Dear Shareholder, Level 2, 35 Outram Street West Perth WA 6005
As announced on 26 April 2016, Great Western Exploration Limited (“the Company” or “GTE”) made an all script offer for unlisted public company Vanguard Exploration Limited (“Vanguard”). The offer to acquire 100% of the shares in Vanguard is on the basis of four GTE fully paid ordinary shares for every one Vanguard share, or approximately 150,833,124 consideration shares.
In conjunction, the Company will seek to raise $1 million at an issue price of at least $0.01 for exploration on both Vanguard and the Company’s tenements.
The Company is now seeking shareholder approval for both the acquisition of Vanguard and $1 million share placement.
Vanguard is a WA based unlisted public company incorporated on the 24 July 2009 that has two exploration projects, Ives Find and Fairbairn. Both of these projects are located in the Northern Yilgarn of WA near the Company’s current projects. Vanguard has invested approximately $1.5 million into these projects over the last six years.
Earlier this year Vanguard made a promising new gold discovery at Ives Find where RC drilling intersected high grade gold mineralisation in two areas along strike of the historical Ives Find gold workings. Also previous work completed by Vanguard confirmed very high grade gold and silver mineralisation continuing at depth under the old workings.
In addition to the gold prospectivity, the project has a favourable geological setting for lithium mineralisation with abundant pegmatites and granite intrusions that match the criteria in the US Geological Survey (“USGS”) guidelines for lithium exploration.
The Ives Find project is well located in terms of infrastructure with a main unsealed rural arterial road approximately 6 km from the project which is accessed from either Wiluna 60km to northeast or from the Bronzewing mine 55km to the southeast. There are also two gold treatment plants in the district, one located at Wiluna and the other at Bronzewing mine.
The Vanguard opportunity was introduced to the Company by its Chairman, Kevin Somes, following the positive drilling results that Vanguard received this year. Mr. Somes is a director and 22% shareholder of Vanguard, and has taken no further part in the transaction and abstained from any related Board decisions.
The Vanguard projects were initially reviewed by myself and Independent Director Terry Grammer and we concluded that there was potential for further high grade gold mineralisation at Ives Find and that the Company should proceed with negotiations to acquire Vanguard.
The Company commissioned an Independent Technical Valuation (“ITV”) by Al Maynard & Associates that concluded that the total value of both Vanguard projects was estimated to be $1.6M from within the range of $1.1M to $2.1M. The ITV formed part of the Independents Experts Report (“IER”) prepared by Bentleys which concluded that the transaction is “unfair but reasonable” and “the likely advantages to non-associated GTE shareholders outweigh the likely disadvantages of the Proposed Transaction proceeding”.
While the Company believes that its existing projects remain prospective for gold, copper and nickel they continue to be within the greenfields conceptual stage of development. The Vanguard acquisition could provide the Company a more rapid transition from greenfields to production and considerably strengthens the Company’s balance sheet of prospective assets and therefore the Board unanimously recommends that the shareholders approve the acquisition of Vanguard and the capital raising.
Yours sincerely For personal use only use personal For
Jordan Luckett Managing Director
8019638_009.docx
Notice of General Meeting
The General Meeting of the Company will be held at The Celtic Club, 48 Ord Street, West Perth, Western Australia on Tuesday, 25 October 2016 at 11.00am (WST).
This notice of general meeting should be read in its entirety. If Shareholders are in any doubt as to how they should vote, they should seek advice from their professional advisor prior to voting. All Shareholders should carefully consider the Independent Expert’s Report enclosed with this Notice of General Meeting for the purposes of the Shareholder approval required under Resolutions 1 to 3 of this Notice. The Independent Expert’s Report comments on the fairness and reasonableness of the Proposed Acquisition to the non-associated Shareholders of the For personal use only use personal For Company. The Independent Expert has determined that the Proposed Acquisition is not fair but reasonable to the non-associated Shareholders of the Company. Please contact the Company Secretary on (08) 6555 9500 or [email protected] if you wish to discuss any matter concerning the Meeting.
