Valuation

Mining Associates, a specialist valuation expert, has prepared a
valuation of the mining exploration assets held by Auzex. We have
had regard to a valuation report prepared by Mining Associates when
determining an appropriate value to adopt for the mining exploration
assets held by Auzex.
Auzex is not listed on a stock exchange where market prices for Auzex
shares can be readily observed.
Market Based Valuation

Cross check
We have however considered the information which is available,
including a rights issue.
In our view it is appropriate to have regard to the MBV methodology as
a cross-check to our ABV of Auzex in this Report.
Source: BDO CFQ analysis
Having regard to the information set out in Table 8.1 above, in our view it is appropriate to adopt the ABV
methodology to value Auzex. We have adopted the MBV methodology as a cross-check to our ABV of Auzex in this
Report.
8.2
Asset Based Valuation of Auzex Prior to the Proposed Transaction
In order to complete an asset based valuation of Auzex we have considered the value of Auzex’s assets and liabilities
as set out in Auzex’s management statement of financial position as at 30 April 2015 and the value of Auzex’s
mineral exploration assets as determined by Mining Associates. BDO CFQ has not performed any audit or review
work on the historical financial information of Auzex. Accordingly, we make no statement as to the accuracy of the
information provided however we have no reason to believe that the information is false or misleading.
Our asset based valuation of Auzex is set out as follows:
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
Section 8.2.1 sets out the value adopted for Auzex’s mineral exploration assets;

Section 8.2.2 sets out the value adopted for Auzex’s other assets and liabilities;

Section 8.2.3 sets out our rationale for the minority interest figure we adopted; and

Section 8.2.4 sets out the asset based valuation of Auzex prior to the Proposed Transaction.
For personal use only
8.2.1
Mining Associate’s Valuation of the Mineral Exploration Assets held by Auzex
We have engaged the services of Mining Associates to assist with a technical valuation of the mineral exploration
assets held by Auzex. Mining Associates are specialist technical valuers of mineral assets and, in our opinion, are
suitably qualified to complete a valuation of the mineral exploration assets held by Auzex.
Mining Associates have set out their view of the fair value of the mineral exploration assets held by Auzex in a
report addressed to BDO CFQ titled “Report on the Technical Valuation of Auzex Exploration Limited’s Mineral Assets
in Australia”, dated 24 June 2015 (‘the MA Report’). We are of the view that it is appropriate for us to refer to the
MA Report when determining an appropriate value for the mineral exploration assets held by Auzex. The MA Report
is attached as Appendix D of this Report.
Mining Associates has adopted the market approach and its extension, the yardstick approach, as the principle bases
for the properties included in their valuation. The Kilburn Geoscience Rating method, a cost approach, is included as
a check on values obtained by the market approach. Further details in relation to the valuation methodologies
considered by Mining Associates are as follows:

Comparable transactions approach (market approach)
— This approach considers transaction values observed for exploration assets considered broadly comparable to
the mineral exploration assets held by Auzex, on the basis of size and grade; and
— This methodology is used by Mining Associates in determining the value of the JORC compliant mineral
resources in Tampia;

Yardstick approach (extension of market approach)
— This approach considers transaction values in terms of a dollar per unit area or dollar per unit of resource in
the ground for exploration assets considered broadly comparable to the mineral exploration assets held by
Auzex;
— A range of implied dollar per unit of resource from broadly comparable transactions is used by Mining
Associates in determining the value of the JORC compliant mineral resources in Tampia; and
— Various ranges of implied dollar per unit area from broadly comparable transactions with no published
resources is used by Mining Associates in determining the value of the tenements in Tampia (excluding the
Gault deposit mining lease, which contains the JORC compliant resources in Tampia), North Queensland and
Kingsgate; and

Kilburn Geoscience Rating method
— This method values a project based on an assessment of its technical attributes to define prospectivity. The
prospectivity rating is then applied to the property’s Base Acquisition Cost, which is defined by totalling
licence application fees, minimum expenditure requirements and access costs; and
— Mining Associates have separately assessed the prospectivity of each group of tenements to generate a value
for each group as a verification of the values from other methods. The groups of tenements valued using this
method are those in Tampia (excluding the Gault deposit mining lease), North Queensland and Kingsgate.
The preferred values for the exploration projects are based on a combination of ranges determined by the market
approach values supplemented with lower confidence Kilburn Geoscience Ratings for exploration licences.
Table 8.2 summarises the range of values that Mining Associates has determined for the mineral exploration assets
held by Auzex.
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Table 8.2: Summary Valuations for the Mineral Exploration Assets held by Auzex
Market Approach
Comparable
Transactions
For personal use only
Project
Low
($m)
Tampia Resources
Cost Approach
Kilburn
Geoscience
Yardstick
High
($m)
Low
($m)
Preferred
High
($m)
Low
($m)
High
($m)
Low
($m)
Preferred
($m)
High
($m)
1.29
1.50
1.10
2.50
-
-
1.10
1.50
2.50
Tampia Exploration
-
-
0.09
0.34
0.08
1.30
0.10
0.30
1.30
North Queensland
Exploration
-
-
0.18
0.68
0.26
2.60
0.20
0.50
2.60
Kingsgate
-
-
0.01
0.01
0.01
0.22
0.01
0.01
0.20
1.41
2.31
6.6
Total
Source: Table 22 of the Mining Associates Report
1 The preferred values adopted for Tampia Resources are on the basis of 90% ownership by Auzex and account for the
Tampiagold Parties’ 10% interest which is free-carried up to completion of a feasibility study, after which time they can elect
to either retain a 10% participating interest, or convert their interest to shares and receive a 2% royalty. Auzex’s joint
venture agreement with the Tampiagold Parties is discussed in more detail in section 5.11.2 of the Scheme Booklet.
Table 8.2 shows that Mining Associates considers the value of the mineral exploration assets held by Auzex to be
within the range of $1.4 million to $6.6 million, with a preferred value of $2.3 million. As set out in section 8 of the
MA Report, Mining Associates has chosen preferred market values closer to the lower value ranges as the tenements
are not in immediate proximity to existing mines and infrastructure.
We note that Mining Associates’ valuation is on a fair value basis, which provides the “estimate of the amount of
money, or cash equivalent, which would be likely to change hands between a willing buyer and a willing seller in an
arms-length transaction, wherein each party had acted knowledgeably, prudently and without compulsion” as at 24
June 2015, being the date of MA Report.
8.2.2
Value of Other Assets and Liabilities
We have been provided with Auzex’s management statement of financial position as at 30 April 2015 which sets out
the value of Auzex’s other assets and liabilities. In order to determine an appropriate value for Auzex’s other assets
and liabilities, we have considered the values set out in Auzex’s statement of financial position as at 30 April 2015
and have made enquiries of the directors and management of Auzex in relation to any material adjustments
required to reflect the fair market value of these assets and liabilities for the purposes of this Report.
Table 8.3 below summarises our view, based on our enquiries of the directors and management of Auzex, of an
appropriate value to adopt for Auzex’s other assets and liabilities for the purpose of the valuation work set out in
this Report.
Table 8.3: Value of Auzex’s Other Assets and Liabilities
Value
($)
Assets
Cash
72,964
Add: Proceeds from Explaurum loan
Less: Estimated transaction costs
1
2
700,000
(340,000)
Trade and other receivables3
91,555
Property, plant and equipment
26,501
Liabilities
Loan from Explaurum
(800,000)
Trade and other payables
(169,269)
Related party creditors
(883,150)
Provision for annual leave
(113,974)
Provisions for rehabilitation
Net assets / deficiency excluding mineral exploration assets
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(123,605)
(1,529,978)
For personal use only
Source: Auzex management statement of financial position as at 30 April 2015 and BDO CFQ analysis
1 As at 30 April 2015, $100,000 of the loan has already been advanced to Auzex and is included in the cash balance. The
$700,000 set out in this table represents the remaining amount of loans to be advanced to Auzex.
2 Estimated transaction costs set out in this table are transaction costs that will be incurred by Auzex irrespective of whether
or not the Proposed Transaction is approved and which have not been accrued as at 30 April 2015.
3 Trade and other receivables have been adjusted to exclude a loan advanced to Tampiagold Pty Ltd with an amount
outstanding as at 30 April 2015 of $187,501 ($120,000 principal and $67,501 interest accrued). We understand that this loan
will be converted on 30 June 2015 into an additional 10% interest in the Tampia Gold Project, resulting in an increase in
Auzex’s interest in the project from 80% to 90%.
With reference to Table 8.3 above, we have calculated the net value of Auzex’s other assets and liabilities to be a
net asset deficiency of approximately $1.5 million.
For completeness we note that in addition to the liabilities set out in Table 8.3, Auzex also had convertible notes
outstanding as at 30 April 2015 totalling $591,432 (including accrued interest of $66,432). For the purpose of our
analysis we have assumed that the convertible notes have been converted into 3 million shares and we have not
included them above.
8.2.3
Application of a Minority Interest Discount
An asset based valuation typically calculates the value of a company on a controlling interest basis. As the valuation
of Auzex set out in this section is an asset based valuation (i.e. a controlling interest basis), it is appropriate to
apply a minority discount to calculate the value on a minority interest basis. We note that a minority interest in a
company is generally regarded as being less valuable than that of a controlling interest as a controlling interest may
provide the owner with the following:

Control over the operating and financial decisions of the company;

The right to set the strategic direction of the company;

Control over the buying, selling and use of the company’s assets; and

Control over the appointment of staff and setting of financial policies.
The increase in value for a controlling interest is often observed where an acquirer launches a takeover bid, or some
other mechanism for control, for another company. Empirical research suggests that control premiums are typically
within the range of 20% to 40% which is consistent with recent transactions in Australia. The inverse of this range to
apply for a minority discount is 16.7% to 28.6%.
For the purposes of this Report, in our view it is appropriate to adopt a minority discount of 23.1% to calculate the
value of Auzex on a minority interest basis. We have set out further discussion in relation to the control premium in
Appendix C of this Report.
8.2.4
Asset Based Valuation of Auzex on a Minority Interest Basis Prior to the Proposed Transaction
Table 8.4 below summarises our asset based valuation of Auzex on a minority interest basis prior to the Proposed
Transaction.
Table 8.4: Equity Value of Auzex on a Minority Interest Basis
Section
Reference
Low Value
($)
Preferred
($)
High Value
($)
Mineral exploration assets
8.2.1
1,410,000
2,310,000
6,600,000
Other assets and liabilities
8.2.2
(1,529,978)
(1,529,978)
(1,529,978)
(119,978)
780,022
5,070,022
-23.10%
-23.10%
-23.10%
(92,263)
599,837
3,898,847
16,801,449
16,801,449
16,801,449
2
0.036
0.232
Asset based value of Auzex - controlling interest basis
Less minority interest discount
8.2.3
Asset based value of Auzex - minority interest basis
Number of Auzex shares on issue
1
Value per Auzex share - minority interest basis
5.2
0.000
Source: BDO CFQ Analysis
1 Number of Auzex shares equal to 13,801,449 shares plus 3,000,000 shares issued on conversion of the convertible notes.
2 While the calculation is equal to negative $0.005, we have adopted a value of $0.000.
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With reference to Table 8.4 above, our asset based valuation equates to a value range of $0.000 to $0.232 per Auzex
ordinary share on a minority interest basis.
8.3
Market Based Valuation of Auzex Prior to the Proposed Transaction
For personal use only
We have cross-checked our asset based valuation of an Auzex share with a market based valuation. We note that a
market based valuation generally provides a value per share on a minority interest basis.
Since its demerger from AZX, Auzex has completed numerous share placements and a rights issue. These
transactions have primarily related to capital raisings to fund explorations and in preparation for an IPO and ASX
listing in December 2014 (‘the Proposed IPO’). In addition, Auzex performed a consolidation of its issued capital on
the basis of 1 Auzex share for every 3 Auzex shares on issue on 25 August 2014.
Table 8.5 below summarises Auzex’s past share placements and a rights issue. To improve comparability across the
periods before and after the 1:3 share consolidation completed on 25 August 2014, in the right hand column of the
table we have provided additional information in relation to the implied share prices of the transactions assuming
the 1:3 share consolidation had occurred.
Table 8.5: Auzex Movements in Ordinary Share Capital
Transaction
Description
$0.10 million
share
placement


$0.15 million
share
placement

$0.57 million
share
placement

$0.23 million
share
placement

$0.13 million
share purchase
plan

1:3 share
consolidation






$0.50 million
pre-IPO rights
issue



28
Post-Consolidation Basis
On 9 August 2012, Auzex issued 400,000 ordinary shares for
cash at $0.25 per share
The shares issued represented approximately 1.84% of the
total Auzex shares outstanding prior to the completion of
the issue

On 12 October 2012, Auzex issued 600,000 ordinary shares
for cash at $0.25 per share
The shares issued represented approximately 2.71% of the
total Auzex shares outstanding prior to the completion of
the issue

On 28 February 2013, Auzex issued 2,280,000 ordinary
shares for cash at $0.25 per share
The shares issued represented approximately 10.04% of the
total Auzex shares outstanding prior to the completion of
the issue

On 15 April 2013, Auzex issued 902,000 ordinary shares for
cash at $0.25 per share
The shares issued represented approximately 3.61% of the
total Auzex shares outstanding prior to the completion of
the issue

On 25 September 2013, Auzex issued 520,000 ordinary shares
for cash at $0.25 per share
The shares issued represented approximately 2.01% of the
total Auzex shares outstanding prior to the completion of
the issue

On 25 August 2014, Auzex performed a consolidation of
Auzex’s issued capital on the basis of 1 Auzex share for
every 3 Auzex shares on issue
Auzex had 25,883,084 shares on issue pre-consolidation

Number of shares on
issue postconsolidation:
8,801,449
On 27 October 2014, Auzex issued 5,000,000 ordinary shares
fully paid for cash at $0.10 per share
The rights issue relates to funding a proposed listing on the
ASX in November 2014 and is offered to shareholders who
have subscribed to any capital raising of Auzex in the last 30
months at $0.25 per share
The issue was fully subscribed from existing shareholders
taking up the rights issue and sophisticated investors taking
up the balance

Actual share price:
$0.10 per share
Actual shares issued:
5,000,000
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





Implied share price:
$0.75 per share
Implied shares issued:
133,333
Implied share price:
$0.75 per share
Implied shares issued:
200,000
Implied share price:
$0.75 per share
Implied shares issued:
760,000
Implied share price:
$0.75 per share
Implied shares issued:
300,667
Implied share price:
$0.75 per share
Implied shares issued:
173,333
Source: Auzex management, BDO CFQ Analysis
For personal use only
With reference to Table 8.5 above, we note the following:

The share issues set out above have occurred since August 2012;

The share trades have separately represented between 1.84% and 56.81% of the total shares outstanding prior to
the completion of each issue of shares. We consider the transactions to relate to minority parcels of shares;

There have been approximately 6.6 million Auzex shares issued at between $0.10 and $0.75 per share on a postconsolidation basis. The majority of the share issues at $0.75 (on an implied post-consolidation basis) were in
the period from August 2012 to September 2013 while the October 2014 rights issue was at a significant discount
of $0.10; and

It is our view that the most relevant transaction for the purpose of the market based valuation is the rights issue
on 27 October 2014 at $0.10, due to the following:
— It is a relatively recent cash transaction that is post Auzex’s 1:3 share consolidation; and
— It represents a significant proportion of Auzex shares outstanding prior to the completion of the issue.
Having regard to the information set out above, our market based valuation equates to a value of $0.10 per Auzex
ordinary share on a minority interest basis and supports our ABV calculation.
For completeness we note that our MBV of Auzex of $0.10 is between our ABV preferred value of $0.036 and ABV
high value of $0.232. Possible explanations for this include:

The rights issue was a pre-IPO capital raising. Participants in the capital raising may have been more optimistic
on Auzex’s prospects in light of the anticipated IPO (which ultimately did not eventuate);

Our ABV incorporates transaction costs in relation to the Proposed Transaction; and

Auzex has incurred operational expenses since the rights issue in October 2014.
8.4
Value per Auzex Share Prior to the Proposed Transaction
In our view, for the purpose of the analysis set out in this Report it is appropriate to adopt a value in the range of
$0.000 to $0.232 per Auzex ordinary share on a minority interest basis, based on ABV and supported by MBV as a
cross check.
For completeness we note that the valuation range adopted above is a relatively wide range. It is our view that it is
appropriate to adopt a relatively wide range having regard to the relatively early stage of development of the key
assets of Auzex, the speculative nature of exploration companies generally and the valuation range (i.e. minimum,
preferred, and maximum) of the mineral exploration assets as set out in the MA Report.
9.0
Value of the Merged Group Following the Proposed Transaction
This section sets out our valuation of the Merged Group immediately following the Proposed Transaction, assuming it
is approved. This section is structured as follows:

Section 9.1 sets out our view of the most appropriate methodology to value the Merged Group assuming the
Proposed Transaction is approved; and

Section 9.2 sets out our calculation of the value of a share in the Merged Group.
9.1
Valuation Approach
In our view, the ABV methodology is the most appropriate methodology to apply in order to calculate the value of
shares in the Merged Group immediately following the Proposed Transaction, assuming that the Proposed
Transaction is approved and implemented. In our view, it is not appropriate to apply the DCF or CME valuation
methodologies to determine a value of the Merged Group for the following reasons:
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For personal use only

The DCF methodology relies on projections which predict the future cash flows of a company. Due to the nature
and stage of development of both Auzex’s and Explaurum’s projects, in our view, future cash flows of the
Merged Group cannot be determined with the appropriate level of certainty or accuracy at the current time.
The DCF methodology is not appropriate for calculating the value of the Merged Group’s shares; and

The business activities of Auzex and Explaurum do not generate an earnings stream at the current time and it is
expected that earnings will not be generated in the short term following the Proposed Transaction. Neither
Auzex nor Explaurum generate and report maintainable earnings suitable for use in a CME valuation of the
Merged Group’s shares.
To determine a value for the Merged Group’s net assets, in our view it is appropriate to add:

the value of Auzex’s assets and liabilities from Section 8.0 above;

the value of Explaurum implied by recent capital raisings including the $1.3 million capital raising at $0.003
announced on 30 April 2015 which, when tranche 1 and 2 are completed, will increase the number of shares in
Explaurum from 256.5 million to 689.8 million on a pre-consolidation basis. We have assumed that tranche 1 and
2 will complete as they are conditions precedent for the Proposed Transaction. While Explaurum shares are
listed on the ASX and market prices for the shares can be observed, in our view the prices may not be reflective
of the value of Explaurum due to the low liquidity of Explaurum’s shares over the past twelve months; and

make adjustments for other assets and liabilities expected to be held by the Merged Group immediately
following the Proposed Transaction.
Our valuation of the Merged Group is set out in Section 9.2 below.
9.2
Value of the Merged Group
To determine a value for ordinary shares in the Merged Group following the Proposed Transaction, we have had
regard to the following:

The value of Auzex’s contribution (set out in Section 9.2.1);

The value of Explaurum’s contribution (set out in Section 9.2.2);

Adjustments to the value of the Merged Group as a result of the Proposed Transaction (set out in Section 9.2.3);
and

Impact of options on the valuation of the Merged Group (set out in Section 9.2.4).
9.2.1
Value of Auzex Contribution
As set out in Section 8.2 of this Report, we have calculated the net value of Auzex’s assets and liabilities on a
controlling interest basis to be within the range of -$119,978 to $5,070,022.
9.2.2
Value of Explaurum Contribution
In order to value Explaurum’s contribution to the Merged Group, we have considered information in relation to
recent share issues by Explaurum. These transactions have primarily related to capital raisings to fund explorations
and in preparation for the Proposed Transaction. Table 9.1 below summarises Explaurum’s recent share issues.
To improve comparability across the periods before and after the proposed 1 for 10 share consolidation, we have
provided additional information in the right hand column of the table below in relation to the implied share prices
of the transactions assuming the share consolidation has occurred.
Table 9.1: Explaurum Movements in Ordinary Share Capital
Transaction
Description
$0.53 million
rights issue


30
In July 2013, Explaurum issued 106,871,400 ordinary shares
fully paid for cash at $0.005 per share in a pro-rata (on the
basis of four shares for every five shares held) nonrenounceable entitlement issue of shares
The shares issued represented approximately 80.0% of the
total Explaurum shares outstanding prior to the completion
of the issue
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Post-Consolidation Basis


Implied share price:
$0.05 per share
Implied shares issued:
10,687,140
Transaction
Description
$0.08 million
share issue

For personal use only

$1.3 million
capital raising



Post-Consolidation Basis
In August 2013, Explaurum issued 600,000 ordinary shares
fully paid for cash at $0.005 per share
The shares issued represented approximately 6.7% of the
total Explaurum shares outstanding prior to the completion
of the issue

As a condition to the Proposed Transaction becoming
effective, Explaurum completed a capital raising of
433,333,700 Explaurum shares and 108,333,780 Explaurum
options to raise no less than $1.3 million before offer costs
at an issue price of $0.003 per share (on a pre-consolidation
basis).
The capital was raised in two tranches:
— Tranche 1: On 7 May 2015, Explaurum announced that it
has completed Tranche 1 Capital Raising for 64,003,420
shares (on a pre-consolidation basis), raising
approximately $192,010. 16,000,103 attaching options
(on a pre-consolidation basis) to participants of Tranche
1 Capital Raising was issued on 29 June 2015; and
— Tranche 2: Explaurum raised $1,108,000 in Tranche 2
Capital Raising, by issuing 369,330,280 Explaurum shares
and 92,332,750 Explaurum options (each on a preconsolidation basis), on 29 June 2015.
The shares to be issued represent approximately 168.9% of
the total Explaurum shares outstanding prior to the
completion of the issue.





Implied share price:
$0.05 per share
Implied shares issued:
60,000
Implied share price:
$0.03 per share
Implied total securities
issued: 43,333,370
ordinary shares and
10,833,378 options
Implied securities
issued in Tranche 1
Capital Raising:
6,400,342 ordinary
shares and 1,600,010
options
Implied securities
issued in Tranche 2
Capital Raising:
36,933,028 ordinary
shares and 9,233,275
options
Source: Explaurum management, BDO CFQ Analysis
Having regard to the information set out in Table 9.1 above, it is our view that it is appropriate to adopt $0.03 per
share from the $1.3 million capital raising (on a post-consolidation basis) for the purpose of valuing Explaurum’s
contribution to the Merged Group as it is a recent cash transaction for a significant proportion of Explaurum shares.
The adopted share price of $0.031 implies a value of $2,069,475 for Explaurum and 68,982,491 Explaurum shares on
issue after the Tranche 2 Capital Raising. We note that this value is for a minority interest.
Table 9.2 below sets out an apportionment of the value we have assigned to Explaurum’s contribution between its
assets and liabilities with the residual value being assigned to Explaurum’s mineral assets.
Table 9.2: Apportionment of Explaurum’s Value to Assets and Liabilities
Value
($)
Assets
Cash1
639,400
Trade and other receivables
11,324
Property, plant and equipment
12,063
Loan to Auzex (receivable)
Mineral assets2
1
31
800,000
1,284,610
The value of $0.03 per share implied by the capital raising includes one option for every four shares. As we are valuing
Explaurum’s contribution to the Merged Group, it is our view that it is appropriate to adopt a value that includes both the
shares and options issued under Tranche 1 and Tranche 2 of the capital raising. As the shares on issue prior to the capital
raising do not include a right to an option, the $0.03 capital raising price less the value of the option should theoretically be
applied to these shares. We consider this adjustment immaterial to the analysis set out in this Report and have adopted $0.03
to simplify the analysis.
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Value
($)
Liabilities
Trade and other payables
(56,273)
2,691,124
Total – Controlling Interest
For personal use only
Less minority interest discount
23.1%
Value of Explaurum’s Contribution
2,069,475
Source: Explaurum management statement of financial position as at 30 April 2015 and BDO CFQ analysis
1 Cash is calculated as $309,400 balance as at 30 April 2015 plus $1,030,000 being Tranche 2 of the capital raising net of costs
less the $700,000 being the balance of the loan to Auzex.
2 The value apportioned to Explaurum’s mineral assets was the residual value after adjusting for the other assets and
liabilities.
3 In our view, it is appropriate to adopt a similar minority interest to the value adopted for Auzex which is discussed in
Section 8.2.3.
9.2.3
Adjustments as a Result of the Proposed Transaction
In addition to the assets and liabilities of Auzex and Explaurum, we have considered the following adjustments as a
result of the Proposed Transaction in determining a value for the Merged Group:

Decrease in cash in relation to costs totalling $150,000 comprising $100,000 of Explaurum legal costs and an
additional $50,000 of costs that Auzex expects to have to pay to implement the Proposed Transaction if
approved; and

Decrease in liabilities by $988,355 in relation to the settlement of outstanding amounts and provision for annual
leave owing to related party creditors of Auzex by way of issuance of 120 million options in the Merged Group.
Table 9.3 below summarises our view of an appropriate value to adopt for the Merged Group, having regard to the
information set out above.
Table 9.3: Equity Value of the Merged Group on a Minority Interest Basis
Section
Reference
Low Value
($)
Preferred
($)
High Value
($)
Value of Auzex – controlling
interest basis
8.2.4
(119,978)
780,022
5,070,022
Value of Explaurum controlling interest basis
9.2.2
2,691,124
2,691,124
2,691,124
Proposed Transaction costs
9.2.3
(150,000)
(150,000)
(150,000)
Adjustment to remove related
party creditors
9.2.3
988,355
988,355
988,355
3,409,501
4,309,501
8,599,501
23.1%
23.1%
23.1%
2,621,907
3,314,007
6,613,017
Value of Merged Group –
controlling interest basis
Less minority interest discount
Value of Merged Group minority interest basis
Source: BDO CFQ Analysis
With reference to Table 9.3 above, we have calculated a value in the range of $2,621,907 to $6,613,017 for the
Merged Group on a minority interest basis.
9.2.4
Value of Options in the Merged Group
Following the Proposed Transaction, the Merged Group is expected to have the following options on issue:

10,833,378 options attached to shares in the Capital Raising, exercisable at $0.05 per option on or before 31
August 2016 (on a post-consolidation basis); and

12,000,000 options issued to Auzex related party creditors as consideration for the settlement of amounts owing
to those parties, exercisable at $0.03 per option on or before 31 August 2018 (on a post-consolidation basis).
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As options represent a claim on the equity of the relevant company by the holder, it is necessary to adjust the value
of the equity to allow for the options.
The valuation methodology that we have adopted to value the options for the purpose of this Report is the BlackScholes formula. The inputs that we have adopted are summarised in Table 9.4 below.
For personal use only
Table 9.4: Inputs Adopted for the Black-Scholes Formula
Capital Raising Options
Creditor Options
Exercise price
$0.05
$0.03
Time to maturity1
0.96
2.96
Interest rate
2.0%
2.0%
Volatility
80%
80%
Dividend rate
0%
0%
Source: BDO CFQ Analysis
1 Time to maturity has been calculated based on a valuation date of 14 September 2015, being the record date for determining
entitlement to the scheme consideration.
The share price adopted is the final valuation share price on a minority interest basis which results in circularity as
this value relies on the value of the options. We have used an iterative process to overcome this circularity.
9.2.5
Value of Ordinary Shares in the Merged Group
Table 9.5 below summarises our valuation of ordinary shares in the Merged Group on a minority interest basis
following the Proposed Transaction. The number of shares assumed for the Merged Group is 136,188,287 and was
calculated as follows:

Shares outstanding in Explaurum following the Capital Raising and the Share Consolidation of 68,982,491; and

Under the terms of the Proposed Transaction, Explaurum will issue 67,205,796 shares in consideration of 100% of
Auzex shares, or 4 new Explaurum shares for each Auzex share outstanding, based on 16,801,449 Auzex shares
outstanding (inclusive of the 3 million shares converted from convertible notes issued by Auzex).
Table 9.5: Value of Ordinary Shares the Merged Group on a Minority Interest Basis
Section
Reference
Low Value
($)
Preferred
($)
High Value
($)
Value of Merged Group after adjustments minority interest basis
9.2.3
2,621,907
3,314,007
6,613,017
Value of options issued in the Explaurum
capital raising and to Auzex related party
creditors
9.2.4
102,344
153,128
470,893
2,519,563
3,160,878
6,142,124
136,188,287
136,188,287
136,188,287
0.0185
0.0232
0.0451
Value of ordinary shares in the Merged
Group – minority interest basis
Number of ordinary shares on issue in the
Merged Group
9.2.5
Value per ordinary share in the Merged
Group – minority interest basis
Source: BDO CFQ Analysis
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10.0
Fairness of the Proposed Transaction
To assess the fairness of the Proposed Transaction, we have:
For personal use only
(a) Calculated the value of the consideration offered to Auzex shareholders under the Proposed Transaction,
being the value of 4 shares in the Merged Group immediately following the Proposed Transaction on a
minority interest basis; and
(b) Compared the value of the consideration offered as determined in (a) above with the value of a share in
Auzex immediately prior to the Proposed Transaction on a minority interest basis.
We have completed the value comparison on an equivalent basis (i.e. minority interest in Auzex and minority
interest in the Merged Group) for the reasons set out in Section 4.2.1.
In accordance with RG 111, the Proposed Transaction is considered fair if the value of the consideration offered is
equal to or greater than the value of the securities subject of the Proposed Transaction.
10.1
Value of the Consideration Offered per Auzex Share
Section 9.2 of this Report sets out our valuation of a share in the Merged Group immediately following the Proposed
Transaction. As per the terms of the Proposed Transaction, the consideration offered to Auzex shareholders is
4 shares in the Merged Group for every Auzex share held.
Table 10.1 below sets out our calculation of the value of the consideration offered per Auzex share under the terms
of the Proposed Transaction.
Table 10.1: Value of the Consideration Offered per Auzex Share
Low
($)
Value of a share in the Merged Group immediately following the Proposed
Transaction
Source:
High
($)
0.0185
0.0232
0.0451
4
4
4
0.074
0.093
0.180
Number of Merged Group shares offered per Auzex share
Value of the consideration offered per Auzex share
Preferred
($)
BDO CFQ analysis
For the purpose of assessing the fairness of the Proposed Transaction, we have calculated the value of the
consideration offered per Auzex share under the terms of the Proposed Transaction to be within the range of $0.074
to $0.180 on a minority interest basis.
10.2
Value per Auzex Share Immediately Prior to the Proposed Transaction
For the purpose of assessing the fairness of the Proposed Transaction, we calculated the value of an Auzex share to
be within the range of $0.000 to $0.232 (with a preferred value of $0.036) on a minority interest basis (refer Section
8.0 of this Report for our valuation of Auzex).
10.3
Assessment of the Fairness of the Proposed Transaction
Table 10.2 below sets out our assessment of the Proposed Transaction.
Table 10.2: Fairness of the Proposed Transaction
Low
($)
Preferred
($)
High
($)
Value of the consideration offered per Auzex share
0.074
0.093
0.180
Value of an Auzex share
0.000
0.036
0.232
Source:
BDO CFQ analysis
Figure 10.1 below illustrates the value comparison of the value of the consideration offered per Auzex share under
the terms of the Proposed Transaction and the value of an Auzex share immediately prior to the Proposed
Transaction.
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Figure 10.1: Fairness of the Proposed Transaction
For personal use only
Value per
AEL Share
Value of
Consideration Offered
per AEL Share
-
0.050
0.100
0.150
0.200
0.250
Value per AEL Share ($)
Source:
BDO CFQ analysis
As illustrated above, the value of the consideration offered per Auzex share is within the range of value of an Auzex
share immediately prior to the Proposed Transaction. After considering the information summarised above and set
out in detail in the balance of this Report, in our view the Proposed Transaction is Fair to Auzex shareholders as at
the date of this Report.
11.0
Reasonableness of the Proposed Transaction
In accordance with RG 111, a transaction is considered reasonable if it is fair. Notwithstanding this, we have also
considered the reasonableness of the Proposed Transaction having regard to other significant factors to which Auzex
shareholders may give consideration prior to voting in favour of or against the Proposed Transaction. Our
assessment of the reasonableness of the Proposed Transaction includes consideration of the likely advantages and
disadvantaged of the Proposed Transaction and the position of Auzex shareholders if the Proposed Transaction does
not proceed.
11.1
Advantages of the Proposed Transaction
Table 11.1 below outlines the potential advantages of the Proposed Transaction to Auzex shareholders.
Table 11.1: Advantages of the Proposed Transaction
Advantage
Explanation
The Proposed Transaction is
fair
In our view, the Proposed Transaction is fair to Auzex shareholders as at the date
of this Report. In accordance with RG 111, a transaction is considered reasonable
if it is fair.
Refer to Section 10.0 of this Report for our assessment of the fairness of the
Proposed Transaction.
No significant change to
nature of business activities
The primary business activities of the Merged Group will continue to be consistent
with the current business activity of Auzex. Auzex shareholders will continue to
hold shares in a company engaged in the exploration and exploitation of mineral
deposits in Australia.
Auzex shareholders will also retain their exposure to the Tampia Gold Project and
benefit from the stated intention of the Merged Group to accelerate exploration
activities for the Tampia Gold Project.
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Advantage
Explanation
Funding for operations
The Merged Group will have more cash relative to Auzex prior to the Proposed
Transaction. This cash will assist the Merged Group to deliver on a number of
planned initiatives, including:
For personal use only




Advancement of the next round of drilling activity for the Tampia Gold Project
in 2015;
Advancement of the Lyons Gold Project;
Investigation of further project acquisitions; and
Other general working capital purposes.
The Merged Group will be
listed on the ASX
Auzex shareholders will be issued with shares in the Merged Group which will be
listed on the ASX. Shares in the Merged Group are likely to be more liquid than
shares in Auzex prior to the Proposed Transaction. An increase in liquidity will
make it relatively easier for Auzex shareholders to buy and sell their shares.
The Merged Group may
realise cost synergies
The directors of Auzex and Explaurum are of the view that the Merged Group may
be able to reduce overhead expenses by minimising the duplication of various back
office functions and services. For completeness we note that we have not adjusted
the valuation set out in Section 9.2 for any synergies that may be able to be
realised.
Increased board capabilities
and technical expertise
Following the Proposed Transaction, the board of the Merged Group will consist of
two directors of Auzex (Mr Chris Baker and Mr John Lawton) and two directors
nominated by Explaurum (Mr Patrick Flint and Mr Mark Calderwood). The directors
of Auzex are of the view that the combined experience will increase the technical
expertise of the board of the Merged Group. This is likely to increase operational
efficiencies and provide the capability to take on more technically complex
projects that are potentially more valuable.
Improved position in capital
markets
Following the Proposed Transaction, Auzex shareholders will hold an interest in a
larger company which may have the ability to raise additional capital on more
favourable terms relative to terms currently available to Auzex. This may assist to
reduce the financing risk associated with exploring and developing Auzex’s and
Explaurum’s projects.
Source:
BDO CFQ analysis
11.2
Disadvantages of the Proposed Transaction
Table 11.2 below outlines the potential disadvantages of the Proposed Transaction to Auzex shareholders.
Table 11.2: Disadvantages of the Proposed Transaction
Disadvantage
Explanation
Dilution of shareholding
Auzex shareholders currently own 100% of the shares in Auzex and the Company’s
interests in the Tampia Gold Project and other projects. If the Proposed
Transaction is approved, Auzex shareholders will hold approximately 49.3% to
49.8% of the total outstanding shares in the Merged Group. As a result, the
Proposed Transaction will:
Dilute the exposure of Auzex shareholders to any potential upside which may
be realised from Auzex’s future operations; and
 Give Auzex shareholders less influence over the future direction of Auzex and
its assets.
Auzex shareholders may be of the view that it is preferable to hold shares in Auzex
rather than shares in the Merged Group.

Potential exposure to a
number of risks to which
Auzex shareholders
currently do not have
exposure to
36
Auzex shareholders will be issued new shares in the Merged Group and have
exposure to a company with a different non-systematic risk profile (i.e. those risks
contributed by Explaurum). We understand that the directors of Auzex are of the
view that the Merged Group represents an enhanced risk and investment profile
relative to Auzex on a standalone basis, however, Auzex shareholders may hold a
different view.
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For personal use only
Disadvantage
Explanation
Implementation and one-off
costs
There is a risk that implementation and other one-off costs of the Proposed
Transaction may be substantial or greater than anticipated, which could have a
material adverse impact on the Merged Group’s financial position.
Source:
BDO CFQ analysis
11.3
Ineligible Foreign Shareholders
Under the terms of the Merger Implementation Agreement, the Merged Group shares that would otherwise have
been issued to an Ineligible Foreign Shareholder will be issued to a sales agent (and/or to a nominee of the sale
agent) and sold with the net sale proceeds to be remitted to the Ineligible Foreign Shareholders.
As the value that is ultimately realised by Ineligible Foreign Shareholders is dependent upon the value that the sales
agent (and/or the nominee of the sales agent) is able to obtain (after deduction of any applicable brokerage, taxes
and charges), it is possible that Ineligible Foreign Shareholders may not receive cash value for their shares in the
Merged Group which reflects the value of the shares in the Merged Group adopted for the purposes of this Report.
For further information regarding the treatment of Ineligible Foreign Shareholders under the Proposed Transaction,
refer to section 4.11 of the Scheme Booklet.
11.4
Taxation Considerations
The Proposed Transaction has taxation implications for Auzex shareholders. The taxation implications of the
Proposed Transaction are complex and depend on the laws of the country in which an Auzex shareholder is a tax
resident. It is outside the scope of this Report to address taxation considerations in detail. Auzex shareholders
should consider these implications when deciding how to vote in relation to the Proposed Transaction.
A more detailed discussion of the taxation implications of the Proposed Transaction for Australian resident Auzex
shareholders is contained in section 10 of the Scheme Booklet. It is recommended that all Auzex shareholders
should, in considering their tax implications from the Proposed Transaction, obtain independent professional tax
advice regarding the income tax and capital gains tax implications specific to their circumstances.
11.5
Position of Auzex Shareholders if the Proposed Transaction does not Proceed
Table 11.3 below outlines the possible position of Auzex shareholders in the event that the Proposed Transaction
does not proceed. We note that the Proposed Transaction may not proceed for a number of reasons including, but
not limited to, Auzex and/or Explaurum not satisfying the conditions precedent to the Proposed Transaction (refer
to Section 3.2 of this Report).
Table 11.3: Position of Auzex Shareholders if the Proposed Transaction does not Proceed
Position of Shareholders
Explanation
The directors of Auzex will
need to seek alternative
funding strategies
Auzex will be required to seek alternative methods of capital raising in order to
fund its operations in the short term and finance the development of its assets.
Auzex may not be able to
develop its assets
In circumstances where Auzex is unable to raise additional capital, the Company
may not be in a position to further develop its assets. In relation to the Tampia
Gold Project, this may lead to Auzex not fulfilling the minimum work and
expenditure requirements. This may lead to the licenses being invalidated and not
being renewed.
Auzex may default on its
loans
Auzex will be required seek alternative methods to raise funds to pay interest and
principal owing to creditors due to Auzex’s current low cash balance. In
circumstances where Auzex is unable to raise additional funds, Auzex may default
on its loans. We note that Auzex’s current cash balance would be negative had
Explaurum not advanced a loan to Auzex.
37
Any capital raising undertaken is likely to be dilutive to Auzex shareholders and
there is no guarantee that Auzex will be able to raise the full amount of any
additional capital required on terms acceptable to Auzex.
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Position of Shareholders
Explanation
Explaurum shares will not
be issued to Auzex
shareholders
Auzex shareholders will not receive shares in the Merged Group. Auzex
shareholders will continue to hold their shares in Auzex and will continue to be
exposed to the risks and benefits of holding an interest in Auzex as an unlisted
entity.
Break fees may be payable
by Auzex
In circumstances set out in section 4.3 of the Scheme Booklet, if the Proposed
Transaction is not approved Auzex may be required to pay a break fee of
$0.25 million.
Auzex will have incurred
costs which are not
recoverable
Auzex will have incurred costs in relation to the Proposed Transaction irrespective
of whether or not the Proposed Transaction is approved. Auzex will not be able to
recover the costs incurred in relation to the Proposed Transaction in the event that
the Proposed Transaction is not approved.
Auzex will be required to
repay loans provided by
Explaurum
Auzex will be required to repay the loans provided by Explaurum totalling $800,000
by no later than April 2016 or, if Explaurum so elects, issue up to 6.67 million
Auzex shares to Explaurum.
Source:
BDO CFQ analysis
11.6
Assessment of the Reasonableness of the Proposed Transaction
In our opinion, after considering all of the issues set out in this Report, in the absence of any other information, the
Proposed Transaction is Reasonable to Auzex shareholders as at the date of this Report.
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12.0
Expert’s Opinion on the Proposed Transaction
For personal use only
In our opinion, the Proposed Transaction is fair and reasonable to Auzex shareholders. On this basis, in the absence
of any other information or a superior offer, it is our view that the Proposed Transaction is in the Best Interests of
Auzex shareholders as at the date of this Report.
The decision to vote in favour of or against the Proposed Transaction is a separate decision to the investment
decision to hold or divest shares in the Merged Group in the event the Proposed Transaction is approved. We
recommend shareholders consult their own professional advisers in relation to the decision on whether to hold or
divest shares in the Merged Group following the Proposed Transaction.
13.0
Sources of Information
This Report has been prepared using information obtained from the following sources:

Auzex annual report for the year ended 30 June 2012;

Auzex annual report for the year ended 30 June 2013;

Auzex annual report for the year ended 30 June 2014;

Auzex management accounts for the 6 months ended 31 December 2014;

Auzex management accounts for the 10 months ended 30 April 2015;

Explaurum ASX announcements;

Explaurum annual report for the year ended 30 June 2012;

Explaurum annual report for the year ended 30 June 2013;

Explaurum annual report for the year ended 30 June 2014;

Explaurum half year report for the 6 months ended 31 December 2014;

Explaurum management accounts for the 10 months ended 30 April 2015;

Auzex company website (www.auzex.com);

Explaurum company website (www.explaurum.com.au);

Technical Valuation Report prepared by Mining Associates dated 24 June 2015;

Capital IQ;

Australian Bureau of Statistics;

Australian Government Department of Foreign Affairs and Trade;

Australian Government Department of Industry;

London Bullion Market Association;

IBISWorld;

Various transaction documents including the Merger Implementation Deed, draft Scheme Booklet and Notice of
Meeting;

Various other research publications and publicly available data as sourced throughout this Report; and

Various discussions and other correspondence with Auzex and Explaurum directors, management and their
advisers.
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14.0
Representations, Indemnities and Warranties
Auzex has agreed to our usual terms of engagement in addition to the indemnities and representations set out
below.
For personal use only
14.1
Indemnities
In connection with BDO CFQ’s engagement to prepare this Report, Auzex agrees to indemnify and hold harmless BDO
CFQ, BDO (QLD) or any of the partners, directors, agents or associates (together ‘BDO Persons’), to the full extent
lawful, from and against all losses, claims, damages, liabilities and expenses incurred by them. Auzex will not be
responsible, however, to the extent to which such losses, claims, damages, liabilities or expenses result from the
negligent acts or omissions or wilful misconduct of any BDO Persons.
Auzex agrees to indemnify BDO Persons in respect of all costs, expenses, fees of separate legal counsel or any other
experts in connection with investigating, preparing or defending any action or claim made against BDO Persons,
including claims relating to or in connection with information provided to or which should have been provided to
BDO CFQ by Auzex (including but not limited to the directors and advisers of Auzex) as part of this engagement.
14.2
Representations & Warranties
Auzex recognises and confirms that, in preparing this Report, except to the extent to which it is unreasonable to do
so, BDO Persons will be using and relying on publicly available information and on data, material and other
information furnished to BDO Persons by Auzex, its management, and other parties, and may assume and rely upon
the accuracy and completeness of, and is not assuming any responsibility for independent verification of, such
publicly available information and the other information so furnished.
Auzex management represent and warrant to BDO Persons that all information and documents furnished by Auzex
(either directly or through its advisors) in connection or for use in the preparation of this Report will not, at the
time so furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in
order to make the statements therein.
Auzex has acknowledged that the Company’s engagement of BDO CFQ is as an independent contractor and not in any
other capacity including a fiduciary capacity.
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15.0
Experience, Disclaimers and Qualifications
For personal use only
BDO CFQ has extensive experience in the provision of corporate finance advice, including takeovers, valuations and
acquisitions. BDO CFQ holds an Australian Financial Services Licence issued by ASIC for preparing expert reports
pursuant to the Listing Rules of the ASX and the Corporations Act.
BDO CFQ and its related parties in Australia have a wide range of experience in transactions involving the advising,
auditing or expert reporting on companies that have operations domestically and in foreign jurisdictions. BDO in
Queensland and in Australia is a national association of separate partnerships and entities and is a member of the
international BDO network of individual firms.
Steven Sorbello has prepared this Report with the assistance of staff members. Mr Sorbello is a director of BDO CFQ
and has extensive experience in corporate advice and the provision of valuation and business services to a diverse
range of clients, including large private, public and listed companies, financial institutions and professional
organisations.
This Report has been prepared at the request of the directors of Auzex to provide Auzex shareholders with
information to assist them to decide whether to vote in favour of or against the Proposed Transaction. BDO CFQ
hereby consents to this Report being used for that purpose. Apart from such use, neither the whole nor any part of
this Report, nor any reference thereto may be included in or with, or attached to any document, circular,
resolution, statement, or letter without the prior written consent of BDO CFQ.
BDO CFQ takes no responsibility for the contents of other documents supplied in conjunction with this Report. BDO
CFQ has not audited or reviewed the information and explanations supplied to us, nor has it conducted anything in
the nature of an audit or a review of any of the entities mentioned in this Report. However we have no reason to
believe that any of the information or explanations so supplied is false or that material information has been
withheld.
Any forecast information which has been referred to in this Report has been prepared by the relevant entity and is
generally based upon best estimate assumptions about events and management actions, which may or may not
occur. Accordingly, BDO CFQ cannot provide any assurance that any forecast is representative of results or
outcomes that will actually be achieved.
With respect to taxation implications of the Proposed Transaction, it is strongly recommended that Auzex
shareholders obtain their own taxation advice, tailored to their own particular circumstances.
APES 225 ‘Valuation Services’ issued by the Accounting Professional & Ethical Standards Board sets out mandatory
requirements for the provision of quality and ethical valuation services. BDO CFQ has complied with this standard in
the preparation of this Report.
The statements and opinions included in this Report are given in good faith and in the belief that they are not false,
misleading or incomplete. This Report is current as at 23 July 2015.
BDO Corporate Finance (QLD) Ltd
Steven Sorbello
Director
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Appendix A: Industry Overview: Gold Mining in Australia 2
For personal use only
We have set out a summary of the Australian gold mining industry below. The gold mining industry consists of
companies that explore, mine, extract, process and refine gold ore resources into a concentrate or bullion. The
information presented in this section has been compiled from a range of publicly available sources. This summary is
not intended to be a comprehensive analysis of the Australian gold mining industry.
We recommend that Auzex shareholders refer to the original source of the information referred to in this section,
and any other information they believe appropriate, for a more comprehensive analysis. This section should be
referred to as a broad guide only.
A.1
Description
Gold is classified as a precious metal which naturally occurs in element form as nuggets or grains in rocks, mineral
veins and alluvial deposits. Pure gold is bright yellow in colour and is considered one of the most malleable and
ductile of all metals. Gold has a number of uses, including a store of value in the form of coins or bullion,
jewellery, electronics, dentistry and other industrial applications.
A.2
Gold Production
Gold is generally sourced from open pit mining, however when the depth of the ore renders open pit mining
uneconomical, underground mining may be used. The process of extracting of gold from the ore is dependent upon
the grade of ore mined.
Low grade ore follows a process whereby the ore is broken into small pieces and a cyanide solution is distributed
over the ore to dissolve carbon loaded gold, which is then collected from the solution. High grade ore undergoes a
grinding process where the ore is crushed into a powder. Depending on the metallurgical characteristics of the high
grade ore, either a roasting, leaching or oxidisation process is used to extract gold loaded carbon. Gold is then
chemically stripped from the carbon and is melted and refined into bars containing up to 99.99% pure gold.
Australia was the world’s second largest producer of gold in 2014, behind China. In 2013-14, Australia mined
approximately 274 tonnes of gold, which represents approximately 8.8% of the global gold production for the period.
Western Australia is the largest state producer and exporter of gold in Australia, accounting for approximately 69%
of total Australian production and 98.7% of total Australian gold exports in 2013-14. Western Australia also hosts
approximately two thirds of Australia’s gold reserves, which were estimated at 9,778 tonnes in December 2013.
Australia’s gold production in 2014-15 is forecast to remain relatively steady at 274 tonnes as higher output at most
operations is offset by the closure of the Murchison mine in December 2014. Australia’s gold exports for the same
forecast period are expected to increase by approximately two per cent to 285 tonnes relative to 2013-14. Global
gold production is expected to increase by approximately one per cent to approximately 3,136 tonnes in 2015, with
production projected to increase at an average annual rate of 1.5 per cent and total 3,386 tonnes in 2020.
A.3
Global Demand
World demand for gold is driven by two primary factors, namely consumption and investment. Gold consumption
relates to the use of gold in the manufacturing of jewellery, electronics, dentistry and other industrial applications.
Gold investment relates to gold purchases as a store of value, usually in the form of gold bullion.
Data from the Australian Bureau of Statistics indicates that consumption demand for gold accounts for
approximately three-quarters of total global demand.Global demand for gold increased in 2014 in comparison to
2013. Following strong growth trends in recent years, the current global demand for gold is, however, below its fiveyear average.
Factors which influence the demand for gold consumption and investment differ. Gold consumption demand is
influenced by changes at the household level, including household income, changes in consumer appetite / taste for
jewellery and gold dentistry, and demand for electronics. Gold investment demand is influenced by broader
economic factors, including developments in the outlook for global economies, shifts in the value of major
currencies and changes in the perceived riskiness of other assets.
2
42
Information in this section has been sourced from the Australian Bureau of Statistics, Australian Government Department of
Foreign Affairs and Trade, Composition of Trade Australia 2013-14, Australian Government Department of Industry, Resources
and Energy Statistics 2014 and Resources and Energy Quarterly March Quarter 2015, London Bullion Market Association,
IBISWorld Industry Report B0804: Gold Ore Mining in Australia, Capital IQ, and other publicly available information.
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A.4
Australian Gold Exports
In 2013-14, Australia’s gold exports totalled approximately 277 tonnes, representing approximately 6.1% of
Australia’s total commodity exports. Figure A.1 below illustrates Australia’s commodities exports by value for 201314.
Iron ore & concentrates
Coal
22%
Gold
39%
Natural gas
Crude petroleum
12%
5%
2% 2%
4% 4%
5%
2% 3%
Wheat
Aluminium ores & concentrates
Copper ores & concentrates
Beef
Aluminium
Other
Source: Australian Government Department of Foreign Affairs and Trade, Composition of Trade Australia 2013-14
Demand for Australian gold in 2013-14 was largely dominated by China, Singapore, and United Kingdom. Australian
gold exports to China constitute over 60% of Australia’s total gold export markets. As disposable incomes in China
continue to rise, together with China representing the world’s largest economy, it is expected that China’s gold
demand will remain a significant market for Australian gold exports.
Overall, the gold exports from Australia are forecast to remain relatively steady. Figure A.2 below sets out historical
and forecast Australian gold exports over a 50 year period from 1970 to 2020.
Figure A.2: Australian Gold Exports – Historical Data and Forecast Data
600
500
Export Volume (t)
For personal use only
Figure A.1: Australian Commodity Exports – 2013-14
Forecast /
Projection
400
300
200
100
0
Source: Australian Government Department of Industry, Resources and Energy Statistics 2014 and Resources and Energy Quarterly
March Quarter 2015
In 2014-15, gold exports are forecast to increase by two per cent to 285 tonnes. This will represent a value of
$13.6 billion, a 4.2 per cent rise from 2013-14 supported by higher volumes of gold exports and a depreciating
Australian dollar.
A.5
Gold Price
Over the 10 years to 2015, the value of gold exports has fluctuated substantially. Gold experienced an approximate
growth rate of 11.0% per annum in the decade prior to 2011-12. Subsequently, the gold price has decreased by an
average of approximately 12.5%. Figure A.3 below sets out historical and forecast gold price for the period from
1970 to 2020.
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Figure A.3: Historical and Forecast Gold Price from 1970 to 2020
1,800
1,600
Forecast /
Projection
Gold Price (US$/oz)
For personal use only
1,400
1,200
1,000
800
600
400
200
0
Source: Australian Government Department of Industry, Resources and Energy Statistics 2014 and Resources and Energy Quarterly
March Quarter 2015, London Bullion Market Association AM Fix
Appendix B: Common Valuation Methodologies
A ‘fair market value’ is often defined as the price that reflects a sales price negotiated in an open and unrestricted
market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing but not anxious seller,
with both parties at arm’s length. The valuation work set out in this Report assumes this relationship.
There are a number of methodologies available to value an entity at fair market value. In preparing this Report, we
have considered, amongst other metrics, the valuation methodologies recommended by ASIC in RG 111 regarding
content of expert reports. The methodologies include those mentioned directly below.
B.1
Discounted Future Cash Flows (‘DCF’)
The DCF approach calculates the value of an entity by adding all of its future net cash flows discounted to their
present value at an appropriate discount rate. The discount rate is usually calculated to represent the rate of
return that investors might expect from their capital contribution, given the riskiness of the future cash flows and
the cost of financing using debt instruments.
In addition to the periodic cash flows, a terminal value is included in the cash flow to represent the value of the
entity at the end of the cash flow period. This amount is also discounted to its present value. The DCF approach is
usually appropriate when:

An entity does not have consistent historical earnings but is identified as being of value because of its capacity
to generate future earnings; and

Future cash flow forecasts can be made with a reasonable degree of certainty over a sufficiently long period of
time.
Any surplus assets, along with other necessary valuation adjustments, are added to the DCF calculation to calculate
the total entity value.
B.2
Capitalisation of Future Maintainable Earnings (‘CME’)
The CME approach involves identifying a maintainable earnings stream for an entity and multiplying this earnings
stream by an appropriate capitalisation multiple. Any surplus assets, along with other necessary valuation
adjustments, are added to the CME calculation to calculate the total entity value.
The maintainable earnings estimate may require normalisation adjustments for non-commercial, abnormal or
extraordinary events.
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The capitalisation multiple typically reflects issues such as business outlook, investor expectations, prevailing
interest rates, quality of management, business risk and any forecast growth not already included in the
maintainable earnings calculation. While this approach also relies to some degree on the availability of market
data, the rate is an alternative way of stating the expected return on an asset, allowing for a risk premium over the
risk free rate.
For personal use only
The CME approach is generally most appropriate where an entity has historical earnings and/or a defined forecast or
budget. Further, a CME is usually considered when relevant comparable information is available.
B.3
Asset Based Valuations (‘ABV’)
Asset based valuations (‘ABV’) are used to estimate the fair market value of an entity based on the book value of its
identifiable net assets. The ABV approach using a statement of financial position alone may ignore the possibility
that an entity’s value could exceed the book value of its net assets, however, when used in conjunction with other
methods which determine the value of an entity to be greater than the book value of its net assets, it is also
possible to arrive at a reliable estimate of the value of intangible assets including goodwill.
Alternatively, adjustments can be made to the book value recorded in the statement of financial position in
circumstances where a valuation methodology exists to readily value the identifiable net assets separately and book
value is not reflective of the true underlying value. Examples of circumstances where this type of adjustment may
be appropriate include when valuing certain types of identifiable intangible assets and/or property, plant and
equipment.
The ABV approach is most appropriate where the assets of an entity can be identified and it is possible, with a
reasonable degree of accuracy, to determine the fair value of those identifiable assets.
B.4
Market Based Valuations (‘MBV’)
Market based valuations (‘MBV’) relate to the valuation of an entity having regard to the value which securities in
the entity have recently been purchased at. This approach is particularly relevant to:

Entities where the shares are traded on an exchange. The range of share prices observed may constitute the
market value of the shares where sufficient volumes of shares are traded and the shares are traded over a
sufficiently long period of time; and/or

Entities where it is possible to observe recent transactions relating to the transfer of relatively large parcels of
shares (e.g. recent capital raisings).
For listed entities, the range of share prices observed may constitute the market value of the shares where
sufficient volumes of shares are traded and the shares are traded over a sufficiently long period of time. Share
market prices usually reflect the prices paid for parcels of shares not offering control to the purchaser.
B.5
Industry Specific Metrics
It is often appropriate to have regard to industry specific valuation metrics in addition to the traditional valuation
approaches outlined above. These metrics are particularly relevant in circumstances where it is reasonably common
for market participants to have regard to the alternative measures of value.
For resource companies, it is common for market analysts to have regard to multiples related to resources and
tenement size.
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Appendix C: Control Premium Analysis
For personal use only
A controlling interest in a company is usually regarded as being more valuable than a minority interest as it provides
the owner with control over the operating and financial decisions of the company, the right to set the strategic
direction of the company, control over the buying, selling and use of the company’s assets, and control over
appointment of staff and setting financial policies.
The increase in value for a controlling interest is often observed where an acquirer launches a takeover bid, or some
other mechanism for control, for another company. For the purposes of our research on control premiums, we have
defined a controlling interest to be an interest where the acquirer has acquired a shareholding of greater than 50%
in the target company.
Generally, control premiums may be impacted by a range of factors including the following:

Specific acquirer premium and/or special value that may be applicable to the acquirer;

Level of ownership in the target company already held by the acquirer;

Market speculation about any impending transactions involving the target and/or the sector that the target
belongs to;

The presence of competing bids; and

General market sentiment and economic factors.
To form our view of an appropriate range of control premium applicable to Auzex for the purposes of this Report,
we have considered information which includes:

Control premiums implied in merger and acquisition transactions of mineral exploration companies in Australia,
which indicate median control premiums in the range of 30% to 40%;

Recent independent expert’s reports which apply control premiums in the range of 20% to 40%;

Various industry and academic research, which suggests that control premiums are typically within the range of
20% to 40%;