Great Western Exploration Limited ABN 53 123 631 470
Notice of General Meeting
Notice is hereby given that a general meeting of the Shareholders of Great Western Exploration Limited will be held at The Celtic Club, 48 Ord Street, West Perth, Western Australia on Tuesday 25 October 2016 at 11.00 am (Western Standard Time) (Meeting). The Explanatory Memorandum to this Notice of Meeting provides additional information on matters to be considered at the Meeting. The Explanatory Memorandum and Proxy Form are included with this Notice of Meeting. Shareholders are urged to vote by attending the Meeting in person or by returning a completed Proxy Form. Instructions on how to complete a Proxy Form are set out in the Explanatory Memorandum. Proxy Forms must be received by no later than Sunday 23 October 2016 at 11.00 am. Terms and abbreviations used in this Notice and Explanatory Memorandum are defined in Schedule 1 of the Explanatory Memorandum.
Agenda
RESOLUTION 1 - ISSUE OF SECURITIES TO ACQUIRE VANGUARD To consider, and if thought fit, to pass the following as an ordinary resolution: “That subject to Shareholders approving Resolutions 2 and 3, and for the purposes of Listing Rule 7.1 and for all other purposes, Shareholder approval is given for the Company to issue up to 130,349,792 Shares to unrelated holders of Vanguard Shares (or their nominees) on the terms set out in the Explanatory Memorandum.” A voting exclusion statement is set out below.
RESOLUTION 2 - ISSUE OF SECURITIES TO RELATED PARTY TO ACQUIRE VANGUARD To consider, and if thought fit, to pass the following as an ordinary resolution: “That subject to Shareholders approving Resolutions 1 and 3, and for the purposes of ASX Listing Rules 10.1 and 10.11 and for all other purposes, approval is given for the Company to issue 20,483,332 Shares to Kevin Somes (or his nominee) on the terms and conditions set out in the Explanatory Memorandum.”
For personal use only use personal For Bentleys has determined that the transaction is not fair but reasonable to the holders of the Company’s ordinary securities whose votes are not to be disregarded. A voting exclusion statement is set out below.
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RESOLUTION 3 - ISSUE OF SECURITIES UNDER SHARE PLACEMENT
To consider, and if thought fit, to pass the following as an ordinary resolution: “That, for the purposes of Listing Rule 7.1 and for all other purposes, Shareholder approval is given for the Company to issue up to 100,000,000 Shares to unrelated investors identified by the Directors at an issue price of at least $0.01 and otherwise on the terms set out in the Explanatory Memorandum.” A voting exclusion statement is set out below.
RESOLUTION 4 - RATIFICATION OF PRIOR SECURITIES ISSUE
To consider, and if thought fit, to pass the following as an ordinary resolution: “That for the purposes of Listing Rule 7.4 and for all other purposes, Shareholders ratify the issue 24,540,000 Shares on the terms set out in the Explanatory Memorandum.” A voting exclusion statement is set out below.
VOTING PROHIBITION AND EXCLUSION STATEMENTS Under Listing Rule 14.11, the Company will disregard any votes cast on the following Resolutions by the following persons and their associates:
Resolution Persons excluded from voting
Resolution 1 – Issue of Securities to Persons who may participate in the proposed issue acquire Vanguard and a person who might obtain a benefit, except a benefit solely in the capacity as a holder of ordinary securities, if the Resolution is passed.
Resolution 2 – Issue of Securities to Kevin Somes, a Director of the Company. Related Parties
Resolution 3 – Issue of Securities Persons who may participate in the proposed issue under Share Placement and a person who might obtain a benefit, except a benefit solely in the capacity as a holder of ordinary securities, if the Resolution is passed.
Resolution 4 – Ratification of Prior Persons who participated in the issue. Securities Issue
For personal use only use personal For However, the Company need not disregard a vote if:
(a) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form; or
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(b) it is cast by the person chairing the Meeting as proxy for the person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides. By order of the Board of Directors
Jordan Luckett Managing Director Great Western Exploration Limited 23 September 2016
For personal use only use personal For
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Great Western Exploration Limited ABN 53 123 631 470
Explanatory Memorandum
INTRODUCTION This Explanatory Memorandum has been prepared for the information of Shareholders in connection with the business to be conducted at the Meeting to be held at The Celtic Club, 48 Ord Street, West Perth, Western Australia on Tuesday 25 October 2016 at 11:00am. The purpose of this Explanatory Memorandum is to provide information to Shareholders in deciding how to vote on the Resolutions set out in the Notice. This Explanatory Memorandum should be read in conjunction with and forms part of the accompanying Notice, and includes the following:
1 ACTION TO BE TAKEN BY SHAREHOLDERS ...... 4 2 PROPOSED ACQUISITION ...... 6 3 RESOLUTION 1 – ISSUE OF SECURITIES TO ACQUIRE VANGUARD ...... 10 4 RESOLUTION 2 - ISSUE OF SECURITIES TO RELATED PARTY TO ACQUIRE VANGUARD 11 5 RESOLUTION 3 - ISSUE SECURITIES UNDER SHARE PLACEMENT ...... 13 6 RESOLUTION 4 - RATIFICATION OF PRIOR SECURITIES ISSUE ...... 14 7 DEFINITIONS ...... 16 A Proxy Form is located at the end of this Explanatory Memorandum. Please contact the Company Secretary on (08) 6555 9500 or [email protected] if you wish to discuss any matter concerning the Meeting. Any forward looking statements in this Explanatory Memorandum are based on the Company’s current expectations about future events. They are, however, subject to known and unknown risks, uncertainties and assumptions, many of which are outside the control of the Company and its Board, which could cause actual results, performance or achievements to differ materially from future results, performance or achievements expressed or implied by any such forward looking statements in this Explanatory Memorandum. This Explanatory Memorandum does not take into account any person’s investment objectives, financial situation or particular needs. If you are in any doubt about what to do
in relation to the Meeting, you should consult your financial or other professional adviser. For personal use only use personal For
1 ACTION TO BE TAKEN BY SHAREHOLDERS Shareholders should read the Notice and this Explanatory Memorandum carefully before deciding how to vote on the Resolutions.
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1.1 Voting in person All Shareholders are invited and encouraged to attend the Meeting. To vote in person, attend the Meeting at the time, date and place set out in the Notice.
1.2 Voting by Proxy If a Shareholder is unable to attend in person, they can appoint a proxy to attend on their behalf by signing and returning the Proxy Form (attached to the Notice) to the Company in accordance with the instructions on the Proxy Form. In accordance with section 249L of the Corporations Act, Shareholders are advised that:
(a) each Shareholder has the right to appoint a proxy;
(b) the proxy need not be a Shareholder of the Company; and (c) a Shareholder who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If the member appoints 2 proxies and the appointment does not specify the proportion or number of the member’s votes, then in accordance with section 249X(3) of the Corporations Act, each proxy may exercise half of the votes. The Company encourages Shareholders completing a Proxy Form to direct the proxy how to vote on each Resolution. The Proxy Form must be received no later than 48 hours before the commencement of the Meeting, i.e. by no later than 11:00am on Sunday 23 October 2016. Any Proxy Form received after that time will not be valid for the Meeting. A Proxy Form may be lodged in the following ways:
By Mail PO Box 8142, Subiaco WA 6008, Australia
By Facsimile (08) 6313 3997
By Hand Level 2, 35 Outram Street, West Perth WA 6005
By Email [email protected]
Shareholders lodging a Proxy Form are not precluded from attending and voting in
person at the Meeting. For personal use only use personal For 1.3 Corporate representatives Shareholders who are body corporates may appoint a person to act as their corporate representative at the Meeting by providing that person with a certificate or letter executed in accordance with the Corporations Act authorising him or her to act as
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the body corporate’s representative. The authority may be sent to the Company and/or registry in advance of the Meeting or handed in at the Meeting when registering as a corporate representative. An appointment of corporate representative form is available from the website of the Company’s share registry (Computershare Investor Services).