Various valuation textbooks; and

Industry practice.
Having regard to the information set out above, in our view, it is appropriate to consider control premiums within
the range of 20% to 40% for the purposes of assessing the Proposed Transaction within the context of this Report.
For the purposes of the calculations set out in this Report we have adopted a control premium of 30%, being the
mid-point of the control premium range that we consider is appropriate based on our research.
Appendix D: Technical Expert’s Report: Auzex Exploration Limited
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For personal use only
Mining Associates Pty Ltd
ABN 29 106 771 671
Level 4, 67 St Paul’s Terrace
PO Box 161
Spring Hill QLD 4004 AUSTRALIA
T +61 7 3831 9154
F +61 7 3831 6754
W www.miningassociates.com
Report on the Market Valuation
Of Auzex Exploration Limited’s Mineral Assets in Australia
Author:
Prepared by Mining Associates Pty Ltd
for
BDO
Andrew Vigar, B App.Sc.(Geol), F.AusIMM, M.SEG
Effective Date: 24 June 2015
Reference: MA1508-1
For personal use only
TABLE OF ACRONYMS
AHD
Australian Height Datum
AUD
Australian Dollar
Auzex
Auzex Exploration Limited
AZX
Auzex Resources Limited
BSc.
Bachelor of Science degree
DDH
Diamond drill hole
DEM
Digital Elevation Model
DNRM
Department of Natural Resources and Mines (Qld)
EL
Exploration Licence
ELA
Exploration Licence Application
EPM
Exploration Permit for Minerals
EPMA
EPM Application
ERA
Environmental Risk Assessment
FAIG
Fellow of the Australian Institute of Geoscientists
FAusIMM.
Fellow of the Australasian Institute of Mining and Metallurgy
DMPWA
WA Department of Mines and Petroleum
GSQ
Geological Survey of Queensland
GSWA
Geological Survey of Western Australia
IP
Induced Polarisation
JV
Joint Venture
Km
Kilometre
LME
London Metal Exchange
M
Million
M
Metre
MA
Mineral Agreement
MAIG
Member of the Australian Institute of Geoscientists
MSc
Master of Science degree
NNE
North northeast
NNW
North northwest
NSW
New South Wales
QA/QC
Quality Assurance/Quality Control
QLD
Queensland
RC
Reverse Circulation
ANNEXURE B
i
Reduction to Pole
SAG
semi-autogenous grinding
SEDAR
System for Electronic Document Analysis and Retrieval
SG
Specific Gravity
sq km
Square kilometres
tpd
Tonnes per day
USD$
United States Dollar
UTM
Universal Transverse Mercator
VALMIN
Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets
and Securities for Independent Expert Reports
WA
Western Australia
WGS84
World Geodetic System 1984
For personal use only
RTP
ii
TABLE OF CONTENTS
REPORT ON THE TECHNICAL VALUATION .................................................................................... I
OF AUZEX EXPLORATION LIMITED’S MINERAL ASSETS IN AUSTRALIA .......................................... I
1
2
SUMMARY ....................................................................................................................6
INTRODUCTION AND TERMS OF REFERENCE ..................................................................8
COMMISSIONING ENTITY AND SCOPE ............................................................................................... 8
VALUATION MANDATE ....................................................................................................................... 8
PURPOSE ............................................................................................................................................. 8
VALUATION DATE ............................................................................................................................... 8
QUALIFIED VALUATOR AND QUALIFIED PERSON ............................................................................... 9
DEFINITION OF VALUATION TYPES ..................................................................................................... 9
OTHER DEFINITIONS USED IN THE REPORT ...................................................................................... 10
INFORMATION USED ........................................................................................................................ 13
SITE VISIT BY QUALIFIED PERSON ..................................................................................................... 13
COMPLIANCE WITH THE VALMIN CODE ........................................................................................... 13
3
PROJECTS .................................................................................................................... 14
For personal use only
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
4
4.1
4.2
4.3
4.4
4.5
4.6
5
5.1
5.2
5.3
5.4
5.5
6
6.1
6.2
WESTERN AUSTRALIA PROJECTS .................................................................................. 16
PROJECT DESCRIPTION AND ACCESS ................................................................................................ 16
CLIMATE............................................................................................................................................ 18
EXPLORATION HISTORY .................................................................................................................... 19
4.3.1
Core Tampia Hill Tenements .................................................................................................. 19
4.3.2
Emu Hill Prospect ................................................................................................................... 21
4.3.3
Historic Mineral Resource Estimates ..................................................................................... 24
GEOLOGY AND MINERALISATION..................................................................................................... 24
4.4.1
Regional Geology.................................................................................................................... 24
4.4.2
Local Geology ......................................................................................................................... 27
4.4.3
Mineralisation ........................................................................................................................ 29
4.4.4
Metallurgical Testwork........................................................................................................... 31
MINERAL RESOURCES ....................................................................................................................... 31
EXPLORATION POTENTIAL ................................................................................................................ 32
NORTH QUEENSLAND PROJECTS .................................................................................. 33
PROJECT DESCRIPTION AND ACCESS ................................................................................................ 33
CLIMATE............................................................................................................................................ 34
DISCOVERY & PREVIOUS EXPLORATION ........................................................................................... 35
GEOLOGY & MINERALISATION ......................................................................................................... 38
5.4.1
Regional Geology.................................................................................................................... 38
5.4.2
Local Geology ......................................................................................................................... 39
5.4.3
Mineralisation ........................................................................................................................ 42
EXPLORATION RESULTS AND POTENTIAL ......................................................................................... 43
5.5.1
EPMs 14797 “Khartoum” & 15570 “Khartoum North” .......................................................... 43
5.5.2
EPM 19114 “Carbonate Creek” .............................................................................................. 44
5.5.3
EPM 14418 “Running Brook” ................................................................................................. 44
NEW SOUTH WALES PROJECTS .................................................................................... 48
PROJECT DESCRIPTION AND ACCESS ................................................................................................ 48
6.1.1
Kingsgate ................................................................................................................................ 48
6.1.2
Junction Reefs ........................................................................................................................ 49
CLIMATE............................................................................................................................................ 49
iii
6.3
6.4
6.5
For personal use only
7
7.1
7.2
7.3
7.4
7.5
DISCOVERY & PREVIOUS EXPLORATION ........................................................................................... 50
GEOLOGY & MINERALISATION ......................................................................................................... 52
6.4.1
Regional Geology.................................................................................................................... 52
6.4.2
Local Geology ......................................................................................................................... 52
6.4.3
Mineralisation ........................................................................................................................ 53
EXPLORATION RESULTS & POTENTIAL.............................................................................................. 54
6.5.1
EL 8203 “Kingsgate” ............................................................................................................... 54
VALUATION ................................................................................................................. 55
CURRENCY AND EXCHANGE RATES .................................................................................................. 55
DATABASE ......................................................................................................................................... 55
MARKET AND EMPIRICAL APPROACHES – COMPARABLE TRANSACTIONS,
AUSTRALIAN GOLD PROJECTS WITH RESOURCES ............................................................................ 55
7.3.1
Terramin – Bird in Hand, South Australia............................................................................... 55
7.3.2
Bullseye Mining – Melrose/Darlot East .................................................................................. 56
7.3.3
WPG Resources – Tarcoola/Tunkillia, South Australia ........................................................... 56
7.3.4
Ramelius Mining – Kathleen Valley, Western Australia ......................................................... 56
7.3.5
Sovereign Gold – Mt Adrah, New South Wales...................................................................... 57
7.3.6
A1 Consolidated Gold – Walhalla, Victoria ............................................................................ 57
7.3.7
Gasgoyne Resources – Egerton, Western Australia ............................................................... 57
7.3.8
Northern Star Resources – Hermes, Western Australia......................................................... 57
7.3.9
Fortuna Mining – Linden, Western Australia ......................................................................... 58
7.3.10 GBM Resources – Mt Coolon, Queensland ............................................................................ 58
7.3.11 Discussion ............................................................................................................................... 58
MARKET AND EMPIRICAL APPROACHES – COMPARABLE TRANSACTIONS,
AUSTRALIAN EXPLORATION PROJECTS............................................................................................. 60
KILBURN GEOSCIENCE RATING ......................................................................................................... 61
7.5.1
Tampia Core Tenements ........................................................................................................ 63
7.5.2
Tampia Remaining Tenements ............................................................................................... 63
7.5.3
North Queensland Tenements – Khartoum ........................................................................... 64
7.5.4
North Queensland Tenements – Running Brook ................................................................... 64
7.5.5
New South Wales - Kingsgate................................................................................................. 65
7.5.6
Summary ................................................................................................................................ 65
8
VALUATION SUMMARY ............................................................................................... 67
9
REFERENCES ................................................................................................................ 68
10
GLOSSARY OF TECHNICAL TERMS ................................................................................ 70
11
CERTIFICATE OF QUALIFICATIONS ................................................................................ 75
Figures
Figure 1. Auzex Project Areas .......................................................................................................................... 15
Figure 2. Location Map, Western Australia Tenements .................................................................................. 16
Figure 3. Western Australia Projects Tenements ............................................................................................ 18
Figure 4. Climate Data for Narembeen (1965-2012) ....................................................................................... 18
Figure 5. Emu Hill Prospect (E70/4473). .......................................................................................................... 22
Figure 6. Soils geochemistry with contours for gold values in ppb. ................................................................ 23
Figure 7. Drill hole collars with best intersections labelled for gold................................................................ 24
Figure 8. Regional Location within Yilgarn Craton ........................................................................................... 25
Figure 9. Regional geology of the Western Gneiss terrane ............................................................................. 26
Figure 10. Gault Prospect - Local Geology Map ............................................................................................... 27
iv
For personal use only
Figure 11. Gault Prospect Long-Section ........................................................................................................... 28
Figure 12. Section View of THDD001 and THDD002, Looking West. ............................................................... 31
Figure 13. Local access, infrastructure and topography, North Queensland projects .................................... 34
Figure 14. Climate data, Dimbulah (1968-2013) .............................................................................................. 35
Figure 15. North Queensland Granite Province ............................................................................................... 39
Figure 16. Local geology, EPMs 14497 15570, 19112, 19113, & 19203 “Khartoum” ...................................... 41
Figure 17. Local Geology: Carbonate Creek EPM19114 .................................................................................. 41
Figure 18. Local Geology: Lyndbrook Project .................................................................................................. 42
Figure 19. Main prospects - EPMs 14797 and 15570 ...................................................................................... 43
Figure 20. Local geology, EPM 14418 “Fossilbrook” & EPM 19305 “Running Brook” ..................................... 45
Figure 21. Local geology, Running Brook Prospect .......................................................................................... 46
Figure 22. Kingsgate tenement, Glen Innes area, New England ...................................................................... 48
Figure 23. Location and access, ELA 4402........................................................................................................ 49
Figure 24. Climate data, Glen Innes 1907-2012............................................................................................... 50
Figure 25. Geology of the Kingsgate molybdenite pipe area, EL 8203 ............................................................ 53
Tables
Table 1. Auzex Exploration Limited –Mineral Tenements in Western Australia ............................................. 17
Table 2. Drillhole Collar Information, Auzex Tampia Drilling ........................................................................... 20
Table 3. Summary of Previous Exploration work, Tampia Project................................................................... 21
Table 4. Best Intercepts from DOM drilling, Emu Hills. ................................................................................... 23
Table 5. Deformation Events at Tampia Interpreted by Kuhns (1988). ........................................................... 29
Table 6. Selected mineralised intersections* .................................................................................................. 30
Table 7. Auzex Exploration Limited - Mineral Tenements in North Queensland ............................................ 33
Table 8. Previous Exploration by Companies in Auzex North QLD EPMs ........................................................ 35
Table 9. Exploration carried out by AZX in the Auzex North QLD tenements ................................................. 37
Table 10. Exploration to date carried out by Auzex in the Auzex North QLD tenements ............................... 38
Table 11. Auzex drilling results, Running Brook prospect ............................................................................... 47
Table 12. Auzex Exploration Limited - Mineral Tenements in NSW ................................................................ 48
Table 13. Previous Exploration by Companies in Auzex New England granted EL .......................................... 51
Table 14. Exploration carried out by AZX in the Auzex New England tenement ............................................. 51
Table 15. Exploration to date carried out by Auzex on the New England tenement ...................................... 52
Table 16. Summary of Comparable Transactions, Gold Projects with Resources. .......................................... 59
Table 17. Summary of Comparable Exploration Project Transactions ............................................................ 60
Table 18. Valuation of Auzex Exploration Tenements by Comparable Transactions ...................................... 61
Table 19. Kilburn Geoscience Rating Assessment Criteria. .............................................................................. 62
Table 20. Kilburn Geoscience Ratings For Auzex Projects. .............................................................................. 65
Table 21. Kilburn Geoscience Rating Values for Auzex Exploration Projects .................................................. 66
Table 22. Summary of Valuations, Auzex Projects........................................................................................... 67
v
1
SUMMARY
This report is an independent technical review prepared at the request of BDO Corporate Finance
(QLD) Ltd (“BDO”) to provide an opinion as to the current fair market value of mineral assets
currently held by Auzex Exploration Limited (“Auzex”) in Australia.
For personal use only
At the request of Steven Sorbello of BDO, Mining Associates Pty Ltd (“MA”) was commissioned in
May 2015 to prepare an Independent Technical Report on the fair market value of Auzex’s mineral
assets in Australia. BDO has been engaged by Auzex to prepare an Independent Experts Report
(“IER”) in relation to relation to the proposed acquisition of Auzex by Explaurum Limited
(“Explaurum”). The IER will be presented to the shareholders of Auzex in relation to the proposed
acquisition of Auzex by Explaurum Limited (“Explaurum”). The scope of this report is to conduct an
assessment of the fair market value of Auzex’ projects, which will be included in the IER prepared by
BDO.
MA has conducted the technical review and valuation assessment in accordance with the VALMIN
code. MA is providing the technical review and valuation report to BDO to assist in evaluating
whether the Proposed Transaction is fair and reasonable to the shareholders of Auzex.
Auzex’s mineral assets in Australia comprise three main projects: Tampia Hill (mineral resource and
exploration), North Queensland exploration (Khartoum and Running Brook) and Kingsgate. Tampia
Hill is located in the Western Gneiss Terrane of Western Australia, an under-explored region
prospective for metamorphosed orogenic gold deposits. North Queensland projects cover two areas
within the Hodgkinson Province considered prospective for high grade tin and intrusion-related gold
deposits. Kingsgate in northern New South Wales comprises a single exploration licence covering
several defined small molybdenum deposits.
Tampia Hill is the most advanced project in Auzex’s portfolio. It includes the Gault gold deposit that
has an Inferred Resource of 310,000 ounces of gold (90% owned by Auzex), which is based on results
of historic drilling confirmed by four new diamond drill holes completed by Auzex in 2014. The
Mineral Resource is reported in accordance with the guidelines of the JORC (2012) Code. Gault
6
For personal use only
comprises two main shallow-dipping, near-surface zones of gold mineralisation that remain open at
depth. Some 450 km2 of exploration tenements are currently held by Auzex around, and near the
Gault deposit and were selected on the basis of reviewing historic exploration data and
interpretation of regional geophysics.
North Queensland exploration tenements comprise two project areas: Khartoum and Running
Brook. Khartoum contains numerous occurrences and historic workings on high-grade tin veins.
Drilliing by Auzex has defined continuous mineralisation over considerable strike lengths, but no
Mineral Resources have yet been defined. Running Brook is at an early stage of exploration and
Auzex consider it to be prospective for intrusion-related gold mineralisation similar to the Kidston
deposit in the same region.
Kingsgate in northern New South Wales is a small exploration licence held over the historic Kingsgate
molybdenum mine 20 km east of Glenn Innes. Auzex completed trial mining in 2006 and a feasibility
study in 2008 that indicated a mining project would be financially viable. Several prospects in the
same licence have not been drill tested.
MA considers the total value for Auzex’s Australian mineral assets to be in the range AUD1.4 M to
AUD6.6 M, with a preferred value of AUD2.3 M. This is based on a combination of ranges
determined by Market Approach comparable transactions (including implied AUD/oz and AUD/km2
values supplemented with lower confidence Kilburn Geoscience Ratings for exploration licences.
Project
Tampia
Resources
Tampia
Exploration
North
Queensland
Exploration
Kingsgate
Market
Approach
Comparable
Yardstick AUD/oz
2
Transactions
or AUD/km
Cost
Approach
Kilburn
Geoscience
Preferred Market Value
Low
AUDM
High
AUDM
Low
AUDM
High
AUDM
Low
AUDM
High
AUDM
Low
AUDM
Preferred
AUDM
High
AUDM
1.29
1.5
1.1
2.5
-
-
1.1
1.5
2.5
-
-
0.09
0.34
0.08
1.3
0.1
0.3
1.3
-
-
0.18
0.68
0.26
2.6
0.2
0.5
2.6
0.01
0.01
0.01
0.22
0.01
0.01
0.2
1.4
2.3
6.6
Total
Note: Preferred valuations are rounded to nearest AUD0.1 M to reflect accuracy.
The Preferred value for Auzex’s Australian mineral assets is AUD2.3M, which is based on a
consideration of ranges determined by Market Comparable Transactions and Cost Approaches.
7
2
INTRODUCTION AND TERMS OF REFERENCE
2.1
COMMISSIONING ENTITY AND SCOPE
For personal use only
At the request of Mr Steven Sorebello of BDO Corporate Finance (QLD) Ltd (“BDO”), Mining
Associates Pty Ltd (“MA”) was commissioned in May 2015 to prepare an Independent Technical
Report for inclusion in an Independent Expert’s Report to be presented to the shareholders of Auzex
Exploration Limited (“Auzex”) in relation to the proposed acquisition of Auzex by Explaurum Limited
(“Explaurum”).
MA has conducted the technical review and valuation assessment in accordance with the VALMIN
code. MA is providing the technical review and valuation report to BDO to assist in evaluating
whether the Proposed Transaction is fair and reasonable to the shareholders of Auzex. This
Technical Report will be included in the Independent Expert’s Report presented to the shareholders
of Auzex
The scope of the Valuation included the following:

Review of Auzex’s projects in Australia including but not limited to historical exploration
expenditure, prospectivity, resources, exploration targets and good standing of the
tenements.

Assessment of the fair market value of the Projects based on appropriate valuation
methodologies.

Report to be prepared in accordance with the VALMIN Code and for the specific purpose of
assisting BDO in the preparation of an Independent Experts Report.
MA was not requested to comment on the Fairness or Reasonableness of any vendor or promoter
considerations, and therefore no opinion on these matters has been offered.
2.2
VALUATION MANDATE
MA was requested to provide an Independent Valuation of Auzex’s projects in Australia, comprising
their main project areas in Western Australia (Tampia Hill), northern Queensland (Khartoum and
Running Brook) and New South Wales (Kingsgate).
2.3
PURPOSE
BDO intends that this report be used as part of an Independent Expert’s Report (“IER”) to be
presented to the shareholders of Auzex in relation to the proposed acquisition of Auzex by
Explaurum. The IER will provide an opinion as to whether the proposed transaction is fair and
reasonable to the shareholders of Auzex, and as such, the report will be a public document.
2.4
VALUATION DATE
All time-sensitive data used in this Valuation, including metal prices, exchange rates, cost-of-living
indices etc. were taken as at 5pm Sydney time on 14th May 2015. Accordingly, this valuation is valid
as of 14th May 2015 and refers to the writer’s opinion of the value of the Projects at this date.
This valuation can be expected to change over time having regard to political, economic, market and
legal factors. Most importantly, the valuation can also vary due to the success or otherwise of any
mineral exploration that is conducted either on the properties concerned or by other explorers on
prospects in the near environs. The valuation could also be affected by the consideration of other
exploration data, not in the public domain, affecting the properties which have not been made
available to the author.
8
2.5
QUALIFIED VALUATOR AND QUALIFIED PERSON
For personal use only
This Valuation was prepared by Mr Andrew Vigar. Mr Vigar has no direct or indirect interest in the
properties which are the subject of this Valuation, nor does he hold, directly or indirectly, any shares
in Auzex or any associated company, or any direct interest in any mineral tenements in Australia.
The technical review and valuation of the Exploration Projects was conducted by Mr Andrew Vigar.
Mr Vigar has sufficient experience which is relevant to the styles of mineralisation and deposits
under consideration and to their valuation to qualify as a Competent Person as defined in the 2012
Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves’ (Australia) and is a Qualified Person as defined in NI43-101 (Canada). He is a Fellow of The
Australasian Institute of Mining and Metallurgy (Melbourne) and a Member of the Society of
Economic Geologists (Denver). Mr Vigar is employed by Mining Associates Pty Ltd of Brisbane,
Australia.
2.6
DEFINITION OF VALUATION TYPES
The three generally accepted Valuation approaches under VALMIN are:
•
Income Approach.
•
Market Approach.
•
Cost Approach.
The Income Approach is based on the principle of anticipation of benefits and includes all methods
that are based on the income or cash flow generation potential of the Mineral Property. This
method provides an indication of the value of a property with identified reserves. It utilises an
economic model based upon known resources, capital and operating costs, commodity prices and a
discount for risk estimated to be inherent in the project. Alternatively a value can be assigned on a
royalty basis commensurate with the in situ contained metal value. The Exploration Projects do not
contain mineral reserves that meet the standards of the JORC 2012 Code so the Income Approach is
not appropriate for Auzex’s projects
The Market Approach is based primarily on the principle of substitution and is also called the Sales
Comparison Approach. The Mineral Property being valued is compared with the transaction value of
similar Mineral Properties, transacted in an open market. Methods include comparable transactions
and option or farm-in agreement terms analysis. The terms of a proposed joint venture agreement
may be used to provide a fair market value based upon the amount an incoming partner is prepared
to spend to earn an interest in part or all of the property. This pre-supposes some form of
subjectivity on the part of the incoming party when grass roots properties are involved.
An extension to the Market Approach is to rate transactions in terms of a dollar value per unit area
or dollar value per unit of resource in the ground. This includes the range of values that can be
estimated for an exploration property based on current market prices for equivalent properties,
existing or previous joint venture and sale agreements, the geological potential of the properties,
regarding possible potential resources, and the probability of present value being derived from
individual recognised areas of mineralisation. This method is sometimes termed a “Yardstick”
approach. It allows recent transactions to be related to the property in question even if they are not
strictly comparable in terms of size of resources and/or exploration area. However, the results
should be confirmed using other methods.
The Cost Approach is based on the principle of contribution to value. The appraised value method is
one commonly used method where exploration expenditures are analysed for their contribution to
the exploration potential of the Mineral Property. The multiple of exploration expenditure method
(‘MEE’) is used whereby a subjective factor (also called the prospectivity enhancement multiplier or
‘PEM’) is based on previous expenditure on a tenement with or without future committed
9
exploration expenditure and is used to establish a base value from which the effectiveness of
exploration can be assessed. Where exploration has produced documented positive results a MEE
multiplier can be selected that takes into account the valuer's judgment of the prospectivity of the
tenement and the value of the database. MEE factors typically range from 0 to 3.0 and occasionally
up to 5.0 applied to previous exploration expenditure to derive a dollar value.
For personal use only
The Kilburn Geological Engineering/Geoscience Method is a cost approach rating method that values
a project based on an assessment of its technical attributes to define prospectivity. A basic
acquisition cost (‘BAC’) is determined, which represents the baseline costs of applying for and
maintaining a tenement for a period of 12 months. Four key technical factors are then assessed and
assigned a numeric value, each of which enhance, downgrade or have no impact on the value of the
property. The factors are then applied serially to the BAC of each tenement in order to derive a value
for the property. The factors used are: off-property attributes, on-property attributes, anomalies and
geology. A fifth factor that may be applied is the current state of the market. The Kilburn method is
highly subjective since it relies on technical considerations and the opinion of the valuer. Choice of
an appropriate BAC can also be difficult in jurisdictions that do not specify minimum exploration
expenditures, or where information of average expenditure is difficult to obtain. Because Kilburn
valuations are based on area units, they can distort values for large licence holdings. However, MA
considers that it serves as a useful validation of Market and Cost approaches and at the very least
provides a minimum value for a licence.
MA has adopted the Market Approach and its extension the Yardstick Approach as the principal
bases for the properties included in this Valuation. The Kilburn Geoscience Rating method is included
as a check on values obtained by the Market Approach.
Valuation methodology of mineral properties is exceptionally subjective. If an economic reserve or
resource is subsequently identified then there is likely to be a substantial increase in the Project’s
value and this valuation will be dramatically low relative to any later valuations. Alternatively, if
further exploration is unsuccessful it is likely that the Project’s value will decrease and this valuation
will be higher than later valuations.
Values obtained are estimates of the amount of money, or cash equivalent, which would be likely to
change hands between a willing buyer and a willing seller in an arms-length transaction, wherein
each party had acted knowledgeably, prudently and without compulsion. This is the required basis
for the estimation to be in accordance with the provisions of VALMIN.
There are a number of generally accepted procedures for establishing the value of mineral
properties with the method employed depending upon the circumstances of the property. When
relevant, MA uses the appropriate methods to enable a balanced analysis. Values are presented as a
range and the preferred value is identified.
The readers should therefore form their own opinion as to the reasonableness of the assumptions
made and the consequent likelihood of the values being achieved.
2.7
OTHER DEFINITIONS USED IN THE REPORT
Commissioning Entity means the organization, company or person commissioning a Valuation.
Competence or Competent means having relevant qualifications and relevant experience.
Current means current with respect to, and relative to, the Valuation Date.
Data Verification means the process of confirming that data has been generated with appropriate
procedures, has been accurately transcribed from the original source and is suitable to be used.
Development Property means a Mineral Property that is being prepared for mineral production and
for which economic viability has been demonstrated by a Feasibility Study or Prefeasibility Study and
10
includes a Mineral Property which has a Current positive Feasibility Study or Prefeasibility Study but
which is not yet financed or under construction.
Exploration Property means a Mineral Property that has been acquired, or is being explored, for
mineral deposits but for which economic viability has not been demonstrated.
For personal use only
Fair Market Value means the highest price, expressed in terms of money or money’s worth,
obtainable in an open and unrestricted market between knowledgeable, informed and prudent
parties, acting at arm’s length, neither party being under any compulsion to transact.
Feasibility Study means a comprehensive study of a deposit in which all geological, engineering,
operating, economic and other relevant factors are considered in sufficient detail that it could
reasonably serve as the basis for a final decision by a financial institution to finance the development
of the deposit for mineral production.
Guideline means a best practices recommendation, which, while not mandatory in the Valuation of
Mineral Properties, is highly recommended.
Independence or Independent means that, other than professional fees and disbursements received
or to be received in connection with the Valuation concerned, the Qualified Valuator or Qualified
Person (as the case requires) has no pecuniary or beneficial (present or contingent) interest in any of
the Mineral Properties being valued, nor has any association with the Commissioning Entity or any
holder(s) of any rights in Mineral Properties which are the subject of the Valuation, which is likely to
create an apprehension of bias. The concepts of “Independence” and “Independent” are questions
of fact. For example, where a Qualified Valuator’s fees depend in whole or in part on an
understanding or arrangement that an incentive will be paid based on a certain value being
obtained, such Qualified Valuator is not Independent.
Materiality and Material refer to data or information which contribute to the determination of the
Mineral Property value, such that the inclusion or omission of such data or information might result
in the reader of a Valuation Report coming to a substantially different conclusion as to the value of
the Mineral Property. Material data and information are those which would reasonably be required
to make an informed assessment of the value of the subject Mineral Property.
Mineral Property means any right, title or interest to property held or acquired in connection with
the exploration, development, extraction or processing of minerals which may be located on or
under the surface of such property, together with all fixed plant, equipment, and infrastructure
owned or acquired for the exploration, development, extraction and processing of minerals in
connection with such properties. Such properties shall include, but not be limited to, real property,
unpatented mining claims, prospecting permits, prospecting licences, reconnaissance permits,
reconnaissance licences, exploration permits, exploration licences, development permits,
development licences, mining licences, mining leases, leasehold patents, crown grants, licences of
occupation, patented mining claims, and royalty interests
Mineral Reserves and Mineral Resources. The terms Mineral Reserve, Proven Mineral Reserve,
Probable Mineral Reserve, Mineral Resource, Measured Mineral Resource, Indicated Mineral
Resource, and Inferred Mineral Resource and their usage have the meaning ascribed by the JORC
Code (2004).
Mineral Resource Property means a Mineral Property which contains a Mineral Resource that has
not been demonstrated to be economically viable by a Feasibility Study or Prefeasibility Study.
Mineral Resource Properties may include past producing mines, mines temporarily closed or on
care-and-maintenance status, advanced exploration properties, projects with Prefeasibility or
Feasibility Studies in progress, and properties with Mineral Resources which need improved
circumstances to be economically viable.
11
For personal use only
Prefeasibility Study and Preliminary Feasibility Study mean a comprehensive study of the viability
of a mineral project that has advanced to a stage where the mining method, in the case of
underground mining, or the pit configuration, in the case of an open pit, has been established, and
which, if an effective method of mineral processing has been determined, includes a financial
analysis based on reasonable assumptions of technical, engineering, operating, economic factors
and the assessment of other relevant factors which are sufficient for a Qualified Person, acting
reasonably, to determine if all or part of the Mineral Resource may be classified as a Mineral
Reserve. A Prefeasibility Study is at a lower confidence level than a Feasibility Study.
Preliminary Assessment means a preliminary economic study by a Qualified Person that includes
Inferred Mineral Resources. The Preliminary Assessment must include a statement that the Inferred
Mineral Resources are considered too speculative geologically to have the economic considerations
applied to them that would enable them to be categorized as Mineral Reserves, outlines the basis
for the Preliminary Assessment and any qualifications and assumptions made, and specifies that
there is no certainty that the Preliminary Assessment will be realized.
Production Property is a Mineral Property with an operating mine, with or without processing plant,
which has been fully commissioned and is in production.
Professional Association is a self-regulatory organization of engineers, geoscientists or both
engineers and geoscientists that (a) has been given authority or recognition by law; (b) admits
members primarily on the basis of their academic qualifications and experience; (c) requires
compliance with the professional standards of competence and the code of ethics established by the
organization; and (d) has disciplinary powers, including the power to suspend or expel a member.
Qualified Person is an individual who (a) is an engineer or geoscientist with at least five years of
experience in mineral exploration, mine development or operations or mineral project assessment,
or any combination of these; (b) has experience relevant to the subject matter of the mineral project
and the Technical Report; and (c) is a member in good standing of a Professional Association
Qualified Valuator is an individual who (a) is a professional with demonstrated extensive experience
in the Valuation of Mineral Properties, (b) has experience relevant to the subject Mineral Property or
has relied on a Current Technical Report on the subject Mineral Property by a Qualified Person, and
(c) is regulated by or is a member in good standing of a Professional Association or a Self-Regulatory
Professional Organization.
Reasonableness, in reference to the Valuation of a Mineral Property, means that other appropriately
qualified and experienced valuators with access to the same information would value the property
at approximately the same range. A Reasonableness test serves to identify Valuations which may be
out of step with industry standards and industry norms. It is not sufficient for a Qualified Valuator to
determine that he or she personally believes the value determined is appropriate without satisfying
an objective standard of proof.
Report Date means the date upon which the Valuation Report is signed and dated.
Self-Regulatory Professional Organization means a self-regulatory organization of professionals that
(a) admits members or registers employees of members primarily on the basis of their educational
qualifications, knowledge and experience; (b) requires compliance with the professional standards of
competence and code of ethics established by the organization; and (c) has disciplinary powers,
including the power to suspend or expel a member or an employee of the member.
Standard means a general rule which is mandatory in the Valuation of Mineral Properties.
Technical Report means a report prepared, filed and certified in accordance with NI 43-101 and
Form 43-101F1 Technical Report or JORC guidelines.
12
Transparency and Transparent means that the Material data and information used in (or excluded
from) the Valuation of a Mineral Property, the assumptions, the Valuation approaches and methods,
and the Valuation itself must be set out clearly in the Valuation Report, along with the rationale for
the choices and conclusions of the Qualified Valuator.
Valuation is the process of estimating or determining the value of a Mineral Property.
For personal use only
Valuation Date means the effective date of the Valuation, which may be different from the Report
Date or from the cut-off date for the data used in the Valuation.
Valuation Report means a report prepared in accordance with the VALMIN Standards and
Guidelines.
2.8
INFORMATION USED
Auzex made available a very large body of data from their various tenements, encompassing a
period of 50 years from 1955 to present. Auzex provided a warranty that, to the best of Auzex’s
knowledge, full accurate and true disclosure of all material information had been supplied to Mining
Associates. Although Mining Associates has made diligent efforts to cross-check and compare the
Auzex data with available material from other sources, investors should bear in mind that this report
is, by its nature, heavily reliant on the data supplied by Auzex.
Additional data was sourced from published books and journals, unpublished company reports held
by the WA Department of Mines and Petroleum (“DMPWA”), Geological Survey of Queensland
(“GSQ”) and the Geological Survey of NSW (“GSNSW”), university theses etc. These references are
cited within the report and listed at the back of this report.
Maps in this report are generally in Universal Transverse Mercator (“UTM”) projection, using the
Map Grid of Australia 1994 (“MGA94”) coordinate system set to the Grid Datum of Australia 1994
(“GDA94”). If latitude and longitude is shown, these are set to GDA94. Maps shown in this report are
for illustration only, and should not be relied upon for navigation.
2.9
SITE VISIT BY QUALIFIED PERSON
Mr Andrew Vigar has not visited the properties that are the subject of this valuation. However, Mr
James Lally and Anthony Woodward, both employees of MA carried out a desktop review of the
Western Australian projects exploration history and mineralisation. They did not visit the project
sites for the compilation of this report as there is no outcropping mineralisation according to the
exploration reports, or site sample storage facilities. Mr Woodward has previously visited the
Khartoum project area on behalf of other clients.
2.10 COMPLIANCE WITH THE VALMIN CODE
This Valuation complies with the VALMIN Code (2005 Edition) in its entirety. The author has taken
due note of Regulatory Guide ("RG") 111 "Content of Expert Reports" (October 2007 & March 2011)
and RG 112 "Independence of Experts" (March 2011 update) promulgated by the Australian
Securities and Investments Commission ("ASIC") and this report meets the guidelines set out in RG
111 and RG 112.
13
3
PROJECTS
For personal use only
Auzex is an unlisted public company that was incorporated on 6 October 2011. As part of the
demerger of the non-Bullabulling Gold project assets of Auzex Resources Limited, Auzex Resources
Limited shareholders who were on the share register on 30 December 2011 received one (1) new
Auzex Exploration Limited Share for each six (6) Auzex Resources Limited shares. Auzex Exploration
Limited Shares were transferred to eligible shareholders on 6 January 2012 and Auzex share
certificates were dispatched on 16 January 2012.
Auzex in its original form began exploring at the end of September 2003. During the nine years since
its inception, Auzex has compiled an extensive spatial database of previous company and
government exploration records. Utilising a “Weights of Evidence” approach to analyse spatial data,
Auzex highlighted a number of areas in North Queensland and the New England Batholith, with the
potential for particularly gold, tin and tungsten mineralisation. These areas most closely fit the
modified Intrusion Related Gold System (“IRGS”) model that Auzex previously developed, and are
covered by the licences and applications that Auzex has secured. The Tampia Gold Project (“Tampia
Project”) at Tampia Hill in Western Australia is located in the Western Gneiss Terrane and although
related to Archaean granites has more similarities to orogenic gold deposits of the Yilgarn craton,
particularly the Southern Cross belt 200 km to the east. Current Auzex properties are at the early to
advances exploration stages.
For convenience, the Auzex tenements have been divided into three groups:



Western Australia (Tampia Hill)
North Queensland (Khartoum, Running Brook)
New South Wales (Kingsgate and Junction Reefs)
Project descriptions are provided for each group separately under each topic heading below.
Auzex tenements were verified by Mining Associates using searches of the Queensland Mines Online
Maps (“MOMaps”) database, the NSW MinView online database and the WA Mineral Titles online
database.
14
For personal use only
Figure 1. Auzex Project Areas
(after Auzex Exploration Limited, 2014)
15
4
WESTERN AUSTRALIA PROJECTS
For personal use only
Western Australia projects comprise the Tampia Hill Project and the Dumbleyung Project, both
located in the Southern Cross region in the south-western part of Western Australia (Figure 2).
Tenement details are shown in Table 1.
4.1
Figure 2. Location Map, Western Australia Tenements
(Source: Department of Mined and Petroleum, WA, after Google, 2013)
PROJECT DESCRIPTION AND ACCESS
Western Australia projects are covered by 14 granted tenements consisting of two mining leases
(“ML), nine exploration licences (“EL”) and three prospection licences (“PL”) (Table 1).
16
For personal use only
Table 1. Auzex Exploration Limited –Mineral Tenements in Western Australia
ANNEXURE
C
Auzex
Tenement Data
Ownership
%
Status
27.90
90
Verified
03-Jan-2018
20.35
100
Verified
02-Nov-2012
01-Nov-2017
2.45
100
Verified
10-Oct-2012
05-Dec-2012
04-Dec-2017
2.91
100
Verified
Emu Hill
05-Mar-2013
06 Jan 2014
05 Jan 2019
16.38
100
Verified
E 70/4474
Tampia Hill
05-Mar-2013
18 Dec 2013
17 Dec 2018
5.82
100
Verified
E 70/4475
Tampia Hill
05-Mar-2013
06 Jan 2014
05 Jan 2019
323.7
100
Verified
E70/4616
Tampia ‘core’
30-May-2014
8.72
100
Pending
M 70/815
Tampia ‘core’
06-Jul 1993
13-Aug-1997
12-Aug-2018
1.99
90
Verified
M 70/816
Tampia ‘core’
06-Jul-1993
13-Aug-1997
12-Aug-2018
5.02
90
Verified
P 70/1637
Tampia ‘core’
07-Sep-2012
06-Nov-2012
5-Nov-2016
1.27
100
Verified
P 70/1638
Tampia ‘core’
07-Sep-2012
06-Nov-2012
5-Nov-2016
0.93
100
Verified
P 70/1645
Tampia ‘core’
7-Sep-2013
03 Apr-2013
02 Apr-2017
0.20
100
Pending
E70/4545
Dumbleyung
27-Sept-2013
08 Jan 2014
07 Jan 2019
34.45
100
Verified
Total
452.09
Tenement
Area Name
Applicationn Date
Grant Date
Expiry Date
Area km
E 70/2132
Tampia ‘core’
17-Sep-1998
23-Aug-2005
22-Aug-2014
E 70/4411
Tampia ‘core’
03-Sep-2012
04-Jan-2013
E 70/4420
Tampia ‘core’
07-Sep-2012
E 70/4433
Tampia ‘core’
E 70/4473
2
The Tampia Hill Project is located about 250 km east from Perth and 12 km south-east of the town of
Narembeen (Figure 3). The project comprises 8 exploration licences, 3 prospecting licences and 2
mining leases. Mining leases M70/815 and M70/816, and exploration license E70/2132 are 90%
owned by Auzex, with the remaining 10% owned by Tampiagold/Goldoro. Tampiagold/Goldoro’s
10% interest is free-carried up to completion of a feasibility study, after which time they can elect to
either retain a 10% participating interest, or convert their interest to shares and receive a 2%
royalty.
The area is easily accessible by sealed and unsealed minor roads from the Great Eastern Highway
about 75 km to the north, or the Condinin-Hyden Road 50 km to the south. The nearest sealed road
is South Kumminin Road East.
The Dumbleyung Project is located approximately 250 km southeast from Perth and comprises one
exploration licence (E70/4545). It is accessible via sealed roads from Perth, and is approximately
5 km north of the township of Moulyinning.
Physiography in the Southern Cross region comprises undulating lowlands with small hills. Elevation
across the project areas varies from approximately 300 m to 400 m ASL. West, northwest and north
draining ephemeral river channels occur throughout the region.
17
For personal use only
4.2
Figure 3. Western Australia Projects Tenements
(Source: Department of Mines and Petroleum, WA, after Google, 2013)
CLIMATE
The local climate is grassland type with hot, dry summers and cool, wetter winters. Annual average
rainfall of 335 mm mostly occurs between the months of May and August. Figure 4 shows average
climate statistics for the region.
Figure 4. Climate Data for Narembeen (1965-2012)
(Source: Australian Bureau of Meteorology)
18
4.3
EXPLORATION HISTORY
For personal use only
Previous exploration activities are described below for two areas of the Tampia Hill Project: the
‘core’ Tampia tenements (E70/4420, E70/2132, P70/1637, E70/4433, P70/1645, P70/1638,
E70/4411, E70/4616, M70/815 and M70/816), and Emu Hill (E70/4473).
The remaining tenements in the Tampia Hill Project, and the single tenement in the Dumbleyung
Project have had very little previous exploration work undertaken within their boundaries and are
not described any further in regards to exploration history. Auzex applied for these tenements on
the basis of their regional target generation work using GIS-based prospectivity analysis and there is
little or no additional information available.
4.3.1
Core Tampia Hill Tenements
Exploration on the Core Tampia Hill tenements is summarised in Table 3.
BHP discovered gold mineralisation at Tampia Hill in 1987 from follow-up of a regional BLEG stream
sediment survey. BHP Minerals undertook a considerable amount of exploration work, including
geological mapping, rock chipping, grid soil and auger sampling, RAB drilling and ground geophysics
that lead to the discovery of the Gault Gold Deposit.
Detailed grid soil sampling outlined a highly anomalous zone over what was named the Gault
prospect, which was tested with shallow RAB drilling followed by diamond core drilling. BHP
calculated a small, shallow high-grade resource for Gault that was pre-JORC code and is not
presented here.
Mining Leases M70/815 and M70/816 were originally part of E70/463, which was granted to BHP
Gold Mines Ltd (later Newcrest Mining Ltd) in 1987. These tenements were sold to Dry Creek Mining
in 1990. Dry Creek Mining was renamed to Nexus Minerals NL in 1993.
Conversion to mining leases occurred in 1998 after a compensation agreement with LAN Stacey was
signed allowing for the approval process to commence for mining lease applications. Nexus Minerals
was renamed as IPT Systems Ltd in 2000, and then was changed to Synergy Equities Group in 2002.
Tenements were transferred to Meridian Mining Ltd in 2005, BHPs royalty interest terminated wtih
the sale of the properties to Meridian Mining Ltd. The properties were subsequently transferred to
Tampiagold Pty Ltd (“Tampiagold”) in 2010.
E70/2132 (originally 24 blocks) was granted to Synergy Equities Group in 2005, and was transferred
to Meridian Mining Pty Ltd in 2006. In 2010, the tenement underwent a 50% reduction (now 12
blocks), and was transferred to Goldoro Pty Ltd (“Goldoro”).
Exploration from 1990 to 1997 was hampered by failure to secure access rights from landowners
and a plaint lodged in 1993. The plaint was dismissed in 1997 and Nexus Minerals commenced RC
drilling at Gault with the aim of confirming BHP results and defining a gold resource. In 2000,
Widenbar and Associates provided a JORC-compliant resource estimate at Gault totalling 3.49Mt
grading 2.08 g/t Au at a cut-off grade of 1 g/t Au. A top cut of 40 g/t and a bulk density of 2.65 t/m3
was applied to the resource model. Limited metallurgical testwork was undertaken on composite RC
samples, which indicated recovery from conventional cyanide leaching of around 45%.
Further plaint actions from 2001 to 2005 resulted in cessation of exploration activity on the
tenements. In 2005, Meridian Mining acquired the project from IPT Systems and commenced a data
review and assessment of exploration targets on the remainder of the licenses outside the limits of
Gault. The mining lease tenements M70/815 and M70/816 were transferred to Tampiagold in 2010,
with the exploration license E70/2132 being transferred to Goldoro in the same year. Both
companies continued to experience problems with land access. High resolution airborne magnetics
was flown over the project area in 2010 and further exploration was planned on the basis of
interpretation of results.
19
For personal use only
Auzex completed a sale and purchase agreement with Tampiagold/Goldoro in February 2012,
forming a joint venture whereby Auzex acquired 80% of the licenses. The remaining 20% is held by
Tampiagold/Goldoro under a free carry arrangement that will persist until a bankable feasibility
study is completed. At that time Tampiagold/Goldoro can either become full participants in the JV,
or convert their interest to shares in Auzex and retain a 2% NSR. Since completing the purchasem
Auzex’s exploration activities have since largely focussed on the consolidation and reinterpretation
of existing data, and diamond drilling (2014) at the Tampa Hill prospect on the Exploration Licence
and both Mining Leases.
A total of four NQ2 sized diamond drill holes were drilled from 26th June to 31st July, 2014. The
drilling contractor ONQ Exploration Limited operated two rigs during the program: a Desco 550 and
a Desco 1250. The diamond drilling programme was planned to take approximately 20 days with an
average drill rate of 20 meters per day. Unfortunately, due to drill rig break downs and constant
heavy rainfall, the programme extended to 34 days with an average drill rate of only 14.6 meters per
day.
All holes were drilled with HQ size diamond core until fresh rock was encountered and then switched
to NQ2 sized diamond coring. Table 2 shows collar information for each hole drilled.
Table 2. Drillhole Collar Information, Auzex Tampia Drilling
Collar
Easting
Northing
RL
Dip Azmith Hole depth
THDD001 636827.17 6440742.22 345.85
-60
0
97.7
THDD002
636822.8 6440398.04 338.02
-60
130
152.3
THDD003 636780.35 6441232.14 335.74
-60
0
81.3
THDD004 636250.73 6442089.94
-60
90
150
336
All holes were orientated, metre marked, logged (lithology, alteration and structural logging) and
had XRF and magnetic susceptibility readings taken. Detailed collar and survey information,
lithological, alteration and structural logs and XRF and magnetic susceptibility readings were
collected according to Auzex standard operating procedures.
Auzex’s results confirmed the historic drill results and confirmed the position, grades and widths of
gold mineralisation in historic mineral resource estimates.
20
Table 3. Summary of Previous Exploration work, Tampia Project.
Period
For personal use only
19871988
Company
BHP Minerals
Ltd
19901993
Dry Creek
Mining NL
19971999
Nexus
Minerals N.L.
20002001
IPT
Systems Ltd
20012005
Synergy
Equities Group
Exploration Activities
Stream Sediment, Soil,
Rock Chip sampling
Drilling – 428 RAB for 133,376m,
RC 1,335m; 18 DDH for 2,944m
Petrology
Geophysics
- Aeromagnetics, Ground magnetics
- Induced polarisation, VLF EM survey
- Down hole magnetics
- Sirotem survey
Structural analysis
Mineral Resource
Preliminary pit designs
Evaluation of Tampia Hill
40 RAB for 1,145m
at the Smoker prospect
Soil sampling
Literature review
4,553m RC drilling
11 Rock samples
Data Review and
Aeromagnetic Re-interpretation
Survey Control and Gridding
Geological interpretation
independent Mineral Resource Estimate for
the Gault deposit
Metallurgical testwork
Soil sampling
LANDSAT data interpretation
No exploration conducted
Comments
over the Tampia Hill Prospect
over the Gault Prospect
over the Gault Prospect
pre-JORC, Gault Prospect
Gault prospect
Three zones identified
Gault Prospect
JORC compliant - inferred resource of
3.49Mt at 2.08 g/t Au
45% leachable recovery
a number of plaint actions
Data review
20062009
Meridian
Mining Ltd
20102011
Tampiagold Pty
Ltd
20122014
Auzex
Exploration Ltd
4.3.2
2,240 line kms high resolution
aeromagnetic and radiometric
survey
Covering Tampia Project area
GIS compilation 1:20,000 scale
Geochemical
and geophysical structural
target definition
Surficial geology and regolith interpretation
Bedrock geology interpretation
SAM geophysical survey planned
Not completed
Data review and consolidation
Covering Tampia Hill Prospect
4 Diamond drill holes
Emu Hill Prospect
Emu Hill is located 8 km northwest of Tampia Hill and 6 km south of Narembeen (Figure 3). Previous
exploration included stream and soil sampling, RAB and aircore drilling.
21
The prospect was first identified using low order gold anomalies from soil, rock chip and stream
sediment sampling carried out by BHP in 1987; however these were not followed up.
For personal use only
Dominion Mining Ltd (“DOM”) collected 434 augered surface geochemical samples within the
current area of tenement E70/4473 and delineated a coherent gold/copper anomaly over 1 km in
strike length with gold values up to 863 ppb from lateritic and surface material (Figure 6).
Figure 5. Emu Hill Prospect (E70/4473).
(Source: Auzex, 2014)
22
For personal use only
Figure 6. Soils geochemistry with contours for gold values in ppb.
(Source: Auzex, 2014)
DOM completed 60 drill holes (23 RAB and 47 aircore) over the geochemical anomaly and 560 3 m
composite samples were assayed, giving best intercepts of 6 m @ 2.50 g/t Au, 6 m @ 0.51 g/t Au and
3 m @.81 g/t Au (Table 4, Figure 7).
Table 4. Best Intercepts from DOM drilling, Emu Hills.
Hole Number
Hole depth (m)
Intersection length (m)
Gold grade (ppm)
03EHVR022
9m
6m
2.5 ppm
03EHAC056
9m
3m
0.81 ppm
03EHAC056
24 m
6m
0.51 ppm
03EHAC053
48 m
3m
0.58 ppm
03EHAC029
27 m
3m
0.38 ppm
23
For personal use only
Figure 7. Drill hole collars with best intersections labelled for gold.
(Source: Auzex, 2014)
4.3.3
Historic Mineral Resource Estimates
BHP conducted a mineral resource estimate for the Gault Gold Deposit during its tenure. However, it
was conducted before the establishment of the JORC Code and therefore was not included in this
report. It has since been superseded by a mineral resource estimate conducted in 2000 by Widenbar
and Associates Pty Ltd (“Widenbar”), referred to in this report as the 2000 Mineral Resource
Estimate.
The 2000 Mineral Resource Estimate for the Gault deposits was prepared by Widenbar in
compliance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves (“JORC Code 1999”). Widenbar estimated total mineral resources in the inferred
category at a cut-off grade of 1 g/t Au of 3,491,000 tonnes at an average grade of 2.08 g/t Au for
233,000 oz gold. This estimate used a top-cut of 40 g/t gold and an assumed dry bulk density of
2.65 t/m3.
4.4
4.4.1
GEOLOGY AND MINERALISATION
Regional Geology
The Tampia Hill and Dumbleyung Projects tenements are located in the southwest portion of the
Yilgarn Craton (Figure 8).
24
For personal use only
Figure 8. Regional Location within Yilgarn Craton
(Source: Auzex 2012)
Previous reports on the Tampia Hill Project placed it within one of two geological regions of Western
Australia: the Western Gneiss Terrane; or the Southern Cross Province (Figure 9). Both regions are
subdivisions of the Archean-age Yilgarn Craton and the confusion arises from differing
interpretations of the location of their contact.
According to the interpretation presented on the Geological Survey of Western Australia’s web
mapping service, both the Tampia Hill Project and the Griffins Find-Lake Grace JV tenements lie
within the Western Gneiss Terrane some 100 km west of its contact with the Southern Cross
Province (Figure 9). The Terrane is dominated by recrystallised granitoid gneiss of quartz monzonite
composition with enclaves of metamorphosed mafic gneiss and associated sediments
(“greenstones”) that have a complex structural and metamorphic history.
25
For personal use only
Figure 9. Regional geology of the Western Gneiss terrane
(Source: after Tomkins & Grundy, 2009)
The Western Gneiss Terrane occupies a broadly triangular-shaped area of the south and western
portion of the Yilgarn Craton. It is distinguished from granite-greenstone terranes of the Southern
Cross, Murchison and Eastern Goldfields Provinces by the predominance of granitic rocks and higher
metamorphic grade. Granulite to upper amphibolite grade rocks of the Western Gneiss Terrane
contrast with mostly greenschist facies rock of the granite-greenstone terranes.
Wilde et al (1996) divided the Western Gneiss Terrane into three smaller terranes comprising
different metamorphic belts (Figure 9) which are separated by major thrust faults. The Lake Grace
Terrane, which contains the Tampia Hill Project, is the easternmost of these belts. The terrane
contains several remnant greenstone belts metamorphosed to granulite facies surrounded by
granitoids and felsic gneisses. The dominant rock type in these domains is a banded quartz-feldsparbiotite paragneiss, also containing garnet, hypersthene, cordierite, and sillimanite. Small, layered
mafic intrusions are distributed throughout the paragneiss between Lake Grace and Dumbleyung in
the Lake Grace terrane (Wilde, 1990).
Syn-metamorphic granites within the Lake Grace Terrane have been dated at 2627±12 Ma. Younger
coarse-grained granodiorites post-dating granulite facies metamorphism have an average age of
2587±25 Ma (Tomkins & Grundy, 2009).
26
There are a number of greenstone belts throughout the region, also metamorphosed to a high
grade, and migmatites are common at the margins of metamorphic belts, indicating partial melting
at high temperatures (Wilde et al., 1996).
For personal use only
4.4.2
Local Geology
Detailed geological work has only been undertaken on the core Tampia Hill tenements around the
Gault Gold Deposit. The remainder of the Tampia Hill and Dumbleyung Projecs are largely covered
by soils and colluvium, with sparse small outcrops of granite gneiss.
Descriptions of the local geology around the Gault Prospect are based on work done by BHP in 19871988 (Woad, 1988). Subsequent license holders have reported very little work on detailed surface
mapping.
Quaternary sand, silt and gravel occur as a thin veneer overlying Archean rocks. Remnant outcrop is
sparse and is visible in areas cleared for agriculture. Woad (1988) describes the Archean geology of
the Tampia Hill area as dominated by banded felsic granulite gneiss that was intruded by seriate and
porphyritic granite plutons, sills and dykes. Belts of mafic granulite gneiss and subordinate
metamorphosed banded iron formation (BIF) and metasedimentary rocks occur within the felsic
gneiss. Pegmatitic granite dykes and sills locally intruded mafic granulite gneiss. Dolerite dykes of
Proterozoic age strike northeast and cross-cut all older rocks and structures. Gneissic foliation strikes
north and dips vary between sub-horizontal and vertical (Figure 10). Structural measurements from
the recent core show the foliation and associated quartz veins strike NW; indicating further work on
the local geology of the Tampia Gold Project is required.
Figure 10. Gault Prospect - Local Geology Map
(Source: after BHP-Utah, 1988)
27
For personal use only
Figure 11. Gault Prospect Long-Section
(Source: Auzex, 2012)
Several different rock types were identified at Gault through mapping and limited drilling. Kuhns
(Woad 1988) identified three principal lithological groups: pyroxene-dominated (mafic-volcanic
derived) gneiss; feldspar-dominated (sedimentary-derived) granulite; and various granitic rocks.
However, it has not been possible to construct a coherent stratigraphic succession due to poor
outcrop and lack of drilling outside of the Gault prospect. Woad (1998) listed the following rock
types identified from RC and diamond drilling with drill hole logging codes used by BHP in brackets:

Pyroxene- plagioclase-amphibolite granulite (GLM)

Feldspar – biotite amphibole –pyroxene granulite (GLM2)

Feldspar – biotite – quartz granulite (GLS)

Feldspar quartz granite (GLF)

Hornblende/biotite granite (GLF2)

Garnet bearing granite (GLF3)

Granite gneiss (GLG)

Hydration/porphyroblastic pods of hornblende + pyroxene +biotite (within GLM and
GLM2)

Hornblende + biotite + plagioclase (in GLS)

Diorite dykes (DIO)

Dolerite dykes (DOL)
Mineral assemblages in granulites indicate peak metamorphic conditions of 675-775°C temperature
and 3.0-4.5 kb pressure, equivalent to upper amphibolite to lower granulite facies.
Structural geology in the project area is complex, with interpretation hampered by poor outcrop.
BHP drilled twelve oriented diamond drill holes in Gault that were used to assist in structural
interpretation. All four Auzex diamd drill holes were orientated and structural measurements on
quartz veins in THDD001 have an average orientation of 50º dipping towards 190º. Structural
28
measurements taken from quartz veining in THDD002 have a shallower average orientation of 20º
towards 240º.
Kuhns (Woad 1988) interpreted the Gault area as an open, northeast-trending synform folding
earlier layer-parallel foliation and recumbent folds. He recognised three main deformation events as
shown in Table 5. Gold mineralisation was interpreted to pre-date the earliest deformation fabric.
Table 5. Deformation Events at Tampia Interpreted by Kuhns (1988).
For personal use only
Event
Fabric
Other
Relationship to mineralisation
D1
Strong penetrative S1 foliation subShears and asymmetric folds (F1) subparallel to gneissic banding. Dips
parallel to S1 with hinges plunging 17° F1 folds deform sulphides
45° to 120 on northwestern side of
to 120
Gault prospect
D2
Upright, open, northeast-striking
synformal fold axial plane (F2) Intrusion of granitic sills and veins
plunging 8° to northeast
Minor gold remobilisation
D3
Low to high angle brittle faulting
Possibly related to Proterozoic dykes
striking NNE
No effect on mineralisation
Baxter (Woad 1988) carried out structural analysis work on oriented diamond drill core and
proposed a different structural model. Baxter’s earliest event, D1, is related to mineralisation and is
essentially the same as that recognised by Kuhns, but with F1 fold hinges plunging to 135°. There is
no open F2 folding event in Baxter’s model, with the Gault area interpreted as an inclined, tight, F1
fold. D2 deformation is interpreted as being related to “sinistral shearing” on a shallow NE-dipping
surface, with associated “pressure shears” and folding. Weak D3 and D4 events were also recognised,
but the exact nature of these was unclear.
Rafty (1998) reported that check mapping in the vicinity of Tampia Hill over the Gault prospect
indicated that many of the outcrops marked on BHP maps were either float or calcrete. Rafty also
commented that the extent of outcrops appears to have been exaggerated and that much of the
BHP ‘mapping’ was information projected from drill section interpretation. There is clearly a need
for detailed surface mapping over the core Tampia Hill project licences to refine structural models of
mineralisation.
4.4.3
Mineralisation
According to Kuhns (1988), gold at Gault is dominantly disseminated throughout, or concentrated
within, pods of hornblende-biotite-pyroxene and hornblende-biotite-plagioclase within pyroxene
and biotite-bearing mafic granulites. Minor remobilised gold is hosted by fractures in granites, but
does not occur within metasedimentary granulites, or gneisses. The association of gold with biotite
rich mafic granulite was also reported by Nexus Minerals (2000). Kuhns (1988) states that gold
occurs with disseminated non-magnetic pyrrhotite, arsenopyrite, chalcopyrite and rare pyrite. Nexus
Minerals report that pyrite and arsenopyrite are the dominant sulphides, with pyrrhotite being rare.
Total sulphide contents of mineralised intersections are between 5% and 10%, with a maximum
estimated 15% sulphide in Nexus drill hole NRC20 from 97-98 m depth. Sulphides occur along S1
foliation planes and are folded by F1 minor folds.
Mineralisation grading more than 1 g/t Au occurs in elongate to ellipsoidal pods that vary in size
from 1-10 m thick, 50-150 m wide (east-west) and 50-200 m long (north-south). Four zones were
identified by BHP in the north of the prospect, with another two zones in the central and southern
parts. Average grades within a zone >1g/t Au vary between 1 to 5 g/t Au over 5-10 m intervals. The
northern zone has yielded the best grades, with selected results from BHP and Nexus drilling
programmes given in Table 6.
29
Very high grade mineralisation (>50 g/t Au over 1 m intervals) was encountered in one area by BHP
through RAB and diamond drilling (GDH01). Gold occurs as free grains within apparently remobilised
and deformed quartz pods and veins, which is atypical of mineralisation in the remainder of Gault.
For personal use only
A four-hole diamond drill hole programme was designed by Auzex to test the historical data at the
Gault Prospect and to test geophysical data and gather geological data in the wider Tampia Hill
Project area. Drilling results from the diamond drilling programme have confirmed the two historic
NW-SE trending gold and arsenic rich ore zones intersected by BHP and Dry Creek Mining in the
upper and lower sections of the Gault Prospect. (Table 6)
Table 6. Selected mineralised intersections*
from BHP and Nexus Minerals drilling, Gault prospect.
Company
BHP
Nexus
Drill Hole
Hole type
Interval from-to (m)
Gold grade (g/t)
GDH01
diamond
19-28
20.30
GDH01
diamond
50-61
8.20
GDH02
diamond
38-49
3.20
GR001
RAB
10-24
17.90
GR003
RAB
13-25
19.80
GR004
RAB
12-25
3.70
GR026
RAB
16-25
16.50
GR028
RAB
8-15
59.30
GR235
RAB
16-25
2.40
GR236
RAB
10-20
3.20
GR238
RAB
9-21
4.10
GR411
RAB
81-95
3.80
NRC12
RC
13-21
2.20
NRC13
RC
57-69
5.03
NRC14
RC
26-30
7.12
NRC15
RC
51-58
1.13
NRC16
RC
31-39
10.26
NRC16
RC
42-56
7.06
NRC17
RC
32-42
1.83
NRC18
RC
11-20
7.73
NRC19
RC
9-13
2.71
NRC20
RC
89-104
1.77
NRC21
RC
84-87
12.88
* Intervals are not true widths of mineralisation
30
For personal use only
In the cross section shown in Figure 12, it appears that steeply dipping quartz veining in THDD001
could have a listric shape and flatten out at depth towards THDD002. There is very little, to no, infill
drilling between the two mineralised zones intersected in THDD001 and THDD002 to confirm if the
zones are continuous. MA considers there is potential for mineralisation to extend between the two
drill holes to defined a zone over 365 m down-dip length with grades up to 22 g/t Au (based on
historical intersects).
Figure 12. Section View of THDD001 and THDD002, Looking West.
(THDD001 and THDD002 as black solid lines. Blue surfaces are the interpreted quartz vein orientation from both holes. Yellow shells are
interpreted grade shells created from historical data, at a cut off grade of 0.5g/t. pink sold lines is the interpreted grade intersected in
both holes.)
4.4.4
Metallurgical Testwork
Six samples were submitted to Oretest in Perth for metallurgical testwork by Nexus Minerals from
their 1999 RC drilling programme. In total 18 m of sampling from two RC holes were composited to
give a single test sample with a head grade of 2.25 g/t Au. Samples were all from fresh, unoxidised
material (minimum downhole depth of 84 m). Cyanidation at a grind size of 75 µm yielded a gold
recovery of 45.3% (0.96 g/t Au). Oretest concluded that the remainder of the gold was sulphide
occluded, i.e. refractory; although it is not known which sulphide phase contains the gold.
Oretest recommended further testwork was necessary to determine the optimal treatment path for
refractory gold.
4.5
MINERAL RESOURCES
A public release from Explaurum dated 30th April 2015 included details of a Mineral Resource
Estimate of the Gault deposit undertaken by Auzex and reported in accordance with the guidelines
of the JORC 2012 code. Auzex utilised all historic data, which was verified using the results from
Auzex’s drill programme.
Inferred Mineral Resources for Gault reported at a cut-off grade of 1 g/t Au are 4,700,000 tonnes at
an average grade of 2.0 g/t Au for 310,000 oz of gold. Estimation was carried out using the inverse
distance squared method constrained within three dimensional mineralisation domains defined
using 0.2 g/t Au grade shells. A single value for dry density of 3.05 t/m3 was used for all mineralised
blocks, which is considered appropriate for the mafic host lithology.
31
4.6
EXPLORATION POTENTIAL
For personal use only
The Tampia Hill and Dumbleyung Project areas are considered prospective for orogenic gold
mineralisation. Regionally the Tampia Hill Project lies approximately 10 km east of a major
transcrustal structure evident on GSWA aeromagnetic imagery, which is most probably the main
controlling structure for mineralisation. Second- or third-order faults associated with this major
structure are the main targets for gold deposition, although remobilisation during metamorphism
also needs to be considered. Granulites with mafic and sedimentary protoliths intersected by drilling
at Gault indicate that the project area covers a greenstone remnant that was subjected to high grade
metamorphism. The geological setting is similar in nature to other gold deposits/prospects in
southwest WA, such as Griffins Find (100 km south of Tampia Hill) and Ausgold’s Katanning Project
(160 km south-southwest of Tampia Hill).
Significant gold mineralisation with locally high grade shoots is present in the Tampia Hill Project
area at the Gault prospect. Shallow gold mineralisation has also been discovered from drilling at Emu
Hill. It is not clear from the reports provided to MA whether a 3D model of mineralisation exists for
the Gault prospect, or whether there is a clear understanding of the structural geology in the area.
Auzex is currently undertaking work to resolve these issues so that further exploration in the licenses
can be effectively targeted.
Meridian (2006) undertook a review of previous exploration and concluded that there were a
number of soil anomalies identified during BHP sampling on the core Tampia Hill tenements that
have not been followed up. Furthermore, Meridian considered, and MA would concur, that the
threshold of 50 ppm used by BHP for soil anomaly follow-up was too high by modern gold
exploration standards and led to Gault as the sole focus of nearly all subsequent work. Application of
a lower (20 ppb) threshold to soil results yields a number of anomalies in the core Tampia Hill
tenements that require testing.
Gold mineralisation previously defined in shallow drilling at Emu Hill requires further work to
determine if more follow-up is required. Other Western Australia tenements need early stage
sampling programmes to define drilling targets.
32
5
NORTH QUEENSLAND PROJECTS
5.1
PROJECT DESCRIPTION AND ACCESS
For personal use only
North Queensland projects comprise 8 granted exploration licences and one exploration licence
(EPM14117) submitted for surrender. As at 5th May 2015 the Queensland Department of Natural
Resources and Mines had not relinquished EPM14417. All tenements are 100% owned by Auzex.
Tenements are centred between 100 km and 180 km SW of Cairns (Figure 13).
Table 7. Auzex Exploration Limited - Mineral Tenements in North Queensland
Tenement Data
Tenement
Application
Date
Grant Date
Expiry Date
Subblocks
Area sq km
Auzex
Ownership
%
EPM
14417
01 Dec 2003
06 Jan 2005
05-Jan-2016
8
26.1
100
Under
relinquish
ment
EPM
14418
01 Dec 2003
06 Jan 2005
05-Jan-2016
7
22.81
100
Verified
EPM
14797
22 Sep 2004
13 Jan 2006
12 Jan 2017
65
212.20
100
Verified
EPM
15570
26 Apr 2006
23 Aug 2007
22 Aug 2015
2
6.53
100
Verified
EPM
19112
01 Mar 2011
04 Mar 2014
03 Mar 2019
14
45.70
100
Verified
EPM
19113
01 Mar 2011
29 May 2014
28 May 2019
35
114.22
100
Verified
EPM
19114
01 Mar 2011
03 Mar 2014
02 Mar 2019
70
228.84
100
Verified
EPM
19203
03 May 2011
03 Mar 2014
02 Mar 2019
11
35.90
100
Verified
EPM
19305
25 Jul 2011
19 Jun 2013
18 Jun 2018
72
234.66
100
Verified
Total
900.86
Status
Tenements are further divided into areas as follows: EPM 15570 “Khartoum North”, EPM’s 19112,
19113, 19114, 19203, 14797, 19203 “Khartoum”, EPM 14417 “Galala”, EPM 14418 “Fossilbrook” and
EPM 19305 “Running Brook”
33
For personal use only
Figure 13. Local access, infrastructure and topography, North Queensland projects
Figure compiled by D G Jones from GSQ mapping
The North Queensland projects are well located near major sealed highways and numerous
secondary roads. These connect the tenements to the city of Cairns (population 164,000 in July
2009) and the city of Townsville (population 182,000 in July 2009). Both cities are serviced by
international airports, the main road and rail system in Queensland, and thriving ports. There is an
active rail line between Chillagoe and Cairns. A branch line from Almaden to Mt Surprise via
Lyndbrook is also still in service.
Documentation to surrender EPM 14417 was lodged with the Queensland Department of Natural
Resources and Mines (DNRM) on 20 January 2014, but as at 11th September 2014 the licence has not
been formally relinquished. EPM 14417 is shown on the maps in this report for completeness, but
details of the geology and exploration are not included.
5.2
CLIMATE
The local climate is characterised by hot, rainy summers and a distinctly dry winter season (Figure
14). The nearest station for both temperature and rainfall records is Dimbulah, with continuous
reporting from 1931-2004. Mean annual rainfall at Dimbulah is 775 mm, with mean monthly
temperatures averaging 38° C in December and 25.6° C in June. Wind frequency data for the region
shows that around 70% of winds come from the east, with average wind strength throughout the
day of 20 kph, typical of a Trade Wind Coast. Rainfall results from a variety of systems, ranging from
convergence related to summer upper-level troughs, orographic wave disturbances within the
general easterly flow, weak tropical depressions through to fully developed tropical cyclones
originating in the Coral Sea. The latter can cause prolonged high-intensity damaging winds and rain,
preventing access for many days. Fortunately such occurrences are rare.
34
For personal use only
Figure 14. Climate data, Dimbulah (1968-2013)
Compiled by D G Jones from Bureau of Meteorology data
5.3
DISCOVERY & PREVIOUS EXPLORATION
Alluvial cassiterite was first discovered in the Herbert River in 1879 and the project area was subject
to historical mining for gold, tin and other metals until prices reduced after World War 1 when only
intermittent mining continued in the Herberton tin field. Total recorded production of cassiterite
concentrate from 1879-1957 was 96,411 tonnes at 70% Sn. From 1937 through 1938, the Aerial
Geological and Geophysical Survey of North Australia (“AGGSNA”) carried out reconnaissance
geological mapping of the Herberton and Watsonville districts. The first company exploration began
in 1957 when New Consolidated Goldfields (Australasia) Pty Ltd (“Goldfields”) commenced
reconnaissance geological mapping of EPM 107 which covered 36,000 sq km of north QLD. The focus
shifted to the Herberton tin field and compilation of mine data, and then to the Cooktown tin field.
Ten large-diameter bores (total 60m) tested the alluvial potential of some river flats. Exploration
since then is summarised in the following table. In all cases, part or the entire tenement overlaps the
current granted tenements held by Auzex. The expenditure shown is in dollars of the day as reported
to the GSQ. Where expenditure was not reported on open file it is shown as zero.
Table 8. Previous Exploration by Companies in Auzex North QLD EPMs
Year(s)
EPM
Sq km
Company
2331 Rio Tinto
Spend
Work undertaken
1959-60
150
1960-66
164
580 Alluvial Gold Ltd
$178440 Drilled 334 holes in Nettle Creek
1961-69
182
700 Tableland Tin
$550000 Drilled 2000 holes in Return Creek
1962-64
185
386 BHP
1963
United Exploration
1963-64
189
1964-65
253
33 Mineral Search
1966-69
319
226 Alluvial Gold Ltd
1969-70
692
1970
944
1972-73
1038
111 CEC
2763 ICI
72 Dampier Mining
30
CEC
$9037 Geol mapping
$60406 Test pits for Sn in Blacks & Return Cks
0 Bulk sampling for Sn in Emu Creek
$27590 Drilled Montalban prospect
$13239 Scout boring 35 holes for alluvial Sn
$258737 Drilled 600 holes in Nettle Creek
$246409 Drilling for Mo at Khartoum
$30000 Prospecting for fluorspar
$20000 Drilled 3 core holes at Khartoum
35
For personal use only
Year(s)
EPM
1972-73
1020
262 Samedan
0 Claret Creek Ring Complex base metals
1976-77
1609
262 Renison
0 Gilmore & Smiths Creek Sn pipes
1978-81
1888
327 Houston Oil
1979-81
2105
164 Laloma
1979-83
2155
262 CEC
1979-83
3624
193 Anmekia Pty Ltd
1984-85
3727
327 AOG Minerals
1984-85
3686
255 Esso
1984-87
3973
4971 CRA
1986
4336
327 Homestake
1986-87
4289
131 Ravenshoe Tin
1986-87
4927
233 WMC
1986-92
4030
327 AOG/Elders
$567355 Regional work & drilling
1987-89
5274
301 WMC
$115297 Regional geochem for Au
1991-92
7871
82 S Moroney
0 Geochem sampling
1992-94
8994
20 Auralia Resources
0 Geochem sampling
1992-97
8982
190 Dominion Mining
0 Geochem sampling & drilling
1992-96
8998
321 Poseidon Gold
0 Geochem sampling & drilling
1992-99
8812
1993-94
9437
111 Cyprus Gold
1993-94
9774
491 CRA
0 Geochem sampling for Cu-Au
10280
190 BHP
0 Geochem sampling & geophysics
1995
Sq km
Company
Centamin Egypt
Spend
Work undertaken
$406380 Claret Creek Ring Complex base metals
$25790 Test pitting for alluvial Sn
$292457 Drilling for Sn
0 Pit sampling for alluvial Sn
$74943 Claret Creek Ring Complex base metals
$216657 Regional geochem, geophysics
0 Bulk sampling for diamonds
$24035 BLEG sampling
0 Claret Creek Ring Complex base metals
$12957 Claret Creek Ring Complex base metals
0 Geochem sampling
$300000 Geochem sampling
95-2000 10453
288 GTN Resources
96-2001 11138
324 Capricorn Dolom
0 Geochem sampling
98-2005
100 Diatreme
0 Ground mag, RC drilling
8998
98-2000 10804
69 GTN Resources
$19300 Data compilation
$14700 Geochem sampling
Auzex Resources Limited (AZX) commenced exploration in North QLD in 2005. The table below
summarises exploration to date carried out by AZX.
36
Table 9. Exploration carried out by AZX in the Auzex North QLD tenements
Year
Expenditure
2005 14417, 14418
NA Geochem sampling
2006 14417, 14418
NA Geochem sampling
2006
For personal use only
EPMs
14797
2007 14417, 14418
Work undertaken
$234734 Geochem sampling
$675514 Geochem, RC (35 holes 3226m), core (2 holes 300m)
2007
14797
NA RC (9 holes 1185m) & 1 core hole (150m); prelim metallurgy
2007
15570
$21777 Data compilation
2008
14417
$76661 Geochem sampling
2008
14418
$78360 Geochem sampling
2008
14797
2008
15570
$32405 Geochem sampling
2009
14417
$26196 Data review
2009
14418
$75563 RC (3 holes 340m)
2009
14797
NA Data review
2009
15570
$13635 Data review
2010
14417
$36282 Data review
2010
14418
$35367 Geochem sampling
2010
14797
2010
15570
NA Data review
2011
14417
$22109 Data review
2011
14418
$41222 Data review
2011
14797
$50514 Data review
2011
15570
$7462 Data review
$454264 Geochem sampling, geophysics
$165494 Geochem sampling, geophysics
Auzex Exploration Limited commenced exploration in North QLD in 2012. The table below
summarises exploration to date carried out by Auzex.
37
Table 10. Exploration to date carried out by Auzex in the Auzex North QLD tenements
For personal use only
Year
5.4
5.4.1
EPMs
Expenditure
Work undertaken
2012 14417
$31,843 Geochemistry, Geological mapping, geophysical modelling
2012 14418
$59,198 Geochemistry, Geological mapping, geophysical modelling
2012 14797
$210,981 Geochemistry, Geological mapping, geophysical modelling
2012 15570
2013 14418
2013 14797
2013 15570
2014 14417
2014 15570
$7,462 Data review
$15,000 Data compilation (approximated)
$227,136 Data compilation, Prospectivity modelling, 3D modelling
$12,278 Data compilation,
$5,000 Review and relinquish
$40,000 prospectivity modelling, 3D modelling (approximated)
GEOLOGY & MINERALISATION
Regional Geology
The early-middle Paleozoic Hodgkinson Province succession forms the northern part of the Tasman
Fold Belt. The province is the most extensive element in the Cairns Region, where it forms a belt
about 500 km long and up to ~150 km wide. It is separated from the coeval Broken River Province to
the south by Carboniferous-Permian igneous rocks of the Kennedy Province and the northwesttrending part of the Palmerville Fault. Lithologies consist dominantly of sandstone, greywacke and
siltstone with limestones occurring along the western margin. To the west, the Palmerville Fault
defines the boundary with the Proterozoic high-grade metamorphic and associated intrusive rocks of
the Dargalong and Yambo Inliers.
38
For personal use only
Figure 15. North Queensland Granite Province
Figure compiled by D G Jones from GSQ mapping
The Dargalong Inlier was intruded by numerous Early Silurian age leucogranitoid bodies (Blackman
Gap Granite Complex). Both the Dargalong Inlier and adjacent Hodgkinson Province were intruded
by numerous I- and A-Type granite plutons of Late Carboniferous-Permian age that belong to the
Townsville – Mornington Island belt. Three major I-type supersuites and one minor I type supersuite
have been identified, namely the Almaden, Ootan, O’Briens Creek, and Claret Creek Supersuites
(Champion, 1991).
The O'Briens Creek Supersuite in the region consists of highly fractionated characteristically pale
pink to white, alkali-feldspar-rich biotite granites, leucogranites and microgranites, some of which
are porphyritic and some of which are miarolitic. The supersuite includes the Go Sam and Nettle
Suites of Johnston (1984), the Emu Suite of Pollard (1984, 1988) and Witt (1985), and the Herberton
Suite of Clarke (1990). Small bodies of relatively felsic (mostly fractionated), fine grained, commonly
miarolitic and/or porphyritic, granite are abundant; some of these contain topaz and/or fluorite.
Plutons of the O'Briens Creek Supersuite intruded the Etheridge Group, Dargalong and McDevitt
Metamorphics (Paleoproterozoic), and the Blackman Gap Granite Complex; and the Hodgkinson
Formation. They were intruded by granites of the Ootan and Claret Creek Supersuites, and were
overlain (or faulted against) volcanic rocks of the Featherbed Group, Nanyeta, Boxwood, Slaughter
Yard, Pratt, Glen Gordon and Walsh Bluff Volcanics.
5.4.2
5.4.2.1
Local Geology
EPMs 14797 “Khartoum”, 15570 “Khartoum North”, 19112, 19113, 19203 & 19114
Basement geology in the Emuford area consists of sandstones and mudstones of the Devonian age
Hodgkinson Formation. These sedimentary rocks were intruded by granites of the Ootan and
O’Briens Creek Supersuites. Pollard (1984, 1988) subdivided the granites in the Emuford area into
two main types based on grain size and field relationships (Donchak and Bultitude, 1994): early
39
For personal use only
granites and late-stage granites; the Late Carboniferous Emuford Granite being the most extensive
of the early granites (Figure 16 and Figure 17).
40
Figure 16. Local geology, EPMs 14497 15570, 19112, 19113, & 19203 “Khartoum”
For personal use only
Figure compiled by D G Jones from GSQ mapping
Figure 17. Local Geology: Carbonate Creek EPM19114
The Emuford Granite forms a relatively large pluton (>200 sq km) and underlays approximately 75%
of the Khartoum permit (Figure 16). The Emuford Granite is composed in the main of a coarse
grained granite which is intruded by numerous small bodies of fine and medium grained, mainly
sparsely to moderately porphyritic biotite granite and adamellite (late-stage). Most of the late-stage
granites form dykes, sheets and small plutons (<10 sq km) which occur along the margins and within
the early granites. The late-stage granites have generally sharp contacts although Pollard and Auzex
geologists have found local evidence of gradational contacts. The most extensive of the late stage
granites is the Billings Granite which forms a sheet-like body in the northwest of the permit.
Granite and diorite and associated volcanics assigned to the Ootan Supersuite form part of the
Gurrumba Ring Complex 1 km west of the Great Boulder deposit in the Khartoum permit area and
surround and intrude an inlier of sandstone and siltstone of the Hodgkinson Formation.
In the south of the tenement area there is a volcanic sequence (Nanyeta Volcanics) of rhyolitic to
andesitic composition interpreted as comagmatic with the O’Brien Creek Supersuite. The Featherbed
Volcanics lie off the northern bounds of the tenement. Adjacent and to the west of the Nanyeta
Volcanics is a narrow north-west trending exposure of Silurian Chillagoe Formation.
5.4.2.1
EPMs 14418 “Fossilbrook”, 19305 “Running Brook”
The Llyndbrook project area is comprised of three exploration permits – EPMs 14417 “Galala” (in
process of relinquishment), 14418 “Fossilbrook” and 19305 Running Brook. Late Carboniferous –
41
For personal use only
Early Permian granites from the Late Carboniferous O’Briens Creek and Ootan Supersuites make up
50% of the Lyndbrook Project area and intrude the Silurian granites/granodiorites of the Blackman
Gap Granite Complex that make up the other half of the area (Figure 18).
5.4.3
Figure 18. Local Geology: Lyndbrook Project
Figure compiled by D G Jones from GSQ mapping
Mineralisation
Alteration, especially greisenisation, is extensive and most, if not all O’Briens Creek Supersuite rocks
contain some Sn ± W ± Mo ± F mineralisation. Most of the tin mineralisation in the Herberton,
Irvinebank, Emuford, Mt Garnet and Tate River areas is intimately associated with granites of this
supersuite. Tin mineralisation occurs mainly in veins, pipes and breccias within shear zones and
fractures in Hodgkinson province sediments adjacent to granite contacts and in veins, pipes and
disseminated deposits in granite or at the contact with Hodgkinson sediments. Estimated total
production from the Herberton-Mt Garnet Tin field is more than 150,000 tonnes of cassiterite
concentrate with close to half (70,000 tonnes) mined from primary lode deposits.
Tin mineralisation occurs mainly as fracture-controlled fissure filling and/or replacement bodies. Ore
types are diverse (Pollard, 1984) with the most prominent types including chlorite-, sericite-,
tourmaline-, and sulphide-rich assemblages. Greisenisation with associated quartz veins is common
within the granites, and quartz-cassiterite veinlet swarms are associated with albite-rich lenses and
albitised granite at Mt Misery near Irvinebank. Skarn-type mineralisation occurs in altered carbonate
rocks near Mt Garnet and tin mineralisation is associated with hydrothermally altered basic volcanics
in the Silver Valley and Sunnymount districts.
Tungsten occurs either in association with molybdenum, bismuth or tin, or as a sole commodity
generally in quartz vein lodes or greisen veins. Wolframite is the dominant species. Tungsten and
bismuth ores associated with molybdenite occur in flat lying greisen lodes occupying joints in granite
in the Gows area. Pollard (1994) reported that at several localities in the Emuford district wolframite
mineralisation appears to be associated with relatively late fine-grained granite and/or pegmatite.
42
Greisen deposits commonly have central cores of quartz and fluorite with abundant large wolframite
crystals.
5.5
5.5.1
EXPLORATION RESULTS AND POTENTIAL
EPMs 14797 “Khartoum” & 15570 “Khartoum North”
For personal use only
Exploration by Auzex since 2006 has defined six prospective areas for tin and tungsten, with gold
potential of the area remaining fully untested (Figure 19). The six prospects are:






Great Boulder Group in the south (centred on the Great Boulder Mine with production
182 tons cassiterite).
Denford Group in the centre (centred on the Denford and related mines).
Normanby Group centred on the abandoned township of Emuford.
Right Bower group, centred on the twin historical mines of Right Bower and Omeo.
Gows group (or Glen deposits) in the central east.
Excelsior group in the southeast near the old township of Brownsville.
Figure 19. Main prospects - EPMs 14797 and 15570
Figure supplied by Auzex
Regional mapping and soil sampling initially identified a 9 km by 3 km zone of highly anomalous tin
geochemistry with 15 key areas that have soil values up to 1.8% tin and 10% of the samples returned
43
greater than 0.05% Sn. The high grade tin values are developed in soils that form on zones of greisen
alteration. The greisen zones are flat-lying or steeply dipping and can be mapped over a 1 km strike
length and are up to 50m wide.
For personal use only
Channel sampling was followed up by five RC holes and one HQ diamond hole, for a total of 528m
(384m RC, 144m DD). Most holes were designed to test down-dip continuations of outcropping
greisen bodies with lower priority drill-targets including structurally controlled linear greisen, soil
anomalies and some conceptual targets. Most holes were designed to finish in unmineralised
granite. All holes intersected the targeted greisen mineralisation and visible coarse cassiterite was
logged in the diamond drill hole within the greisen alteration. Mineralisation was intersected over
wide intervals from the surface to a depth of 132m with grades of mineralisation between 0.13%
and 0.26% Sn intersected. Narrow zones of high grade tin were also intersected within the broader
intersections with 1m at 1.76% Sn from 13m and 1m at 1.10% Sn from 102m in BARD07-05 and 1m
at 3.00% Sn from 44m in BARC07-02. The drilling results compare well with the surface sample
results.
Of 107 greisens mapped and sampled on the surface, 45 greisen bodies average greater than 0.10%
Sn and Auzex estimated tonnage per vertical metre at about 250,000 tonnes per vertical metre at
0.18% using a SG of 2.55. Given many of the greisens form 20-30m hills and drilling intersected
mineralisation to a depth of 135m, Auzex assumes that the greisens can be mined to a depth of
150m. This gives a reasonable target for the project of approximately 40 Mt at an average grade of
about 0.2% Sn, which is a typical average grade for tin greisen deposits. However, MA would caution
that there is no guarantee that this target will be achieved with further exploration.
Initial metallurgical test work, performed on diamond drill core comprising fresh greisen
mineralisation, returned a combined tin recovery from gravity and flotation of 71%. This result is
considered highly encouraging because significant improvements are likely to be made with
modification to grinding and flotation circuit parameters. Mineralogical studies indicate the
cassiterite is generally of fine grained (<100μm), free from sulphide and contains only trace stannite
(an uneconomic tin mineral). The greisen mineralisation is also anomalous in silver, indium and
gallium associated with recoverable zinc and copper sulphides.
5.5.2
EPM 19114 “Carbonate Creek”
Carbonate Creek is a recently granted tenement and forms part of the Khartoum project. The
tenement has good tin potential around and along strike from the Kitchener Tin Prospect. Significant
occurrences of W and Sn exist on the property.
The bulk of production from the Kitchener area came from a single line of lode 1.3 km in strike
length. The Kitchener Tin Project comprises several historic mines, the larger You and Me, Kitchener,
Kitchener Extended, Black Rock and Eclipse workings, extending south to the General White, Great
Western and Thea mines. The mines were discovered in 1891 and have been intermittently worked
up until open pit mining in 1978 at the You and Me mine.
Incomplete records show 2,760 tons of cassiterite concentrate (containing ~71% tin metal) was
produced at an average grade of 1.83% Sn. EPM19114 surrounds these mining leases.
5.5.3
EPM 14418 “Running Brook”
The Running Brook prospect is located 36 km north of Mount Surprise township and lies directly
adjacent to one of the main access tracks to the area 5 km west of Burlington Station homestead
(Figure 20). The topography is undulating with only limited outcrop.
The prospect comprises 5 hard rock historical copper workings and was originally included in the
Auzex exploration portfolio because of its high prospective potential for Au. Limited stream
44
sediment and rock chip sampling by CRA returned highly anomalous results for Au and Cu with
maxima of 130 ppb Au in streams and 0.81 ppm Au in rocks.
For personal use only
First phase mapping determined Running Brook comprises a large body of moderate to strongly
foliated, fine to medium-grained orthogneiss or paragneiss. The unit is dominantly derived from a
biotite rich protolith, with layering varying from 1 cm to >10 m. Alteration within the gneiss varies
from unaltered to weakly sericite or chlorite altered.
Figure 20. Local geology, EPM 14418 “Fossilbrook” & EPM 19305 “Running Brook”
Figure compiled by D G Jones from GSQ mapping
Intruding the gneiss at the southern end of the prospect is an unfoliated, porphyritic unit with a fine
grained groundmass. The overall composition of the unit is granitic to dacitic. Projecting out from
this stock are a number of dykes with variable width (0.5 to >20 m) and a sub-radial outcrop pattern;
although most dykes appear to dip moderately to steeply west. This unit is pervasively silica-sericite
± chlorite altered with intensity varying from moderate to strong.
45
For personal use only
Figure 21. Local geology, Running Brook Prospect
Figure compiled by D G Jones from Pilcher (2010)
Initial soil sampling by Auzex identified a 30 ppb Au in soil anomaly defined over a 1 km x 300 m
area. Sampling also highlighted a 150 ppm Cu in soil anomaly measuring 1 km x 500 m that partially
overlaps the gold in soil anomaly to the north. Results from follow-up sampling confirm the
prospectivity of the region with coherent gold and copper anomalies defined over 900 m x 200 m
and 1,700 m x 800 m areas respectively. The anomalies overlap but are offset from each other. Work
completed to date includes:

Digital data compilation of previous geochemical data over the permit area.

Minus 80# (mesh) soil sampling completed at Running Brook over a 4.2km x 3.1km area
(n=1033).

Detailed geological mapping and rock chip sampling (n=121).

Four costeans excavated and sampled across Au and Cu soil anomalies at Running Brook for
a total of 1040m. Costeans were sampled as 2m composites and submitted to ALS
Townsville for analysis for Au via Au-AA21, Sn via XRF05 and Ag, As, Bi, Cu, In, Ge, Ga, Mo,
Pb, Sb, W and U via ME-MS62s.

A drill program comprising a total of 9 RC holes and 2 HQ diamond holes, for a total of
1196.7m (896m RC, 300.7m DD) at the Running Brook Prospect.