1.4 Eligibility to vote For the purposes of regulations 7.11.37 and 7.11.38 of the Corporations Act Regulations, the Directors have determined that, for the purposes of voting at the Meeting, Shareholders are those persons who are the registered holders of Shares at 11:00 am (WST) on Sunday 23 October 2016.
2 PROPOSED ACQUISITION
2.1 Introduction On 26 April 2016 the Company announced the proposed acquisition of Vanguard Exploration Limited (Vanguard), an unlisted public company with two projects in Western Australia, on the basis of 4 Shares for 1 Vanguard Share on issue, or 150,833,124 Shares (Consideration Shares) (Proposed Acquisition) under a share sale and purchase agreement to be entered into between the Company and Vanguard’s shareholders (Sale Agreement). Mr Kevin Somes, a Director, holds approximately 22% of Vanguard’s issued shares. The Proposed Acquisition is conditional upon, amongst other things, Shareholder approval and the Company raising a minimum of $1 million at an issue price of at least $0.01 per Share (Share Placement). The purpose of the Meeting is to approve the Proposed Acquisition and Share Placement for the purposes of Listing Rules 7.1, 10.1 and 10.11.
2.2 Vanguard Vanguard was incorporated in Western Australia on 24 July 2009. Vanguard engages primarily in copper and gold mineral exploration with the following two areas of focus:
(a) a promising new gold-silver discovery with bonanza grades at its Ives Find project located in the Yandal greenstone belt; and
(b) a project called Fairbairn which is located east of Doolgunna on the
For personal use only use personal For Jenkins/Goodin fault along strike of the Degrussa copper deposit. Further information on Vanguard and its projects is contained in the Independent Expert’s Report.
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The Company’s tenements and Vanguard’s tenements are located within 80km of the Company’s tenements and are prospective for the same style of mineralization that is being targeted by GTE – providing some geological “fit” between the two packages. Both Vanguard’s and GTE’s tenements are also prospective for a wide range of other metals and industrial minerals that include but are not limited to iron ore, tin, tungsten, graphite, oil shale, phosphate, kaolin, lithium, tantalum and diamonds. Vanguard’s tenements entitle it to all mineral rights and while the primary focus is on base metals and gold, the Company remains aware of the opportunity to explore for other metals or minerals if market conditions are favorable for the economic exploitation of these non-core elements. Further information on Vanguard’s tenements is set out in the independent technical valuation of Vanguard’s Ives Find and Fairbairn Projects dated 11 June 2016, a copy of which accompanies the Independent Expert’s Report. Vanguard currently has 39 shareholders holding 37,708,281 Vanguard Shares. Vanguard last issued 50,000 Vanguard Shares at $0.04 per share in March 2016 in payment for services provided to a third party unrelated to Vanguard and 5,000,000 Vanguard Shares at an issue price of $0.04 per share to raise $200,000 in November 2015. Further information on Vanguard is set out in the Independent Expert’s Report.
2.3 Material terms of the Sale Agreement The material terms of the Sale Agreement under which the Company has agreed to purchase all Vanguard Shares on issue are as follows:
(a) The Company agrees to purchase all Vanguard Shares on issue, on the basis of 4 Shares for each Vanguard Share on issue.
(b) Completion under the Sale Agreement is subject to satisfaction or waiver of the following conditions precedent prior to the End Date (being 180 days from the date the Sale Agreement is first signed):
(i) acceptance of the offer by Vanguard Shareholders representing no less than 90% of the Vanguard Shares on issue which will allow GTE to compulsorily acquire the remaining shares in accordance with section 414 of the Corporations Act;
(ii) GTE raises a minimum of $1,000,000 through the issue of up to 100 million Shares under the Share Placement;
(iii) Shareholders approving the issue of Consideration Shares, including
For personal use only use personal For for the purpose of Listing Rule 10.1, and Shares issued under the Share Placement;
(iv) no material adverse event occurring with respect to GTE or Vanguard or their respective businesses and assets between the date of signing the Sale Agreement and completion;
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(v) no material breach of warranties; (vi) due diligence to the satisfaction of both parties; and (vii) Vanguard not suffering an insolvency event. (c) The offer of Consideration Shares to minority Vanguard Shareholders will be made under a prospectus, with such Consideration Shares not being subject to any escrow restrictions. Shares issued to Mr Somes or his nominees will be subject to 12 months escrow from issue.