Ground based magnetic survey over a 4km x 4.5km area covering the main soil anomaly.
46
Drill holes intersected broad zones of weak to moderately anomalous gold in chlorite-sericite altered
gneiss. All holes were drilled on an azimuth of 120° at a 60° angle. The results are summarised in the
table below:
For personal use only
Table 11. Auzex drilling results, Running Brook prospect
Hole No. Easting Northing
RL m
Length
RBDD 01
218870 8027403
423
150.1m 5m @ 0.15 g/t Au from 39m
RBDD 02
218670 8027290
418
150.6m 150.6m @ 0.037 g/t Au
RBRC 03
218699 8027277
415
100.0m 100m @ 0.13 g/t Au
RBRC 04
218752 8027252
414
120.0m 113m @ 0.18 g/t Au
RBRC 05
218769 8027343
414
114.0m 114m @0.05 g/t Au
RBRC 06
218805 8027322
419
102.0m 5m @ 0.72 g/t Au from 43m
RBRC 07
218851 8027296
420
100.0m 90m @ 0.23 g/t Au
RBRC 08
218614 8027216
412
108.0m 108m @0.026 g/t Au
RBRC 09
218660 8027188
414
96.0m 92m @ 0.1 g/t Au
RBRC 10
219235 8027908
424
78.0m 5m @ 0.13% Cu from 35m
RBRC 11
219173 8027935
426
78.0m 7m @ 0.2% Cu from 11m
TOTAL:
Mineralisation
1197m
47
6
NEW SOUTH WALES PROJECTS
Auzex has one exploration licence at Kingsgate and one exploration licence application at Junction
Reefs (Table 12), both 100% owned by Auzex. Since Junction Reefs is still under application, MA has
not included detailed descriptions of the project apart from its location and will not be considering
the area as part of its valuation of Auzex’s assets.
For personal use only
Table 12. Auzex Exploration Limited - Mineral Tenements in NSW
Tenement Data
Tenement
EL8203
Grant Date
Expiry Date
18 Nov 2013
18 Nov 2016
ELA 4402
6.1
6.1.1
Application 12 Oct 2011
Sub-blocks
44
Auzex
Ownership %
Status
8.94
100
Verified
125.87
100
Verified
Area sq km
PROJECT DESCRIPTION AND ACCESS
Kingsgate
EL 8203 “Kingsgate” is located 25 km east of Glen Innes (population 6,000 in the 2010 census). The
tenement lies on the dissected eastern edge of the New England Plateau (Figure 22). Topography
varies from minor areas of undulating agricultural land to extensive areas of heavily timbered
mountainous terrain, frequently dissected by spectacular gorges. Access is provided by numerous
fire trails and farm tracks.
Figure 22. Kingsgate tenement, Glen Innes area, New England
(Source: Google Maps, 2014)
The New England Highway passes close to the Auzex tenement, and a comprehensive network of
local highways and roads provides excellent access. The area has a long history of mining (including
48
tin, gold, wolfram, molybdenum and sapphires) and grazing (sheep and cattle). Cropping, orchards
and vineyards are becoming more significant every year.
The rural centre of Glen Innes (population 6,000) provides limited engineering support services to
the dominantly rural industries in the area.
For personal use only
6.1.2
Junction Reefs
In October 2011, Auzex made application for 44 sub-blocks (125.87 sq km) in the Bathurst-Orange
district of NSW. ELA 4402 “Junction Reefs” is centred about 35 km south of Orange and 30 km WSW
of Bathurst. It lies 20 km due south of Newcrest’s Cadia mines complex, and 25 km SW of the town
of Blayney (Figure 23).
There are numerous known gold and copper occurrences within the ELA, of which the largest is the
former skarn copper-gold mine of Sheahan-Grants. Auzex considers the area to be prospective for
intrusion-related copper-gold deposits, of which the adjacent Cadia mines are prime examples.
The grant of any ELA can never be certain. If the ELA is granted, the boundaries may be different
from those that were in the application, subject to competing land use priorities as determined by
the government. Nevertheless, if Auzex is granted ELA 4402, it is very favourably located and in an
area demonstrably rich in copper-gold intrusion-related deposits.
Figure 23. Location and access, ELA 4402
Compiled by D G Jones from mapping published by Geoscience Australia
6.2
CLIMATE
Glen Innes is close to Guyra, the coldest town in New England (record minimum -11°C). Frosts are
common overnight in winter, although the days are generally clear, mild and sunny. In summer,
maximum temperatures often reach 38°C, and peak rainfall occurs at this time, generally from
thunderstorms.
49
For personal use only
6.3
Figure 24. Climate data, Glen Innes 1907-2012
Compiled by D G Jones from Bureau of Meteorology data
DISCOVERY & PREVIOUS EXPLORATION
Bismuth was discovered on Yarrow Creek Station in 1877 (Kenny, 1924). Mining commenced prior to
the 1883 visit by Chief Government Geologist (Andrews, 1916). He noted that the Mo pipes were
clustered along the margins of the granite. Approximately 380t of bismuth concentrate and 175t of
molybdenite concentrate was produced between 1880 and 1922. There was sporadic production
from 1922 to 1951. At Glen Elgin, records of mine production commenced in 1892, although alluvial
mining may have commenced as early as 1853. From 1892 to 1940 a total of 742t of tin and 10,252
oz of gold production was recorded. The Surprise molybdenite mine was worked during the 1920s
and 1930s but not records of production are available. The first company exploration reported
commenced in 1964, when Carpentaria Exploration Company Pty Ltd (“CEC”) undertook tape and
compass mapping of 150 acres around the Glen Eden molybdenum prospect. CEC drilled 79
percussion holes (2,103m). Most assays were below their 0.4% Mo cut-off.
Exploration since then is summarised in the following table. In all cases, part or the entire tenement
overlaps the current granted tenements held by Auzex. The expenditure shown is in dollars of the
day as reported to the GSQ. Where expenditure was not reported on open file it is shown as zero.
50
Table 13. Previous Exploration by Companies in Auzex New England granted EL
Year
EL
Company
1964
CEC
1969-70
162
AOG Minerals
1969-72
195
Eastmet
1971
383
Glendale
1972
455
Kingsgate Mining
1974-75
715
Buka Minerals
1978-82 1084
Amoco Minerals
1981
$15859 Geochem sampling
$208601 Geochem sampling, percussion drilling
$151994 Geochem sampling, airborne geophysics
$17209 Geochem sampling , mapping
0 Data compilation
$4121 Geochem sampling
0 Geochem sampling, percussion drilling
Aerospace Metals
1981-82 1644
1988-92
Work undertaken
$14721 Percussion drilling (79 holes 2103m)
North BH
1969-72
For personal use only
Expenditure
$11065 Bulk sampling, metallurgy
Amoco Minerals
$7077 Geochem sampling
G&J Gem Merchants
$80000 Sampling, ground mag, RAB drilling
2001-02 5858
Tamas Kapitany
0 Data review
2002-03 5836
Great Northern
0 Sapphire search
$510647.00
In dollars of the day, identified expenditure in the area prior to the entry of Auzex is $510,647.
Escalating the expenditures using the Consumer Price Indices published by the Reserve Bank of
Australia gives an equivalent expenditure in 2011 dollars of at least $5.5 million.
Auzex Resources Limited commenced exploration in New England in 2005. The table below
summarises exploration to date carried out by Auzex Resources Limited.
Table 14. Exploration carried out by AZX in the Auzex New England tenement
Year
Expenditure
Work undertaken
2005
$201461 Geochem sampling, ground radiometrics
2006
$803042 Geochem sampling, IP, RC drilling (38 holes 1268m)
2007
$2077412 Geochem sampling, IP, RC drilling (83 holes 4169m)
2008
$2300633 Geochem sampling, airborne geophysics, RC (252 holes 12136m)
2009
$87028 Data review & feasibility study on Kingsgate
2010
$103877 Data compilation, RC drilling (5 holes 492m)
2011
$42618 Data review
2008
$78360 Geochem sampling
2008
$454264 Geochem sampling, geophysics
2008
$32405 Geochem sampling
2009
$26196 Data review
51
For personal use only
2009
$75563 RC (3 holes 340m)
2009
0 Data review
2009
$13635 Data review
2010
$36282 Data review
2010
$35367 Geochem sampling
Auzex Exploration Limited commenced exploration in New England in 2011. The table below
summarises exploration to date carried out by Auzex Exploration Limited.
6.4
6.4.1
Table 15. Exploration to date carried out by Auzex on the New England tenement
Year
EPM
Expenditure
Work undertaken
2011 6333 $15,077
Rehabilitation Reviews
2012 6333 $13,310
Data Management, Reconnaisance
2013 6333 $7,000 approx Rehabilitation reviews , data
GEOLOGY & MINERALISATION
Regional Geology
The Upper Carboniferous to Triassic New England Batholith (“NEB”) has an outcrop area of ~15,000
sq km and intrudes the accretionary prism complexes of the southern New England Fold Belt (Shaw
and Flood, 1981). It is composed of synorogenic, Late Carboniferous to Early Permian peraluminous
S-type granitoids, and post-orogenic Permo-Triassic I-type intrusions. The I-type intrusions form a
NNE trending 300 km long by 60 km wide belt and are interpreted to be products of a continental
margin magmatic arc with Andean-type affinities (Chappell 1994). The intrusion-related gold
deposits that are the focus of this appraisal are considered to be associated with Late Permian-Early
Triassic I-type granitoids that intrude the accretionary prism rocks of the Coffs Harbour block.
Shaw and Flood (1981) subdivided the New England Batholith into the Bundarra, Hillgrove, Moonbi,
Uralla and Clarence River suites based on distinct mineralogical, geochemical, isotopic and age
criteria. Several economically-significant, fractionated and felsic granitoids were assigned to a
separate “leuco-adamellite” group. Subsequently Chappell and Bryant (1994) renamed these groups
Supersuites and reclassified the “leuco-adamellites” as leuco-monzogranite and incorporated many
of them into the Moonbi Supersuite.
6.4.2
Local Geology
Late Permian-Early Triassic granitoids dominate the geology of EL 8203 “Kingsgate” (Figure 25). The
Wards Mistake Adamellite is extensively developed and comprises coarse to medium-grained
monzogranite-granodiorite (Undifferentiated granitoid in Figure 25). It has been intruded by the two
main leucogranites in the area, the Kingsgate Leucogranite and the Red Range Microleucogranite.
The Kingsgate Leucogranite is a very coarse-grained, equigranular biotite granite. The Red Range
Microleucogranite is a fine- to very fine-grained saccharoidal, pink, equigranular microleucogranite.
52
For personal use only
The Red Range Microleucogranite is considered to form the carapace to the Kingsgate Leucogranite.
This region has high potential for intrusion related gold deposits (IRGD’s) due to the analogous
geological setting to Timbarra.
Figure 25. Geology of the Kingsgate molybdenite pipe area, EL 8203
Figure compiled by D G Jones from mapping by GSNSW
6.4.3
Mineralisation
The NEB has been a significant historical producer of tin and molybdenum. Estimated production of
approximately 300,000 tonnes tin and 450 tonnes molybdenum were won from dominantly alluvial
and hard rock sources respectively (Stroud et al., 1999; Weber et al., 1978). Timbarra represents the
first significant disseminated intrusion-hosted gold deposit recognised in the NEB. This new class of
gold deposit are now being recognised in tin-tungsten bearing magmatic provinces elsewhere
around the world (Thompson et al., 1999).
The Kingsgate Leucogranite and the Red Range Microleucogranite host a range of Mo, Bi, W and Sn
deposits. Mo-Bi-Ag±Au quartz pipes and veins are developed in clusters along the margins of the
Kingsgate Leucogranite and the Red Range Microleucogranite (Figure 25). The Kingsgate and Yarrow
Creek (Comstock) deposits are the best known examples of this mineralisation style.
53
6.5
6.5.1
EXPLORATION RESULTS & POTENTIAL
EL 8203 “Kingsgate”
For personal use only
Within EL 8023, detailed exploration commenced in late 2004 at Kingsgate. Trial mining was
successfully completed in December 2006 with results forming part of a scoping study. Drilling of the
quartz pipe which was the subject of trial mining revealed an average grade of 0.34% Mo and
0.64% Bi. The amount and grade of bismuth was unexpected and, if maintained, will add significant
value to the project.
A scoping study for development of the project (based on an annual processing rate of 250,000 tpa
at an average grade of 0.23% Mo and 0.23% Bi) was completed in June 2007. This study was based
on production of separate Mo and Bi concentrates.
Best results from the resource drilling program include 5m at 1.35% Mo and 0.69% Bi from 42m and
7m at 0.70% Mo and 0.52% Bi from 43m. Drilling was successful in identifying individual mineralised
zones (quartz pipes) with the results revealing a much larger scale of mineralisation than had been
modelled.
Auzex idefined an Exploration Target of 1 Mt to 1.5 Mt of molybdenum pipe mineralisation at grades
ranging from 0.20% to 0.25% Mo and 0.20% to 0.25% Bi. The target was based on 25 individual
molybdenum pipes of which 11 were interpreted from geophysical data with the remainder
evidenced by surface historical workings and exploration drilling.
A study for development of the hypothetical target was completed in December 2008, based on
downstream processing of high purity silica, ammonium molybdate (or molybdenum trioxide), and
bismuth metal or fusible Bi-Pb alloy. According to Auzex, the study indicated that if the Kingsgate
resource target could be established, then the project would be attractive for development in the
current market.
54
7
VALUATION
For personal use only
The three generally accepted Valuation approaches are:
 Income Approach.
 Market Approach.
 Cost Approach.
The primary methods used in this Valuation are the Market Approach and its derivative the Empirical
Yardstick Approach, with Kilburn Geoscience Rating used as an alternative check on values of
exploration projects.
7.1
CURRENCY AND EXCHANGE RATES
The currency used in this Valuation is the Australian dollar (“AUD”). In the case of comparing
transactions carried out in other currencies, exchange rates utilized are the Monthly and Annual
Noon Exchange Rate Averages published by the Reserve Bank of Australia
(http://www.rba.gov.au/statistics/frequency/exchange-rates.html).
7.2
DATABASE
The database used for the valuations comprises public company announcements, annual reports,
annual information forms, management discussions and analysis, news releases and statutory
technical reports.
7.3
MARKET AND EMPIRICAL APPROACHES – COMPARABLE TRANSACTIONS, AUSTRALIAN GOLD
PROJECTS WITH RESOURCES
MA researched transactions that occurred since January 2013 involving the acquisition of gold
projects with published resources and only involving ASX listed companies as the vendor or
purchaser. January 2013 was chosen as a cut-off date because it approximates the period during
which gold prices dropped from around US$1600/oz to US$1300/oz. Since January 2013 the gold
price has stabilised around US$1200-US$1300/oz.
In total there were twenty transactions involving sale and purchase of 100% of gold projects.
Transactions were filtered to remove those that were not comparable with Tampia because they
included mining assets, which left ten in total. Details of the properties and acquisition deals
considered comparable to Tampia are given below, and summarised in Table 16. For all transactions,
an AUD value per ounce of attributable contained gold was derived by taking the total purchase cost
divided by contained gold ounces in resources. In one case where silver resources were also
reported (Tunkillia), these were converted to a gold equivalent amount using a silver price of
US$17.50/oz and a gold price of US$1300/oz.
7.3.1
Terramin – Bird in Hand, South Australia
On 19th July 2013 Terramin Australia Ltd (ASX:TZN) announced it had entrered intoa binding
agreement to acquire 100% of the Bird-in-Hand Gold Project from Maximus Resources Ltd (ASX:
MXR). Terramin agreed to pay AUD3,500,000 in upfront and staged payments conditional on the
satisfaction of performance milestones, and 25 million ordinary Terramin shares (priced at AUD0.02
on the day of the announcement).
The Bird-in-Hand Gold Project is located approximately 30 km north of Terramin’s existing mining
and processing facilities at the Angas Zinc Mine in the Adelaide Hills area of South Australia. The
project had a total Resource of 598,000 tonnes at 12.3 g/t gold for 237,000 ounces mostly in
Indicated and Inferred categories, which was considered amenable to underground mining.
55
Assuming that all conditional payments were met, the deal valued 237,000 ounces of gold resources
at $4,000,000 yielding an implied value of AUD16.88/oz.
7.3.2
Bullseye Mining – Melrose/Darlot East
On 13 January 2014, Korab Resources Ltd (ASX: KOR) announced the completion of the sale of its
Melrose/Darlot East project to Bullseye Mining Ltd, an unlisted private company. Terms of the sale
were a consideration of AUD1,500,000 in cash payable in three tranches.
For personal use only
Melrose-Darlot East is located in the Eastern Goldfields region of Western Australia, 160 km
northwest of Laverton. In 2012 Korab reported JORC (2004) Mineral Reources for three deposits
(Boundary, Bungarra and Stirling), totalling 6.56 Mt grading 1.61 g/t gold for 340,000 ounces gold,
mostly in Indicated and Inferred categories with some Measured. Metallurgical testwork carried out
in 2013 indicated amenability for heap-leach gold extraction for Boundary and Bungarra
mineralisation with recoveries >87%.
The deal valued 340,000 ounces of gold resources at AUD1.5 million, yielding an implied value of
AUD4.41/oz.
7.3.3
WPG Resources – Tarcoola/Tunkillia, South Australia
On 22nd May 2014 WPG Resources (ASX: WPG) entered into a binding Term Sheet agreement with
Mungana Goldmines Ltd (ASX: MUX) to purchase 100% of Tarcoola and 72% of Tunkillia Gold
Projects. WPG agreed to pay a non-refundable deposit of AUD150,000 while it undertook due
diligence on the project. To complete the acquisition, WPG agreed to pay a further AUD1.35 million
in cash and 7.5 million fully paid ordinary shares. WPG also agreed to pay a Net Smelter Return to
Mungana on a sliding scale depending on gold price from 1% to 1.5%. WPG also agreed AUD1.25
million in a number of stages dependent on the achievement of certain milestones.
Tarcoola and Tunkillia are located 450 km northwest of Port Augusta in South Australia, within the
Gawler Craton geological region. Mungana had undertaken resource estimates on both deposits in
2012. Tunkillia (WPG purchasing 72%) was estimated to contain 26.3 Mt grading 1.05 g/t gold and
3.0 g/t silver for 878,000 ounces gold and 2,500,000 ounces silver in Measured, Indicated and
Inferred categories. Tarcoola (WPG purchasing 100%) was estimated to contain 0.973 Mt grading
3.12 g/t gold for 97,540 ounces gold. Two scoping studies had also been completed on the projects.
Assuming that all conditional payments were met, the deal valued 754,000 attributable gold
equivalent resource ounces at AUD2.975 million, yielding an implied value of AUD3.95/oz
7.3.4
Ramelius Mining – Kathleen Valley, Western Australia
On 10th June 2014 Ramelius Resources Ltd (ASX: RMS) signed a sale and purchase agreement with
Xstrata Nickel Australasia Operations Pty Ltd (XNAO), a subsidiary of Glencore plc, to acquire 100%
of the Kathleen Valley tenements. Terms of the agreement were a single cash payment of
AUD3,645,000 to XNAO.
The XNAO Kathleen Valley tenements are located 50 km north of Leinster in Western Australia
and contain a JORC (2012) Mineral Resource of 1.44 Mt grading 2.8 g/t gold in Indicated and Inferred
categories for 130,000 ounces of gold in three deposits - Mossbecker, Yellow Aster and Nils
Desperandum. Scoping studies completed on the deposits indicated potential for open pit
developments with low capital costs.
The deal valued 130,000 resource ounces of gold at AUD3.645 million, yielding an implied value of
AUD28.04/oz.
56
7.3.5
Sovereign Gold – Mt Adrah, New South Wales
For personal use only
On 11th July 2014 Sovereign Gold Company Ptd (ASX: SOC) announced that it had increased its
interest in Mount Adrah Gold Limited (private company) to 99.2% following a share purchase plan
implemented on 17th June 2014. The announcement stated that the consideration for the total
acquisition would be the issue of 64.7 million Sovereign Gold shares with a cash value of
AUD3,100,000.
Mt Adrah owned several prospects in southern New South Wales on the same tectonic structure
that hosts world-class intrusion-related Au and Au-Cu deposits at Northparkes, Cadia-Ridgeway and
Cowal. Adrah’s main prospect, named Hobbs Pipe 1, was estimated to contain a total JORC 2012
Mineral Resource of 20.5 Mt grading 1.1 g/t gold for 770,000 ounces gold in Indicated and Inferred
categories. The area was considered to have excellent potential for increasing the resource base and
for additional discoveries.
The deal valued 770,000 resource ounces of gold at AUD3.1 million, yielding an implied value of
AUD4.03/oz.
7.3.6
A1 Consolidated Gold – Walhalla, Victoria
On 29th August 2014, A1 Consolidated Gold Ltd (ASX: AYC) announced it had entered into an option
agreement with Orion Gold NL (ASX: ORN) to acquire the Walhalla tenements. Terms of the
agreement were payment of AUD10,000 on execution, AUD40,000 12 weeks from execution, an
exercise fee of AUD500,000 cash plus AUD500,000 shares. Included was AUD240,000 to replace
environmental bonds. Orion was to retain a 2% NSR on any future production.
Walhalla tenements cover approximately 80 km2 of strike in the Walhalla Goldfield of Victoria,
covering historic mines. Inferred resources in three deposits (Tubal Cain, Eureka and Cohen’s) total
1.91 Mt grading 4.37 g/t gold for 268,400 ounces gold.
The deal valued 268,400 resource ounces of gold at AUD1.29 million, yielding an implied value of
AUD4.81/oz.
7.3.7
Gasgoyne Resources – Egerton, Western Australia
On 24th September 2014 Gasgoyne Resources Ltd (ASX: GCY) announced it had exercised an
exclusive option for the purchase of the Egerton Gold Project from Exterra Resources Ltd (ASX: ).
Terms of the option were a consideration of 4,166,667 shares (AUD0.18 per share on date of
announcement) plus 5000 options exercisable at 25c.
The Egerton project is located in the Gasgoyne region of Western Australia. It includes the Hibernian
deposit, which has a JORC (2012) Mineral Resource totalling 116,400 tonnes grading 6.4 g/t gold for
24,000 ounces gold in Measured, Indicated and Inferred categories. Drilling at a second prospect in
the project area intersected narrow high grade gold mineralisation.
The deal values 24,000 resource ounces of gold at AUD751,250, yielding an implied value of
AUD31.30/oz.
7.3.8
Northern Star Resources – Hermes, Western Australia
On 24th February 2015 Northern Star Resources (ASX: NST) entered into an agreement to purchase
100% of the Hermes Gold Project from Alchemy Resources Ltd (ASX: ALY). Terms of the deal were
payment of AUD1.45M cash, acquisition of Alchemy shares valued at $500,000, and payment of 1%
NSR to Alchemy on gold produced >70,000 oz and less than 90,000 oz. Northern Star could also earn
an interest in additional Bryah Basin projects held by Alchemy by spending $400,000 per year for 3
years.
57
The Hermes Gold Project is located in the Bryah Basin region of Western Australia, and is within
trucking distance of Northern Star’s Plutonic Gold Mine. The Hermes deposit contains JORC (2004)
Mineral Resources of 3.3 Mt grading 2.0 g/t gold for 212,000 ounces gold in the Indicated category.
The deal values 212,000 resource ounces of gold at AUD1.95 million, yielding an implied value of
AUD9.20/oz.
7.3.9
Fortuna Mining – Linden, Western Australia
For personal use only
On 13th April 2015 Extrerra Resources Ltd (ASX: EXC) announced it had entered into a project sale
agreement for the Linden Project to Fortuna SL Mining Pty Ltd. Under the agreements, Exterra will
receive a total consideration of AUD7,000,000 cash in three tranches. Exterra will also be granted a
2% gross royalty on the mining property.
The Linden project is located in the Eastern Goldfields of Western Australia, at the southern end of
the Laverton Tectonic Zone. The project covers most of the historic Linden Goldfield, which
produced about 34,500 ounces gold from small, high-grade mines. Exterra largely focused work on
the Second Fortune deposit, where a pre-feasibility for the development of a high grade
underground mine was completed in 2014. The PFS indicated that the mine would yield a positive
cash flow of AUD17.3 million over 2.5 years. This study was based on a JORC (2004) Mineral
Resource estimate of 478,000 t grading 8.5 g/t gold for 131,000 ounces gold.
The deal values 131,000 resource ounces of gold at AUD7 million, yielding an implied value of
$53.44/oz.
7.3.10 GBM Resources – Mt Coolon, Queensland
On 13th April 2015 GBM Resources Ltd (ASX: GBZ) announced completion of its acquisition of 100%
interest in Mt Coolon Gold Mines Pty Ltd, a wholly owned subsidiary of Drummond Gold Ltd (ASX:
DGO). Consideration included cash of $850,000 (which was inclusive of $370,000 in financial
assurance bonds), plus 50 million shares in GBM (valued at AUD0.02 each).
The Mt Coolon Project is located in the northern Drummond Basin region of central Queensland,
250 km west of Mackay. The region hosts several major gold deposits, including high grade
epithermal gold veins at Pajingo, to bulk tonnage intrusive related gold stockwork/breccia style at
Mt Leyshon. Mount Coolon Gold Mines reported JORC (2004) Mineral Resources totalling 5.174 Mt
grading 1.7 g/t gold for 283,000 ounces gold in Measured, Indicated and Inferred categories.
The deal values 283,000 resource ounces of gold at AUD1.48 million, yielding an implied value of
AUD5.23/oz
7.3.11 Discussion
As shown in Table 16, implied AUD/oz values for in situ gold resources in Australia purchased since
1st January 2013 vary between AUD4.0/oz to AUD53.4/oz. Of the ten transactions examined, five
have AUD/oz values of AUD5.2 or less, with higher values spread fairly evenly between about
AUD10/oz and AUD53/oz. The Linden project purchased by Fortuna Mining can be considered an
outlier in the analysis and most probably attracted a premium value because a pre-feasibility study
had been completed by the vendor.
Using implied AUD/oz values (but ignoring Linden), MA would consider a value of AUD5.5/oz as a
preferred value for Tampia Mineral Resources, with a minimum of AUD4.0/oz and a maximum of
AUD9.0/oz. Applying these figures to the Tampia Mineral Resource of 310,000 ounces and adjusting
for Auzex’s 90% ownership gives a range of values from AUD1.1 million to AUD2.5 million with a
preferred value of AUD1.5 M.
Four projects could be considered directly comparable to Auzex’s Tampia deposit on the basis of size
and grade: Melrose, Walhalla, Hermes and Mt Coolon. Total consideration for three of these
58
transactions was between AUD1.29 and AUD1.5 million, which MA would consider as a reasonable
range for the value of Tampia. Hermes attracted a far higher consideration of AUD9.2 million, which
was most likely due to its strategic importance and proximity to Northern Star’s Plutonic gold mine
and MA does not consider the transaction to be a reasonable comparison to Tampia.
For personal use only
Table 16. Summary of Comparable Transactions, Gold Projects with Resources.
Project
State
Purchaser
Acquisition
date
%
Purchased
Purchase
price
(AUDM)
Attributable
resource
ounces Au
Implied
AUD/attributable
resource ounce
Bird in Hand
SA
Terramin
19/7/2013
100%
4.0
237,000
16.9
Melrose/Darlot
East
WA
Bullseye
Mining
13/1/2014
100%
1.5
340,000
4.4
Tarcoola/Tunkilllia
SA
WPG
Resources
22/5/2014
100%
Tarcoola,
72%
Tunkillia
2.975
753,900
4.0
Kathleen Valley
WA
Ramelius
Mining
10/6/2014
100%
3.645
130,000
28.0
Mt Adrah
NSW
Sovereign
Gold
11/7/2014
100%
3.1
770,000
4.0
Walhalla
VIC
A1
Consolidated
Gold
24/8/2014
100%
1.29
268,000
4.8
Egerton
WA
Gasgoyne
Resources
24/9/2014
100%
0.75
24,000
31.3
Hermes
WA
Northern
Star
24/2/2015
100%
1.95
212,000
9.2
similar size
and grade
to Tampia
Comment
similar size
and grade
to Tampia
similar size
and grade
to Tampia
Linden
WA
Fortuna
Mining
13/4/2015
100%
7.0
131,000
53.4
Most
advanced
stage
project,
had PFS
completed
Mt Coolon
QLD
GBM
Resources
13/4/2015
100%
1.48
283,000
5.2
similar size
and grade
to Tampia
Median / Mean (after removing Linden)
5.2 / 12.0
59
7.4
MARKET AND EMPIRICAL APPROACHES – COMPARABLE TRANSACTIONS, AUSTRALIAN
EXPLORATION PROJECTS
MA researched transactions that occurred since January 2013 involving the acquisition exploration
projects with no published resources and only involving ASX listed companies as the vendor or
purchaser. Only those transactions involving 100% of a project were used in the analysis of
comparable value and are summarised in Table 17. An implied AUD value per km2 was calculated as
a means of applying values to Auzex’s tenements.
For personal use only
As shown in Table 17, there is a very wide range of implied values per km2. This is mainly because a
large number of factors determine how much a purchaser is prepared to pay for an exploration
project, including its perceived prospectivity (largely driven proximity to known, large deposits), the
commodity being sought, ‘fit’ of the project with the purchaser’s existing projects, and the level of
exploration work already undertaken. In general there is a negative correlation between value per
km2 and total area, in part because larger areas tend to be ‘greenfields’ projects in geological
terranes that are less mature in an exploration sense. However, the correlation is not precise enough
to enable values to be assigned on the basis of area alone.
Table 17. Summary of Comparable Exploration Project Transactions
Project Name
Location
Commodity
Bergslagen
Sweden
W
Morille
Spain
Sn-W
Sandstone
Viking
Mystique
Australia
(WA)
Australia
(WA)
Australia
(WA)
Yellow
Australia
Jack/Devils
(QLD)
Mountain
Mt
Harris/Kathleen Australia
Valley JV
Australia
Miclere
(QLD)
Fraser Range
Australia
North
(WA)
Australia
Kintore
(WA)
Australia
Grafters
(WA)
Australia
Coulston Lakes
(QLD)
Australia
Cuddingwarra
(WA)
Australia
Valley Floor
(WA)
Au
Au
Au
Transaction
Purchaser
date
Tasman
3/10/2013
Metals
Plymouth
7/10/2013
Minerals
Beacon
16/02/2014
Minerals
Genesis
3/03/2014
Minerals
Parmelia
7/03/2014
Resources
%
Consideration
2
Area, km
AUD
Implied
2
AUD/km
100
13,400
36.8
364
80%
420,000
57
7,368
100
1,550,000
4
387,500
100
50,000
970
52
100
312,957
205
1,526
Au
14/04/2014
Laura
Exploration
100
125,000
167
748
Au
10/06/2014
Ramelius
Mining
100
405,000
80.5
5,031
Au
19/12/2013
100
395,000
111
3,558
Au,Ni
17/02/2014
100
330,000
163
2,024
Au
20/06/2013
100
33,000
1.72
19,186
Au
17/10/2013
100
250,000
18
13,889
Au-Cu
19/11/2013
100
200,000
189.9
1,053
Au
12/08/2013
100
20,000
114.85
174
Au
4/07/2013
100
150,000
5.5
27,273
100
400,000
114.4
3,497
100
14,400,000
372
38,710
100
5,000
132
38
Spargoville
Australia
Au
1/07/2013
Ardlethan
Australia
(NSW)
Sn
13/04/2015
Staveley
Australia (VIC) Au
10/04/2015
Plenty Gold
Pty Ltd
Ram
Resources
Phoenix
Gold
Excelsior
Gold
ActiveX
Gleneagle
Gold
Tychean
Resources
Tychean
Resources
Thomson
Resources
Stavely
Minerals
60
For personal use only
Eight transactions highlighted in grey in Table 17 are considered by MA to be closest to Auzex’s
exploration tenements in terms of exploration stage and overall prospectivity. The remaining
transactions involve either more advanced exploration projects (eg Grafters), or projects in proximity
to significant known mineralisation (eg Ardlethan). Implied values per area range from AUD38/km2
to $2,024/km2, with a median value of AUD556 and a mean value of AUD747.
MA has applied a range of values from AUD200/km2 to AUD750/km2 to Auzex’s early stage
exploration tenements in North Queensland and Tampia non-core tenements. A range of values
from AUD550/km2 to AUD1000/km2 was applied to Tampia core and Kingsgate tenements on the
basis that they are more advanced projects with higher prospectivity. Preferred values within these
ranges are varied to reflect the different stages of exploration, with earlier stage projects valued less
than more advanced ones. Tampia non-core tenements are considered to have somewhat higher
prospectivity due to their proximity to known mineralisation at Gault when compared to North
Queensland tenements.
Valuations for Tampia exploration tenements do not include the area covered by mining leases over
the Gault deposit as these are already valued by using resources. Exploration license E70/2132 is
included, but assuming 100% ownership. Correcting the area of this single, small tenement to 80%
has a negligible effect on the valuation.
Tampia core tenements (not including Gault deposit ML)– AUD700/km2
Tampia non-core tenements (not including Gault deposit ML)– AUD550/km2
North Queensland tenements – AUD500/km2
Kingsgate – AUD750/km2
Valuation of the various tenement packages are summarised in Table 18.
Table 18. Valuation of Auzex Exploration Tenements by Comparable Transactions
Project Area
Area
2
km
AUD/km
low
Tampia Core
tenements
71.74
500
2
Value high
AUD 1000’s)
AUD/km
preferred
Preferred
Value
(AUD 1000’s)
1000
72
750
55
Value low
(AUD 1000’s)
AUD/km
high
36
2
2
Tampia non-core
380.35
200
76
750
285
550
210
North Queensland
900.86
200
180
750
676
500
450
Kingsgate
8.9
500
5
1000
9
750
7
7.5
KILBURN GEOSCIENCE RATING
Use of the Kilburn geoscience rating method requires the definition of an appropriate Base
Acquisition Cost (BAC) for the licence being assessed. BAC’s are defined by totalling licence
application fees, minimum expenditure requirements and access costs (eg land title negotiation
fees). The main assumption is that when a property is acquired it is deemed to be worth at least the
cost of holding the licence. There is no allowance for previous exploration work carried out, although
results are factored into a prospectivity ranking
In Australia the BAC varies depending on jurisdiction, but is between AUD350-AUD550 per km2 for
exploration licences, which accounts for licence acquisition costs and minimum expenditure
requirements per km2. Kilburn Geoscience rating criteria used to assess Auzex’s exploration projects
are shown in Table 19.
MA has divided the valuation by Kilburn Geoscience Rating into groups of tenements that share
similar geological and geographic characteristics. For the Western Australia Tenements, the single
Mining Lease that includes the Gault deposit is not assessed by this method. The remaining Western
61
Australia tenements are divided into the Tampai “core” licences (those continguous with the Gault
ML, including Emu Hill), and the remaining larger tenements to the south-southwest. For North
Queensland tenements, Khartoum and Running Brook groups are assessed separately as they have
different mineralisation targets and have seen different amounts of work completed.
For personal use only
Note that MA has does not put a high significance on the values generated by the Kilburn
Geoscience Rating, but they are included as a verification of the values that should be expected from
other methods.
Table 19. Kilburn Geoscience Rating Assessment Criteria.
Rating
Off Property Factor
On Property Factor
Anomaly Factor
Geological Factor
0.1
Unfavourable lithology
0.2
Unfavourable with structures
0.3
Generally favourable lithology
(10-20%)
0.5
Extensive previous exploration
with poor results
Alluvium covered, generally
favourable lithology
0.9
Poor results to date
Generally favourable lithology
(50%)
No targets outlined
Generally favourable lithology
(70%)
1
No known mineralisation
No known mineralisation
1.5
Minor workings
2
Several old workings or
exploration targets identified
Several old workings
Abundant workings/mines with
significant historical
production
Abundant workings
Several significant
subeconomic intersections
Abundant workings/mines with
significant historical
production
Several economic grade
intersections on adjacent
sections
Significant historic production
Several significant ore grade
correlatable intersections
Minor workings or mineralised Several well-defined targets,
zones exposed
initial results promising
Generally favourable lithology
2.5
3
3.5
4
Significant mineralised zones
exposed in prospective host
rocks
Along strike from major
mine(s)
4.5
5
10
Along strike from world class
mine
World class mine
62
7.5.1
Tampia Core Tenements
MA has considered the following as part of its assessment of the Kilburn rating criteria for Tampia
Core tenements (excluding Gault deposit mining lease, but including Emu Hill)
For personal use only




7.5.2
Off Property Factor:
o
Tampia Hill lies within the Western Gneiss Terrane, host to at least one significant
gold deposit (Griffins Find) in a different greenstone belt
o
Factor: 1.5-2.5
On Property Factor:
o
Inferred Mineral Resource defined at Gault prospect
o
Factor: 1.0-2.0
Anomaly Factor:
o
Gold in auger anomaly at Emu Hill
o
Other areas untested, but high potential
o
Factor: 1.5-3.0
Geological Factor:
o
Extensive alluvial/colluvial cover
o
Geophysics indicates prospective metamorphosed greenstones under cover
o
Factor: 1.0-1.5
Tampia Remaining Tenements
MA has considered the following as part of its assessment of the Kilburn rating criteria for Tampia
tenements other than Tampia Core




Off Property Factor:
o
Within the Western Gneiss Terrane, host to at least one significant gold deposit
(Griffins Find) in a different greenstone belt
o
Inferred Mineral Resource defined at Gault prospect to north
o
Factor: 1.0-2.0
On Property Factor:
o
No significant exploration done, no known mineralisation
o
Factor: 0.5-1.0
Anomaly Factor:
o
Gold in auger anomaly at Emu Hill
o
Other areas untested, but high potential
o
Factor: 0.5-1.0
Geological Factor:
o
Extensive alluvial/colluvial cover
o
Geophysics indicates prospective metamorphosed greenstones under cover
63
o
7.5.3
Factor: 0.5-1.0
North Queensland Tenements – Khartoum
MA has considered the following as part of its assessment of the Kilburn rating criteria for North
Queensland Khartoum tenements
For personal use only




7.5.4
Off Property Factor:
o
Within Hodginskon Province, contain several major intrusion related mineral deposit
types (tin, tungsten, bismuth, gold)
o
Numerous small historic workings
o
Factor: 1.5-1.75
On Property Factor:
o
Numerous small historic workings
o
Factor: 1.5-1.75
Anomaly Factor:
o
Several targets identified, mostly small extents
o
No intersects correlated into larger system
o
Factor: 0.5-1.0
Geological Factor:
o
Reasonable outcrop with generally favourable lithologies (tin bearing granites)
o
Factor: 0.75-1.5
North Queensland Tenements – Running Brook
MA has considered the following as part of its assessment of the Kilburn rating criteria for North
Queensland Running Brook tenements




Off Property Factor:
o
South of Kidston gold mine, a significant past producer, but not in same structure
o
Numerous small historic workings
o
Factor: 1.5-1.75
On Property Factor:
o
Several small historic workings for Cu, Sn, W, but no Au recorded
o
Factor: 1.0-1.75
Anomaly Factor:
o
Several targets identified, none drilled
o
Factor: 1.0-1.5
Geological Factor:
o
Reasonable outcrop with generally favourable lithologies
o
Factor: 0.5-1.5
64
7.5.5
New South Wales - Kingsgate
MA has considered the following as part of its assessment of the Kilburn rating criteria for Kingsgate:
For personal use only




7.5.6
Off Property Factor:
o
Numerous small historic workings in area for Sn, Mo
o
Factor: 1.5-2.5
On Property Factor:
o
Several small historic workings for Sn, Mo, Bi
o
Factor: 1.0-2.0
Anomaly Factor:
o
Several targets identified, some quartz-Mo pipes drilled and others interpreted from
geophysics.
o
Factor: 1.5-3.0
Geological Factor:
o
Reasonable outcrop with generally favourable lithologies in a small licence area
o
Factor: 1.0-3.0
Summary
Factors assigned to Auzex’s projects are summarised in Table 20, with the Prospectivity Index ranges
derived by successive multiplication of factors.
Table 20. Kilburn Geoscience Ratings For Auzex Projects.
Off Property
Factor
On Property
Factor
low
high
low
high
low
high
low
high
low
high
Tampia core
+ Emu Hill
1.5
2.5
1
2
1.5
3
1
1.5
2.25
22.50
Tampia
remaining
1
2
0.5
1
0.5
1
0.75
1
0.19
2.00
North
QueenslandKhartoum
1.5
1.75
1.5
1.75
0.5
1
0.75
1.5
0.84
4.6
North
Queensland Running
Brook
1.5
1.75
1
1.75
1
1.5
0.5
1.5
0.75
96.9
Kingsgate
1.5
2.5
1
2
1.5
3
1
3
2.25
45
Project
Anomaly Factor
Geological Factor
Prospectivity Index
For Auzex’s projects, the Kilburn Geoscience Rating valuations are given by:
BAC(per Ha) x licence area (Ha) x Prospectivity Index
MA considers the value ranges in Table 21 to provide a check of whether the values derived from
comparable market transactions are reasonable. There is a general tendency for the Kilburn
Geoscicence method to over-value the projects when compared with a market transaction value.
65
This is largely due to the underlying premise that a project with some prospectivity is worth at least
the amount of holding the licences. Market comparisons on the other hand reflect what a vendor is
likely to pay for a project, which as discussed previously reflects factors other than prospectivity.
Table 21. Kilburn Geoscience Rating Values for Auzex Exploration Projects
Project
Area
BAC
For personal use only
Low
Prospectivity Index
High
Value AUD 1000’s
low
high
low
high
average
Tampia core
+ Emu Hill
71.74
350
550
2.25
22.50
56
888
472
Tampia
Remaining
380.35
350
550
0.19
2.00
25
418
221
North
QueenslandKhartoum
643.39
350
550
0.84
6.00
190
1,626
908
North
Queensland Running
Brook
257.47
350
550
0.75
9.00
68
976
522
Kingsgate
8.9
350
550
2.25
45.00
7
220
113
66
8
VALUATION SUMMARY
For personal use only
On the basis of an analysis of comparable transactions and Kilburn Geoscience Ratings for Auzex’s
Projects, Table 22 has been compiled. The “Preferred Market Value” column indicates the most
preferable market value placed on the Projects by MA. These values consider a large of number of
variables and geographical location, and are not necessarily the median values of the high and low
ranges. MA has chosen preferred market values closer to the lower value ranges as the tenements
are not in immediate proximity to existing mines and infrastructure.
MA notes that the total high value of AUD6.6 M is mostly influenced by the high Kilburn Geoscience
Rating for North Queensland exploration tenements, and reflects the limitations of this valuation
technique.
Table 22. Summary of Valuations, Auzex Projects.
Project
Tampia
Resources
Tampia
Exploration
North
Queensland
Exploration
Kingsgate
Market
Approach
Comparable
Yardstick AUD/oz
2
Transactions
or AUD/km
Cost
Approach
Kilburn
Geoscience
Preferred Market Value
Low
AUDM
High
AUDM
Low
AUDM
High
AUDM
Low
AUDM
High
AUDM
Low
AUDM
Preferred
AUDM
High
AUDM
1.29
1.5
1.1
2.5
-
-
1.1
1.5
2.5
-
-
0.09
0.34
0.08
1.3
0.1
0.3
1.3
-
-
0.18
0.68
0.26
2.6
0.2
0.5
2.6
0.01
0.01
0.01
0.22
0.01
0.01
0.2
1.4
2.3
6.6
Total
Note: Preferred valuations are rounded to nearest AUD0.1 M to reflect accuracy.
The Preferred value for Auzex’s Australian mineral assets is AUD2.3M, which is based on a
consideration of ranges determined by Market Comparable Transactions and Cost Approaches.
67
9
REFERENCES
Andrews, E.C., 1916. The Molybdenum Industry of New South Wales. NSW Dept. Mines Geol. Survey
Mineral Report No.24, pp.92-116.
Auzex Exploration Limited, 2014. The Tampia Hill Gold Project Western Australia and Company
Update, April 2014
For personal use only
Baker, T., 2003, Intrusion-Related Gold Deposits: Explorable Characteristics. Gold Short Course,
Cordilleran Exploration Roundup. 12pp.
Boleneus, D.E., Raines, G.E., Causey, J.D., Bookstrom, A.A., Frost, T.P., and Hyndman, P.C., 2001,
Assessment Method for Epithermal Gold Deposits in northeast Washington State using Weights of
Evidence GIS Modeling. USGS Open File Report No.01-501, 52 pp.
Champion, D.C., 1991. Petrogenesis of the felsic granitoids of far north Queensland. Ph. D. Thesis,
Australian National University, Canberra (unpublished).
Chappell, B.W., 1994. Lachlan and New England: Fold Belts of contrasting magmatic and tectonic
development. J Proc Roy Soc NSW 127: pp.47-59.
Chappel, B.W. and Bryant C.J., 1994. New England Batholith granites chemical data. Department of
Geology, Australian National University. AMIRA Project P147B.
Chappell, B.W., Blevin P.L. and Bryant C.J., 1999. Moonbi Supersuite: evolution from partially melted
juvenile crust to strongly fractionated leucogranites. In: Flood PG (ed) Regional geology, tectonics
and metallogenesis: New England Orogen. Earth Sciences, University of New England, Armidale,
pp.295-296.
Department of Minerals and Energy, 2007. Queensland Geological Mapping (polygonised vector)
Data Regional & 1:100000 Sheet areas: Atherton, Ravenshoe, Chillagoe and Bullock Creek.
Donchak, P.J.T. and Bultitude, R.J., 1994. Geology of the Atherton 1:250000 Sheet area. Department
of Minerals and Energy Queensland.
Flood, C.L. and Aitchison J.C., 1993. eds. New England Orogen, eastern Australia. Department of
Geology and Geophysics, University of New England, Armidale.
Kemp, L.D., Bonham-Carter, G.F. and Raines, G.L., 1999, Arc-W of E: Arcview extension for weightsof-evidence mapping. Geol Surv of Canada, Users guide, 76 pp.
Kenny, E.J., 1924. Antimony, Arsenic, Bismuth, Molybdenum, Tungsten. NSW Dept. Mines Geol.
Survey Mineral Bulletin No.5, 54p.
Mustard, R., 2001, Granite-hosted Gold Mineralisation at Timbarra, northern New South Wales,
Australia. Min. Dep. 36, pp 542-562.
Partington, G.A, and Smillie, R., 2002, A National Scale GIS and Prospectivity Models of
Mesothermal Gold in New Zealand. In Mesothermal Gold in New Zealand: GIS Data Package and
Prospectivity Modelling. Crown Minerals NZ CD set.
Pollard, P., 1984. Granites and associated tin-tungsten mineralisation in the Emuford District,
Northeast Queensland, Australia. Ph. D. Thesis, James Cook University, Townsville (unpublished).
Pollard, P.J, Taylor, R.G., and Cuff, C., 1988, Genetic Modelling of Greisen-Style Tin Systems. In
Hutchison, C.S. (ed) Geology of Tin Deposits in Asia and the Pacific. Mineral Concentrations and
Hydrocarbon Accumulations in the ESCAP Region, Vol. 3, pp 59-72.
Rafty, D.J., 1998, Annual Report M70/815, 816, 13 August 1997 to 12 August 1998, Tampia Hill
Project, Report Reference M6085/1.
68
Shaw, S.E. and Flood R.H., 1981. The New England Batholith, eastern Australia: geochemical
variations in time and space. J Geophys Res 86: pp.1530-1544.
For personal use only
Stroud, W.J., Barnes R.G., Brown R.E., Brownlow J.W. and Henley H.F., 1999. Some aspects of the
metallogenesis of the Southern New England Fold Belt. In: Flood PG (ed) Regional geology, tectonics
and metallogenesis: New England Orogen. Earth Sciences, University of New England, Armidale,
pp.365-371.
Thompson J.F.H., Sillitoe R.H., Baker T., Lang J.R., Mortensen J.K. 1999, Intrusion-related gold
deposits associated with tungsten-tin provinces. Min Dep 34, pp 323-334.
Tomkins, A.G., Grundy, C., 2009, Upper Temperature Limits of Orogenic Gold Deposit Formation:
Constraints from the Granulite-Hosted Griffin’s Find Deposit, Yilgarn Craton, in Economic Geology,
2009 v. 104, pp. 669–685
Weber, C.R., Patterson I.B.L. and Townsend D.J., 1978. Molybdenum in New South Wales.
Geological Survey of NSW, Mineral Resources 43, pp.218.
Widenbar, L., 2000. Tampa Prospect Resource Review. Internal Report for IPT Systems Ltd.
Wilde, S.A., Middleton, M.F., and Evans, B.J., 1996, Terrane accretion in the southwestern Yilgarn
craton; evidence from a deep seismic crustal profile: Precambrian Research, v. 78, p. 179–196.
Woad, G., 1988, Tampia Hill Exploration Licence E70/463 Western Australia Annual Report July 1987
to August 1988, Report CR 6201 October 1988.
69
10 GLOSSARY OF TECHNICAL TERMS
For personal use only
This glossary comprises a general list of common technical terms that are typically used by
geologists. The list has been edited to conform in general to actual usage in the body of this report.
However, the inclusion of a technical term in this glossary does not necessarily mean that it appears
in the body of this report, and no imputation should be drawn. Investors should refer to more
comprehensive dictionaries of geology in printed form or available in the internet for a complete
glossary.
AAS (Atomic Absorption Spectrophotometry) – a chemical analysis technique.
aeromagnetic survey Systematic measurement and collection, from an aircraft, of the earth’s
magnetic field at regular intervals.
alluvial deposit A mineral deposit consisting of recent surface sediments laid down by water.
alteration The change in the mineral composition of a rock, commonly due to hydrothermal activity.
alteration zone A zone in which rock-forming minerals have been chemically changed.
anomaly A departure from the expected or normal background.
auger sampling A sampling technique utilising a screw-like tool to obtain shallow samples.
AusIMM Australasian Institute of Mining and Metallurgy.
basalt A dark-coloured igneous rock.
base-metal A non-precious metal, usually referring to copper, lead and zinc.
BLEG – Bulk leach extractable gold
breccia A rock composed of angular rock fragments.
bulk sample A large volume of soil or rock obtained for examination or analysis.
Cainozoic An era of geological time from the end of the Mesozoic to the present.
calcalkaline Igneous rocks containing calcium-rich feldspar.
calcrete Superficial gravels cemented by secondary calcium carbonate.
Cambrian A period of geological time approximately from 506 Ma to 544 Ma.
Carboniferous A period of geological time approximately from 295 Ma to 355 Ma.
chalcopyrite A mineral of copper with the chemical formula CuFeS2.
clastic A rock composed principally of fragments derived from pre-existing rocks.
complex An assemblage of rocks of various ages and origins intricately mixed together.
conglomerate A sedimentary rock formed by the cementing together of water-rounded pebbles,
distinct from a breccia.
costean A trench excavated in the surface for the purpose of geological investigation.
craton A major part of the Earth’s crust that has been stable and little deformed for a long time.
Cretaceous A period of geological time approximately from 65 Ma to 135 Ma.
crosscut A level driven across the main direction of underground mine workings.
cut-off grade The lowest or highest assay value that is included in a resource estimate.
dacite A fine-grained extrusive rock composed mainly of plagioclase, quartz and pyroxene or
hornblende or both. It is the extrusive equivalent of granodiorite.
70
Devonian A period of geological time approximately from 355 Ma to 410 Ma.
diamond drilling Rotary drilling technique using diamond set or impregnated bits, to cut a solid,
continuous core sample of the rock. The core sample is retrieved to the surface, in a core barrel, by a
wire line.
For personal use only
dilution The proportion of material which is inadvertently included during mining operations, and
which is generally of a significantly lower grade than the ore zone of interest.
dip The angle at which any planar feature is inclined from the horizontal.
dyke A tabular igneous intrusion that cuts across the bedding or other planar structures in the host
rock.
EM survey Electromagnetic survey. A method of measuring the alternating magnetic fields
associated with electrical currents artificially or naturally maintained in the subsurface. A technique
often used to identify massive sulphide deposits.
Famennian A stratigraphic name for a stage at the top of the European Upper Devonian (around
355-370 Ma).
felsic Light coloured rocks containing an abundance of feldspars and quartz.
foreland basin A basin formed within a continental setting, often adjacent to a mountain range.
Frasnian A stratigraphic name for a stage at the base of the European Upper Devonian (around 370375 Ma).
Ga Billion years ago.
gabbro A coarse-grained intrusive igneous rock composed chiefly of plagioclase feldspar and
pyroxene.
GIS Geographic Information System. A system devised to present spatial data in a series of
compatible and interactive layers.
Givetian A stratigraphic name for a stage at the top of the European Middle Devonian (around 375380 Ma).
gossan A ferruginous deposit remaining after the oxidation of the original sulphide minerals in a vein
or ore zone.
graben An elongate, relatively depressed crustal unit or block that is bounded by faults on its long
sides.
granitoids A general term to describe coarse-grained, felsic intrusive plutonic rocks, resembling
granite.
granodiorite A coarse-grained granitic rock containing quartz, feldspar and biotite.
gravity survey Systematic measurement and collection of the earth’s gravitational field at the
surface at regular intervals. Used to discern different rock types based on associated variations with
differences in the distribution of densities, and hence rock types.
greenschist A schistose metamorphic rock which owes its green colour and schistosity to abundant
chlorite and lesser epidote and/or actinolite.
ignimbrite The rock formed by the widespread deposition and consolidation of volcanic ash flows
(=welded tuff).
indicated resource A mineral resource sampled by drill holes, underground openings or other
sampling procedures at locations too widely spaced to ensure continuity but close enough to give a
71
reasonable indication of continuity, and where geoscientific data is known with a reasonable level of
reliability.
inferred resource A mineral resource inferred from drill holes, geoscientific evidence, underground
openings or other sampling procedures where the gaps in the data are such that continuity cannot be
predicted with confidence, and where geoscientific data may not be known with a reasonable level of
reliability.
For personal use only
intermediate Igneous rocks whose composition is intermediate between felsic and mafic rocks.
intracratonic Within a large, stable mass of the earth’s crust.
IP survey Induced Polarisation survey - an electrical geophysical survey technique measuring the
magnetic field spontaneously induced in a volume of rock by the application of an electric current.
This technique is often used to identify disseminated sulphide deposits.
ironstone A rock formed by cemented iron oxides.
I-type granite A granite that results from igneous magmatic processes.
JORC Joint Ore Reserves Committee - The Australasian Institute of Mining and Metallurgy. The
guidelines of the JORC Code (1999) are observed in the calculation and reporting of ore resources and
ore reserves.
jordisite An amorphous variety of molybdenite.
Jurassic A period of geological time approximately from 135 Ma to 203 Ma.
LandSat imagery Reflective light data of the earth’s surface collected by the LandSat satellite and
commonly processed to enhance particular features. Includes the visible and invisible light spectrums.
lithic tuff A tuff containing fragments of previously formed non-pyroclastic rocks.
lithophile element An element that is concentrated in crustal rather than mantle rocks, and
associated with the silicate rather than the sulphide phases.
Ma Million years ago.
mafic A dark-coloured rock composed dominantly of magnesium, iron and calcium-rich rock-forming
silicates, and for rocks in which these minerals are abundant.
magma Naturally occurring molten rock, generated within the earth.
magnetic anomalies Zones where the magnitude and orientation of the earth’s magnetic field differs
from adjacent areas.
magnetic survey Systematic collection of readings of the earth’s magnetic field. The data are
collected on the surface or from aircraft.
mantle The zone in the earth between the crust and the core.
massive sulphides Rock containing abundant sulphides that constitutes close to 100% of the rock
mass.
mesothermal Mineral deposits formed (precipitated) at moderate temperatures.
Mesozoic An era of geological time approximately from 65 Ma to 248 Ma.
meteoric water Water derived from the earth’s atmosphere.
molybdenite The main ore of molybdenum; a lead-grey hexagonal mineral with composition MoS2.
monzogranite A granular plutonic rock with a composition between monzonite and granite.
72
Namurian A stratigraphic name for a stage at the base of the European Upper Carboniferous (around
320-325 Ma).
Neoproterozoic An era of geological time approximately from 544 Ma to 1000 Ma.
Ordovician An era of geological time approximately from 435 Ma to 500 Ma.
oxide Pertaining to weathered or oxidised rock.
For personal use only
pelite A sediment or sedimentary rock composed of the finest detritus (clay or mud-sized particles).
penecontemporaneous Formed at almost the same time.
percussion A method of drilling where the rock is broken into small chips by a hammering action.
Permian An era of geological time approximately from 248 Ma to 295 Ma.
pitchblende A massive brown to black variety of uraninite.
plunge The attitude of a line in a plane which is used to define the orientation of fold hinges,
mineralised zones and other structures.
Porphyritic Descriptive of igneous rocks containing relatively large crystals set in a finer-grained
groundmass.
ppb, ppm Parts per billion, parts per million (quantitative equivalent of g/t).
pyrite A common iron sulphide mineral with the chemical formula FeS2.
RAB drilling Rotary Air Blast drilling - a method of rotary drilling in which sample is returned, using
compressed air, to the surface in the annulus between drill-rod and the drill-hole. This is a relatively
inexpensive but less accurate drilling technique than RC or diamond coring.
radiometric survey Systematic collection of radioactivity emitted by rocks at or near the earth’s
surface; usually collected by helicopter or fixed wing aircraft.
raft A relatively large block of extraneous rock incorporated into an intrusive magma.
RC drilling Reverse Circulation drilling - a method of rotary drilling in which the sample is returned to
the surface, using compressed air, inside the inner-tube of the drill-rod. A more accurate drilling
technique than simple percussion drilling, the RC technique minimises contamination.
refractory Descriptive of ore difficult to treat for recovery of valuable minerals.
rhyolite A volcanic rock composed chiefly of potassium feldspar and quartz.
rift basin A large fault-bound depression, in-filled with volcanic and/or sedimentary material.
sericite A white, fine-grained mica, usually formed as an alteration product of various silicates in
metamorphic rocks and the wall rocks of ore deposits.
shear zone A zone in which rocks have been deformed primarily in a ductile manner in response to
applied stress.
sheet wash A widely distributed, thin blanket of sediment deposited in a broad, poorly defined
drainage.
silicified The alteration or replacement of primary minerals by silica.
Silurian An era of geological time approximately from 410 Ma to 435 Ma.
skarn A thermally metamorphosed impure limestone.
soil sampling The collection of soil specimens for mineral analysis.
stockwork A network of (usually) quartz veinlets produced during pervasive brittle fracture.
73
stratabound Occurring within and parallel to the rock strata, but not necessarily deposited at the
same time.
stratiform Occurring within and parallel to the rock strata, and deposited at the same time.
stream sampling The collection of stream sediments for mineral analysis.
For personal use only
strike The direction or bearing of a geological structure on a level surface, perpendicular to the
direction of dip.
stringer A small, thin discontinuous or irregular veinlet.
subduction The process where one slab of the Earth’s crust descends beneath another.
syncline A basin-shaped fold.
syntectonic Occurring or forming at the same time as deformation and metamorphism.
t, tpa Metric tonne, tonnes per annum.
tectonics The processes that create the broad architecture of the surface of the earth.
tectonism A general term for all movement of the crust produced by tectonic processes.
Tertiary Applied to the first period of the Cainozoic era, 1.8Ma to 65Ma.
terrane A crustal block or fragment that preserves a distinctive geologic history that is different from
the surrounding areas.
tholeiitic A term applied to mafic or ultramafic rocks composed predominantly of magnesium-rich
feldspar and pyroxene minerals.
tonalite A coarse grained plutonic rock similar to diorite in composition but containing quartz as 5%
to 20% of the light coloured minerals.
trench A long, narrow depression in the sea floor.
Tournaisian A stratigraphic name for a stage at the base of the European Carboniferous (around
345-355 Ma).
Triassic Applied to the first period of the Mesozoic era, 203Ma to 248Ma.
ultramafic Igneous rocks consisting essentially of ferro-magnesium minerals with trace quartz and
feldspar.
uraninite The main ore of uranium, essentially UO2.
Viséan A stratigraphic name for a stage at the top of the European Carboniferous (around 325-345
Ma).
volcanoclastic A sedimentary clastic rock containing volcanic material.
74
11 CERTIFICATE OF QUALIFICATIONS
ANDREW JAMES VIGAR, F.AusIMM, M.SEG.,
STATEMENT OF QUALIFICATIONS
For personal use only
I, Andrew James Vigar, B.App.Sc (Geol.), hereby certify that:
1.
I am an independent Consulting Geologist and Professional Geoscientist residing at 97 Isaac
Street, Spring Hill Queensland 4000, Australia with my office at Level 4, 67 St Paul’s Terrace,
Brisbane, Queensland 4001, Australia (Telephone +61-7-38319154).
2.
I graduated from the Queensland University of Technology, Brisbane, Australia in 1978 with
a Bachelor Degree in Applied Science in the field of Geology.
3.
I have continuously practised my profession as a Geologist for the past 30 years since
graduation, in the fields of Mineral Exploration, Mine Geology and Resource Estimation. I have held
senior positions with Emperor Gold, WMC, Costain Australia and CRA (Rio Tinto) prior to
commencing full-time consulting in 1996. I have been involved in consulting to the minerals industry
both independently (Vigar & Associates and now Mining Associate Pty Ltd) and as an employee of
the international consultancy, SRK Consulting.
4.
My specific experience concerning the Kharmagtai Project is my extensive experience in
mineral resource estimation in a number of porphyry-style copper-gold. I have worked in mineral
exploration since 1980 when I joined the exploration team at the Vatukoula gold mine in Fiji. This
was followed by senior roles at gold mines in Western Australia and Queensland and
exploration/evaluation in SE Asia and PNG. I spent 2 years with the WH Bryan Mining Geology
Research Centre at the University of Queensland tutoring and studying Geostatistics. I commenced
full-time consulting in 1996. I have prepared in-depth reviews and/or resource estimates of a large
number of deposits over the last 14 years. I have worked on the identification and estimation of
resources for porphyry style mineralisation in similar environments in PNG, Philippines, Indonesia
and throughout Australia.
5.
I was elected a Fellow of the Australasian Institute of Mining and Metallurgy (“The
AusIMM”) in 1993, having been a member since 1980. My status as a Fellow of The AusIMM is
current, and I am recognized by the Australian Securities and Investments Commission and the
Australian Stock Exchange as a Qualified Person for the submission of Independent Geologist’s
Reports.
6.
I have read the definition of “Independent Individual Expert” set out VALMIN Section 37 and
certify that by reason of my education, affiliation with a professional association (as defined in
VALMIN) and past relevant work experience, I fulfill the requirement to be an "Expert" for the
purposes of VALMIN. I have read the definition of "qualified valuator" set out in CIMVal and certify
that by reason of my education, affiliation with a professional association (as defined in CIMVal) and
past relevant work experience, I fulfill the requirement to be a "qualified valuator" for the purposes
of CIMVal.
7.
I am author of the Valuation entitled "Report on the Market Valuation of Auzex Ltd’s Mineral
Assets in Australia” dated 24th June 2015 (“the Valuation”). I have reviewed all sections of the report
for which I am responsible and found them to be accurate and reliable within the limitations of this
Valuation.
I have not previously inspected the property that is the subject of the Valuation
75
|
AND
THE HOLDERS OF FULLY PAID ORDINARY
SHARES IN AUZEX LIMITED
SCHEME OF ARRANGEMENT – PURSUANT TO
SECTION 411 OF THE CORPORATIONS ACT
Scheme of Arrangement
For personal use only
ANNEXURE B
AUZEX EXPLORATION LIMITED
ACN 153 608 596
(AZX)
TABLE OF CONTENTS
For personal use only
1. DEFINITIONS AND INTERPRETATION ............................................................................... 1 1.1 1.2 1.3 1.4 2. CONDITIONS ................................................................................................................... 5 2.1 2.2 2.3 3. Scheme Consideration .................................................................................... 7 Rounding entitlements..................................................................................... 7 Provision of Scheme Consideration ............................................................... 7 Joint holders ...................................................................................................... 8 Binding instruction or notifications .................................................................. 8 Ineligible Overseas Shareholders ................................................................... 8 Status of EXU Shares ......................................................................................... 9 DEALINGS IN AZX SHARES ............................................................................................. 9 6.1 6.2 6.3 6.4 6.5 7. Lodgement ....................................................................................................... 6 Transfer of Scheme Shares .............................................................................. 6 Timing ................................................................................................................. 7 SCHEME CONSIDERATION ............................................................................................. 7 5.1 5.2 5.3 5.4 5.5 5.6 5.7 6. Effective Date of Scheme ............................................................................... 6 End Date ........................................................................................................... 6 IMPLEMENTATION OF SCHEME ...................................................................................... 6 4.1 4.2 4.3 5. Conditions to this Scheme............................................................................... 5 Certificates in relation to conditions .............................................................. 5 Termination of Merger Implementation Deed.............................................. 6 SCHEME ........................................................................................................................... 6 3.1 3.2 4. Definitions .......................................................................................................... 1 Interpretations................................................................................................... 3 Best and reasonable endeavours .................................................................. 4 Business Day ...................................................................................................... 5 Dealings in AZX Shares by Scheme Shareholders......................................... 9 AZX Share Register ........................................................................................... 9 Information to be made available to EXU .................................................. 10 Effect of Share certificates and holding statements ................................. 10 Disposals after Record Date ......................................................................... 10 GENERAL PROVISIONS ................................................................................................. 10 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 7.10 7.11 7.12 7.13 7.14 7.15 7.16 7.17 Effect of Scheme ............................................................................................ 10 Appointment of agent and attorney .......................................................... 10 Enforcement of Deed Poll ............................................................................. 10 Scheme Shareholders' consent .................................................................... 11 Scheme Shareholder’s agreements ............................................................ 11 Transfer with clear title and warranty by Scheme Shareholders .............. 11 Title to Scheme Shares ................................................................................... 11 Appointment of EXU as sole proxy ............................................................... 12 Alterations or conditions ................................................................................ 12 Notices ............................................................................................................. 12 Inconsistencies ................................................................................................ 12 Further assurances ......................................................................................... 12 Stamp duty...................................................................................................... 12 Fees and charges .......................................................................................... 12 Governing law ................................................................................................ 13 Limitation of liability ........................................................................................ 13 Definition of "send" ......................................................................................... 13
i
Scheme of Arrangement made under section 411 of the Corporations Act 2001 (Cth)
BETWEEN
For personal use only
AUZEX EXPLORATION LIMITED (ACN 153 608 596) of C/- Level 16, Waterfront Place, 1 Eagle
Street, BRISBANE QLD 4000 (AZX);
AND
THE HOLDERS OF AZX SHARES.
RECITALS
A.
AZX is a public company incorporated in the state of Queensland.
B.
Explaurum Ltd (EXU) is a public company incorporated in the state of Western
Australia and is admitted to the Official List of the ASX.
C.
AZX and EXU have entered into a merger implementation deed dated on or
about 15 May 2015 (Merger Implementation Deed) pursuant to which, amongst
other things, AZX has agreed to propose this Scheme to AZX Shareholders, and
each of AZX and EXU have agreed to take certain steps to give effect to this
Scheme.
D.
If this Scheme becomes Effective (as defined below), then:
(a)
all of the Scheme Shares will be transferred to EXU and the Scheme
Consideration will be provided to the Scheme Shareholders in
accordance with the provisions of this Scheme; and
(b)
AZX will enter the name and address of EXU in the AZX Share Register as
the holder of all of the Scheme Shares.
E.
EXU has entered into the Deed Poll for the purpose of covenanting in favour of
Scheme Shareholders to perform the obligations contemplated of it under this
Scheme.
1.
DEFINITIONS AND INTERPRETATION
1.1
Definitions
In this document, unless the contrary intention appears or the context requires
otherwise:
AEST means Australian Eastern Standard Time.
ASIC means the Australian Securities and Investments Commission.
ASX means ASX Limited (ACN 008 624 691) or the Australian Securities Exchange,
as the context requires.
ASX Listing Rules means the official listing rules of ASX.
AZX Share means a fully paid ordinary share in the capital of AZX.
AZX Shareholder means each person who is registered as a holder of an AZX
Share.
1989-09/Legal/44092753_1
1
AZX Share Register means the register of members of AZX maintained by or on
behalf of AZX in accordance with section 168(1) of the Corporations Act.
For personal use only
Business Day is any day that is both a business day within the meaning given in
the ASX Listing Rules and a day that banks in Perth, Western Australia are open
for business.
Condition means a condition to this Scheme set out in clause 2.1.
Consolidation means the consolidation of the issued capital of the EXU on the
basis of 1 EXU Share for every 10 EXU Shares on issue and 1 EXU Option for every
10 EXU Options on issue (with the exercise price of the EXU Options adjusted
accordingly), rounded up to the nearest EXU Share or EXU Option, or such other
ratio as agreed between EXU and AZX in writing.
Corporations Act means the Corporations Act 2001 (Cth).
Court means the Federal Court of Australia or such other court of competent
jurisdiction as AZX and EXU agree in writing.
Deed Poll means the deed poll to be executed by EXU in favour of the Scheme
Shareholders (subject to any amendments permitted by its terms) prior to the
despatch of the Explanatory Memorandum to Scheme Shareholders.
Effective means, when used in relation to this Scheme, the coming into effect,
pursuant to section 411(10) of the Corporations Act, of the order of the Court
made under section 411(4)(b) (and, if applicable, section 411(6)) of the
Corporations Act in relation to this Scheme.
Effective Date means the date on which this Scheme becomes Effective.
End Date means 30 September 2015 or such later date as is agreed by AZX and
EXU in writing.
Explanatory Memorandum means the explanatory memorandum to be
prepared by AZX in respect of this Scheme approved by the Court under section
411(1) of the Corporations Act for distribution to AZX Shareholders containing,
among other things, the explanatory statement required by Part 5.1 of the
Corporations Act relating to this Scheme and a notice convening the Scheme
Meeting.
EXU Share means a fully paid ordinary share in the capital of EXU.
EXU Share Register means the register of holders of EXU Shares maintained by or
on behalf of EXU in accordance with section 168(1) of the Corporations Act.
Implementation Date means the date which is 5 Business Days after the Record
Date or such other date as AZX and EXU agree in writing.
Ineligible Overseas Shareholder means an AZX Shareholder whose address as
shown in the AZX Share Register at 5.00 pm on the Record Date is a place
outside Australia and its external territories and New Zealand unless EXU and AZX
are satisfied, acting reasonably, that the laws of that AZX Shareholder's country
of residence (as shown in the AZX Share Register) permit the issue and allotment
of EXU Shares to that AZX Shareholder, either unconditionally or after
compliance with conditions which EXU in its sole discretion regards as
acceptable.
2
Record Date means the date which is 5 Business Days after the Effective Date.
Registered Address means, in relation to an AZX Shareholder, the address of that
AZX Shareholder shown in the AZX Share Register.
For personal use only
Regulatory Authority means:
(a)
any government, semi-government or local authority
department, minister or agency of any government; and
and
any
(b)
any other authority, agency, commission, administrative, fiscal or judicial
body (including the Court), tribunal or similar entity having powers or
jurisdiction under any law or regulation or the listing rules of any
recognised stock or securities exchange, including without limitation the
ASX.
Related Body Corporate has the meaning given in section 9 of the Corporations
Act.
Sale Nominee means the person appointed by EXU to sell the EXU Shares that
are attributable to Ineligible Overseas Shareholders under the terms of this
Scheme.
Scheme means the scheme of arrangement under Part 5.1 of the Corporations
Act between AZX and the Scheme Shareholders as set out in this document,
subject to any alterations or conditions made or required by the Court pursuant
to section 411(6) of the Corporations Act and approved in writing by EXU and
AZX.
Scheme Consideration means the consideration to be provided to Scheme
Shareholders under the terms of this Scheme being 672,057,960 EXU Shares
(subject to clauses 5.2 and 5.6) to be apportioned amongst the AZX
Shareholders on a fully diluted basis after the AZX Convertible Notes are
converted into AZX Shares (as contemplated by the condition set out in clause
4(c)(i)).
Scheme Meeting means the meeting of AZX Shareholders ordered by the Court
in relation to this Scheme pursuant to section 411(1) of the Corporations Act.
Scheme Share means each AZX Share on issue as at 5.00 pm on the Record
Date.
Scheme Shareholder means each person registered in the AZX Share Register as
the holder of Scheme Shares.
Second Court Date means the first day of hearing of an application made to the
Court for an order pursuant to section 411(4)(b) of the Corporations Act
approving this Scheme or, if the hearing of such application is adjourned for any
reason, means the first day of the adjourned hearing.
1.2
Interpretations
In this document unless the contrary intention appears or the context requires
otherwise:
(a)
a word importing the singular includes the plural and vice versa, and
word indicating gender includes every other gender
3
For personal use only
1.3
(b)
if a word or phrase is given a defined meaning, any other part of
speech or grammatical form of that word or phrase has a
corresponding meaning;
(c)
references to a person includes an individual the estate of an individual,
a corporation, an authority, an association or a joint venture (whether
incorporated or unincorporated), a partnership and a trust;
(d)
unless stated otherwise, references to EXU Shares and EXU Options are
on a pre-Consolidation basis;
(e)
a reference to a statute includes any regulations or other instruments
made under it and a reference to a statute or any regulation or other
instrument made under it or a provision of any such statute, regulation or
instrument includes consolidations, amendments, re-enactments and
replacements;
(f)
a reference to a party includes a reference to that party's executors,
administrators, and permitted assigns, s including persons taking by
novation and, in the case of a trustee, includes any substituted or
additional trustee;
(g)
if a time period is specified and dates from a given date or the day of
an act or event, it is to be calculated exclusive of that day;
(h)
a reference to any time is a reference to that time in Perth, Australia,
except where specified to be AEST;
(i)
a reference to "$" or "A$" is to the lawful currency of the Commonwealth
of Australia;
(j)
a reference to a document is that document as varied, novated,
ratified or replaced from time to time;
(k)
a reference to a party, clause, schedule, exhibit, attachment or
annexure is a reference to a party, clause, schedule, exhibit,
attachment or annexure to or of this document, and a reference to this
document includes all schedules, exhibits, attachments and annexures
to it;
(l)
this document must not be construed adversely to a party just because
that party prepared it or caused it to be prepared; and
(m)
the word including or any form of that word is not a word of limitation.
Best and reasonable endeavours
Any provision of this document which requires a party to use best endeavours or
reasonable endeavours, or to take all steps reasonably necessary, to procure
that something is performed or occurs does not include any obligation:
(a)
to pay any money or to provide any financial compensation, valuable
consideration or any other incentive to or for the benefit of any person;
or
(b)
to commence any legal action or proceeding against any person, to
procure that that thing is done or happens, except for payment of any
4
applicable fee for the lodgement or filing of any relevant application
with any Regulatory Authority,
except where that provision expressly specifies otherwise.
For personal use only
1.4
Business Day
Except where otherwise expressly provided, where under this document the day
on which any act, matter or thing is to be done is a day other than a Business
Day, such act, matter or thing shall be done on the immediately following
Business Day.
2.
CONDITIONS
2.1
Conditions to this Scheme
This Scheme is conditional upon, and the provisions of clauses 3, 4 and 5 will not
come into effect unless and until each of these conditions have been satisfied:
2.2
(a)
as at 8.00 am AEST on the Second Court Date each of the conditions set
out in clause 4.1 of the Merger Implementation Deed (other than the
condition relating to the approval of the Court set out in clause 4.1(l) of
the Merger Implementation Deed) have been satisfied or waived in
accordance with the terms of the Merger Implementation Deed;
(b)
as at 8.00 am AEST on the Second Court Date the Merger
Implementation Deed has not been terminated;
(c)
the Court approves this Scheme under section 411(4)(b) of the
Corporations Act with or without modification;
(d)
such other conditions made or required by the Court under section
411(6) of the Corporations Act in relation to this Scheme as are
acceptable to EXU and AZX have been satisfied; and
(e)
the coming into effect, pursuant to section 411(10) of the Corporations
Act, of the orders of the Court made under section 411(4)(b) of the
Corporations Act (and, if applicable, section 411(6) of the Corporations
Act) in relation to this Scheme.
Certificates in relation to conditions
(a)
At or before the Court hearing on the Second Court Date, AZX and EXU
will each provide to the Court a certificate (or such other evidence as
the Court may request) confirming whether or not all of the conditions
set out in clause 4.1 of the Merger Implementation Deed (other than the
condition set out in clause 4.1(l) of the Merger Implementation Deed)
have been satisfied or waived in accordance with the terms of the
Merger Implementation Deed.
(b)
The certificates given by AZX and EXU constitute conclusive evidence
that the conditions set out in clause 4.1 of the Merger Implementation
Deed (other than the condition set out in clause 4.1(l) of the Merger
Implementation Deed) have been satisfied or waived (as the case may
be).
5
2.3
Termination of Merger Implementation Deed
For personal use only
Without limiting any rights under the Merger Implementation Deed, in the event
that the Merger Implementation Deed is terminated in accordance with its terms
before 8.00 am AEST on the Second Court Date, AZX and EXU are each released
from:
(a)
further obligation to take steps to implement this Scheme; and
(b)
any liability with respect to this Scheme.
3.
SCHEME
3.1
Effective Date of Scheme
Subject to clause 3.2, this Scheme will take effect on and from the Effective
Date.
3.2
End Date
This Scheme will lapse and be of no further force or effect if the Effective Date
has not occurred on or before the End Date.
4.
IMPLEMENTATION OF SCHEME
4.1
Lodgement
If the Conditions are satisfied, AZX must lodge with ASIC in accordance with
section 411(10) of the Corporations Act an office copy of the Court order
approving this Scheme promptly after, and in any event by no later than
4.00 pm AEST on the Business Day following the date on which the Court
approves this Scheme (or such other Business Day as AZX and EXU agree in
writing).
4.2
Transfer of Scheme Shares
On the Implementation Date, subject to the provision of the Scheme
Consideration in the manner contemplated by clause 5 and EXU having
provided AZX with written confirmation thereof, all of the Scheme Shares will,
together with all rights and entitlements attaching to the Scheme Shares, be
transferred to EXU without the need for any further act by any Scheme
Shareholder (other than acts performed by AZX or its directors as attorney or
agent for Scheme Shareholders under this Scheme), by:
(a)
AZX delivering to EXU a duly completed and executed share transfer
form or forms to transfer all of the Scheme Shares to EXU (executed by
AZX as the attorney and agent of each Scheme Shareholder under
clause 7.2) (which may be a master transfer of all or part of the Scheme
Shares);
(b)
EXU duly executing such share transfer form or forms and delivering it or
them to AZX for registration; and
(c)
immediately after receipt of the share transfer form or forms under
clause 4.2(b), AZX entering, or procuring the entry of, the name and
address of EXU in the AZX Share Register as the holder of all of the
Scheme Shares.
6
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4.3
Timing
Notwithstanding any other provision of this Scheme, while EXU Shares forming
part of the Scheme Consideration must be issued (and relevant registers
updated to record their issuance) on the Implementation Date, any
requirements under clause 5 for the sending of share certificates, holding
statements or allotment advices may be satisfied within 10 Business Days after
the Implementation Date.
5.
SCHEME CONSIDERATION
5.1
Scheme Consideration
Subject to this Scheme becoming Effective, AZX will procure that, in
consideration of the transfer to EXU of each Scheme Share held by a Scheme
Shareholder under this Scheme, EXU will provide the Scheme Consideration to
each Scheme Shareholder for each Scheme Share held by it on the
Implementation Date.
5.2
Rounding entitlements
If the number of Scheme Shares held by a Scheme Shareholder as at 5.00 pm on
the Record Date is such that the aggregate entitlement of the Scheme
Shareholder to Scheme Consideration is a fractional entitlement to an EXU
Share, then the entitlement of that Scheme Shareholder must be rounded down
to the nearest whole number of EXU Shares.
5.3
Provision of Scheme Consideration
Subject to clause 4.3, the obligations of EXU under this Scheme to provide the
Scheme Consideration to Scheme Shareholders will be satisfied:
(a)
(b)
in the case of EXU Shares which are required to be issued to Scheme
Shareholders under this clause 5, by EXU procuring that:
(i)
the name and Registered Address of each such Scheme
Shareholder is entered into the EXU Share Register on the
Implementation Date in respect of the EXU Shares to which it is
entitled under this clause 5; and
(ii)
the Scheme Shareholder is entered into a direct registration
system or other electronic book-entry system as holding the
number of EXU Shares issued to the Scheme Shareholders
pursuant to this Scheme;
in the case of EXU Shares to be issued in respect of Scheme
Consideration due to Ineligible Overseas Shareholders - by EXU
procuring that:
(i)
the name and address of the Sale Nominee is entered into the
EXU Share Register on the Implementation Date in respect of
the EXU Shares required to be issued to it under this clause 5;
(ii)
a share certificate in the name of the Sale Nominee is sent to
the Sale Nominee representing the number of EXU Shares so
issued to it; and
7
(iii)
5.4
the Sale Nominee sells those EXU Shares on behalf of the
Ineligible Overseas Shareholders, and pays the proceeds in
accordance with clauses 5.6.
Joint holders
For personal use only
In the case of Scheme Shares held in joint names:
(a)
any cheque required to be paid to Scheme Shareholders will be
payable to the joint holders; and
(b)
the EXU Shares to be issued under this Scheme will be issued to and
registered in the names of the joint holders,
and will be forwarded to the holder whose name appears first in the AZX Share
Register as at 5.00 pm on the Record Date.
5.5
Binding instruction or notifications
Except for a Scheme Shareholder's tax file number, any binding instruction or
notification between a Scheme Shareholder and AZX relating to Scheme Shares
as at 5.00 pm on the Record Date (including any instructions relating to payment
of dividends or to communications from AZX) will, from 5.00 pm on the Record
Date, be deemed (except to the extent determined otherwise by EXU in its sole
discretion) to be a similarly binding instruction or notification to, and accepted
by EXU, in respect of the EXU Shares issued to the Scheme Shareholder until that
instruction or notification is revoked or amended in writing addressed to EXU,
provided that any such instructions or notifications accepted by EXU will apply to
and in respect of the issue of EXU Shares as the Scheme Consideration only to
the extent that they:
5.6
(a)
are not inconsistent with the other provisions of this Scheme; or
(b)
are recognised under Australian law or EXU's constituent documents.
Ineligible Overseas Shareholders
(a)
Unless EXU and AZX are satisfied, acting reasonably, that the laws of an
Ineligible Overseas Shareholder's country of residence (as shown in the
AZX Share Register) permit the issue of EXU Shares to the Ineligible
Overseas Shareholder, either unconditionally or after compliance with
conditions which EXU in its sole discretion regards as acceptable, EXU
will issue the EXU Shares to which that Ineligible Overseas Shareholder
would otherwise be entitled to the Sale Nominee, and EXU will be under
no obligation under this Scheme to issue, and will not issue, any EXU
Shares to any such Ineligible Overseas Shareholder.
(b)
EXU will procure that, as soon as reasonably practicable and in any
event not more than 15 Business Days after the Implementation Date,
the Sale Nominee:
(i)
sells on the ASX all of the EXU Shares issued to the Sale Nominee
pursuant to clause 5.6(a) in such manner, at such price and on
such other terms as the Sale Nominee determines in good faith
and at the risk of the Ineligible Overseas Shareholders; and
(ii)
remits to EXU the proceeds of sale in Australian dollars, subject
to any applicable withholding taxes.
8
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5.7
(c)
Promptly after the last sale of EXU Shares in accordance with clause
5.6(b), EXU will pay to each Ineligible Overseas Shareholder the
proportion of the net proceeds of sale received by EXU pursuant to
clause 5.7(b)(ii) to which that Ineligible Overseas Shareholder is entitled
(calculated on an average basis so that all Ineligible Overseas
Shareholders receive the same price per Scheme Share subject to
rounding).
(d)
EXU will pay the relevant fraction of the proceeds of sale referred to in
clause (c) to each Ineligible Overseas Shareholder by sending, or
procuring the despatch to each such Ineligible Overseas Shareholder
by prepaid post to the registered address of the Ineligible Overseas
Shareholder at 5.00 pm on the Record Date, a cheque in the name of
that Ineligible Overseas Shareholder for the relevant amount
(denominated in Australian dollars).
(e)
Each Ineligible Overseas Shareholder appoints AZX as its agent to
receive on its behalf any financial services guide or other notices
(including any updates of those documents) that the Sale Nominee is
required to provide to Ineligible Overseas Shareholders under the
Corporations Act.
Status of EXU Shares
Subject to this Scheme becoming Effective, EXU will:
(a)
issue the EXU Shares required to be issued by it under this Scheme on
terms such that each such EXU Share will rank equally in all respects with
each existing EXU Share;
(b)
ensure that each EXU Share issued as Scheme Consideration is duly
issued and is fully paid, non assessable and free from any mortgage,
charge, lien, encumbrance or other security interest; and
(c)
use all reasonable endeavours to ensure that all EXU Shares issued as
Scheme Consideration are approved for quotation and trading on the
ASX as of the first trading day following the Effective Date (or such later
date as the ASX requires).
6.
DEALINGS IN AZX SHARES
6.1
Dealings in AZX Shares by Scheme Shareholders
For the purposes of establishing who are Scheme Shareholders, dealings in AZX
Shares will be recognised by AZX provided that registrable transfers or
transmission applications in respect of those dealings are received at the place
where the AZX Share Register is kept on or before 5.00 pm on the Record Date,
and AZX will not accept for registration, or recognise for the purpose of
establishing who are Scheme Shareholders, any transmission application or
transfer in respect of AZX Shares received after 5.00 pm on the Record Date.
6.2
AZX Share Register
AZX will, until the Scheme Consideration has been paid and EXU has been
entered in the AZX Share Register as the holder of all of the Scheme Shares,
maintain the AZX Share Register in accordance with the provisions of this clause
9
6 and the AZX Share Register in this form and the terms of this Scheme will solely
determine entitlements to the Scheme Consideration.
For personal use only
6.3
Information to be made available to EXU
AZX must procure that as soon as practicable following the Record Date, details
of the names, Registered Addresses and holdings of AZX Shares of every Scheme
Shareholder shown in the AZX Share Register at 5.00 pm on the Record Date are
made available to EXU in such form as EXU may reasonably require.
6.4
Effect of Share certificates and holding statements
As from 5:00 pm the Record Date, all share certificates and holding statements
for the Scheme Shares (other than for EXU following the Implementation Date)
will cease to have effect as documents of title, and each entry on the AZX Share
Register at that date will cease to have any effect other than as evidence of
entitlement to the Scheme Consideration.
6.5
Disposals after Record Date
If this Scheme becomes Effective, a Scheme Shareholder, and any person
claiming through that Scheme Shareholder, must not dispose of or purport or
agree to dispose of any Scheme Shares or any interest in them after the Record
Date.
7.
GENERAL PROVISIONS
7.1
Effect of Scheme
Each Scheme Shareholder acknowledges that this Scheme binds AZX and all of
the holders for the time being of AZX Shares (including those who do not attend
the meeting of AZX Shareholders to approve this Scheme or who do not vote at
that meeting or who vote against this Scheme at that meeting) and, to the
extent permitted by law, overrides the constitution of AZX.
7.2
Appointment of agent and attorney
Each Scheme Shareholder, without the need for any further act, is deemed to
have irrevocably appointed AZX as its agent and attorney for the purpose of:
(a)
executing any document or form or doing any other act necessary to
give effect to the terms of this Scheme including, without limitation, the
execution of the share transfer(s) to be delivered under clause 4.2(a)
and the giving of the Scheme Shareholders' consent under clause 7.4;
and
(b)
enforcing the Deed Poll against EXU,
and AZX accepts such appointment.
AZX, as agent of each Scheme
Shareholder, may sub-delegate its functions, authorities or powers under this
clause 7.2 to all or any of its directors and officers (jointly, severally, or jointly and
severally).
7.3
Enforcement of Deed Poll
AZX undertakes in favour of each Scheme Shareholder that it will enforce the
Deed Poll against EXU on behalf of and as agent and attorney for the Scheme
Shareholder.
10
7.4
Scheme Shareholders' consent
For personal use only
Each Scheme Shareholder irrevocably:
7.5
(a)
consents to AZX and EXU doing all things and executing all deeds,
instruments, transfers or other documents as may be necessary,
incidental or expedient to the implementation and performance of this
Scheme; and
(b)
acknowledges that this Scheme binds AZX and all of the AZX
Shareholders from time to time (including those who do not attend the
Scheme Meeting, do not vote at that meeting or vote against this
Scheme).
Scheme Shareholder’s agreements
Under this Scheme:
7.6
7.7
(a)
each Scheme Shareholder (other than an Ineligible Overseas
Shareholder) who is issued EXU Shares under this Scheme agrees to
become a shareholder of EXU in respect of those EXU Shares, to be
bound by the constitution of EXU and to have their name entered in the
EXU Share Register;
(b)
each Scheme Shareholder that is an Ineligible Overseas Shareholder
agrees and acknowledges that the payment to it of an amount in
accordance with clause 5.6 constitutes the satisfaction in full of its
entitlement under this Scheme; and
(c)
each Scheme Shareholder agrees to the transfer of its Scheme Shares,
together with all rights and entitlements attaching to those Scheme
Shares, to EXU in accordance with the terms of this Scheme.
Transfer with clear title and warranty by Scheme Shareholders
(a)
To the extent permitted by law, the Scheme Shares transferred to EXU
under this Scheme must be transferred free from all mortgages, charges,
liens, encumbrances and interests of third parties of any kind, whether
legal or otherwise.
(b)
Each Scheme Shareholder is deemed to have warranted to AZX, in its
own right and for the benefit of EXU, that all their Scheme Shares
(including any rights and entitlements attaching to those shares) will, at
the date of the transfer of them to EXU, be fully paid and free from all
mortgages, charges, liens, encumbrances and interests of third parties
of any kind, whether legal or otherwise, and restrictions on transfer of
any kind, and that they have full power and capacity to sell and to
transfer their Scheme Shares to EXU under this Scheme.
Title to Scheme Shares
EXU will be beneficially entitled to the Scheme Shares transferred to it under this
Scheme pending registration by AZX of EXU in the AZX Share Register as the
holder of the Scheme Shares.
11
7.8
Appointment of EXU as sole proxy
For personal use only
From the Effective Date until AZX registers EXU as the holder of all of the AZX
Shares in the AZX Share Register, each Scheme Shareholder:
7.9
(a)
appoints EXU as attorney and agent (and directs EXU in each capacity)
to appoint any officer or agent nominated by EXU as its sole proxy and
where applicable, corporate representative, to attend shareholders'
meetings, exercise the votes attaching to AZX Shares registered in its
name and sign any shareholders resolution, and no Scheme
Shareholder may itself attend or vote at any of those meetings or sign
any resolutions, whether in person, by proxy or by corporate
representative (other than pursuant to this clause 7.8(a); and
(b)
must take all other actions in the capacity of the registered holder of
AZX Shares as EXU directs.
Alterations or conditions
AZX may, by its counsel or solicitors, and with the consent of EXU, consent on
behalf of all persons concerned, including a Scheme Shareholder, to any
alteration or condition to this Scheme which the Court thinks fit to make or
impose.
7.10
7.11
Notices
(a)
Where a notice, transfer, transmission application, direction or other
communication referred to in this Scheme is sent by post to AZX, it will for
all purposes be deemed to be received on the date (if any) on which it
is actually received at AZX's registered office (and it will not be deemed
to be received in the ordinary course of post).
(b)
The accidental omission to give notice of the Scheme Meeting to any
AZX Shareholder, or the non-receipt of such a notice by any AZX
Shareholder, will not, unless ordered by the Court, invalidate this
Scheme or the proceedings at the Scheme Meeting.
Inconsistencies
This Scheme binds AZX and all AZX Shareholders, and to the extent of any
inconsistency, overrides the constitution of AZX.
7.12
Further assurances
The AZX Shareholders consent to AZX doing all things necessary for the
implementation and performance of its obligations under this Scheme. AZX will
execute all documents and do all acts and things as may be necessary or
expedient for the implementation of, and performance of its obligations under,
this Scheme.
7.13
Stamp duty
EXU will pay any stamp duty payable on the transfer by Scheme Shareholders of
the Scheme Shares to EXU.
7.14
Fees and charges
AZX must pay all filing, application or similar fees due in relation to this Scheme.
12
For personal use only
7.15
7.16
7.17
Governing law
This Scheme is governed by the laws of the State of Western Australia. Each of
AZX and EXU and the holders of AZX Shares irrevocably and unconditionally
submits, in connection with this Scheme, to the non-exclusive jurisdiction of the
Court and any courts which have jurisdiction to hear appeals from the Court
and waives any right to object to any proceedings being brought in these
courts.
Limitation of liability
None of AZX or EXU nor any officer of any of them is liable for anything done or
omitted to be done in the performance of this Scheme in good faith.
Definition of "send"
For the purposes of clause 5, the word "send" (or any variant thereof) means
(a)
sending by ordinary pre-paid post or courier to the Registered Address
of the Scheme Shareholder; or
(b)
delivering to that address by any other means at no cost to the
recipient.
13
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|
IN FAVOUR OF EACH SCHEME SHAREHOLDER
DEED POLL (IN RESPECT OF THE SCHEME)
Deed Poll
For personal use only
ANNEXURE C
EXPLAURUM LIMITED
(EXU)
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For personal use only
SCHEME BOOKLET
Merger with
Explaurum Limited
SCHEME BOOKLET Merger with Explaurum
For personal use only
ACN 153 608 596
www.auzex.com
In relation to a recommended proposal to merge
Auzex Exploration Limited and Explaurum Limited by
a scheme of arrangement
Your Directors unanimously recommend that you
vote in favour of the scheme of arrangement in the
absence of a Superior Proposal
This is an important document and requires your immediate attention. You should
read this document in its entirety. If you are in any doubt about how to deal with this
document, you should contact your broker, financial advisor or legal advisor immediately.
If you have any questions in relation to this Booklet you can call the Auzex Information
Line on (07) 3106 5044 (for Australian callers) or + 61 7 3106 5044 (for international
callers) on weekdays between 9.00 am and 5.00 pm (Brisbane time).
Auzex Legal Advisor
Independent Expert
EXU Legal Advisor