(d) Both parties give covenants and warranties customary in this kind of transaction.
2.4 Management changes Upon Completion Vanguard’s managing director, Mr Ian Kerr, will be appointed an Executive Director of GTE. Mr Kerr is a successful prospector with over 25 years’ experience exploring the Eastern Goldfields of Western Australia. Mr Kerr’s employment package will consist of a salary of $120,000 per annum plus superannuation and $30,000 Director’s fee.
2.5 Capital structure following completion of the Proposed Acquisition Following Completion and assuming 100,000,000 Shares are issued under the Share Placement and no Directors participate in the Share Placement, the Company’s Share register will consist of the following:
Shareholder Current Post Proposed Acquisition
No. of Shares % No. of Shares %
Kevin Somes & 24,389,572 8.45 44,872,904 8.32 Associates
Holdrey Pty Ltd ATF The 28,218,496 9.78 28,218,496 5.23 Don Mathieson Family Trust & Associated1
Dilkara Nominees Pty Nil Nil 32,333,336 5.99 Ltd,4
Ian Kerr2 Nil Nil 25,808,336 4.78
For personal use only use personal For Jordan Luckett 22,783,333 7.89 22,783,333 4.22
Terry Grammer Nil Nil Nil Nil
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Existing unrelated 213,249,425 73.88 213,249,425 39.53 Shareholders
Unrelated Vanguard Nil Nil 72,208,120 13.38 Shareholders
Share Placement Nil Nil 100,000,000 18.54
Total 288,640,826 100 539,473,950 99.993
Notes 1 An entity controlled by Craig Mathieson, a director of GTE. 2 Vanguard shareholder 3 Errors due to rounding 4 Mr B M Smith, a Director of Vanguard, is a sole Director of Dilkara Nominees Pty Ltd. Dilkara Nominees acts as trustee for the Millwood Smith Family Trust (24,833,332 post proposed acquisition GTE shares) and the BMS Consultants Super Fund (7,500,000 post proposed acquisition GTE shares), for which Mr Smith is a named beneficiary of the Trust and member of the Super Fund respectively. GTE currently has no options on issue.
2.6 Independent Expert’s Report In accordance with Listing Rule 10.10, accompanying this Notice is an Independent Expert’s Report prepared by Bentleys. The Independent Expert’s Report assesses whether the Proposed Acquisition is fair and reasonable to the non-associated Shareholders. A VALMIN report has also been prepared and provides a valuation of the assets of both Vanguard and the Company. The report concludes that the Proposed Acquisition is not fair but reasonable to non- associated Shareholders. Please refer to the Independent Expert’s Report in the Annexure to this Notice for further details and in particular the advantages and disadvantages of the Proposed Acquisition. This assessment is designed to assist all Shareholders in reaching their voting decision. It is recommended that all Shareholders read the Independent Expert’s Report in full.
2.7 Directors’ Recommendation For personal use only use personal For The Directors other than Mr Somes recommend that Shareholders vote in favour of Resolutions 1 to 3, for the following reasons:
(a) Vanguard has recently made a new high grade gold discovery near the historical Ives Find gold workings located in the Yandal greenstone belt.
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(b) Vanguard’s Fairbarn project is located on the Jenkins/Goodin fault, along strike from Degrussa that the Company believes to be prospective for copper and gold and to be an excellent fit with the Company’s current Doolgunna project.
(c) Vanguard’s managing director, Mr Kerr will join GTE’s board as an executive Director, and in doing so providing valuable expertise.
(d) The Proposal Acquisition and Share Placement will, if completed, result in the Company raising $1 million; providing funds to further explore Vanguard’s tenements and for working capital.
3 RESOLUTION 1 – ISSUE OF SECURITIES TO ACQUIRE VANGUARD
3.1 Introduction Resolution 1 seeks Shareholder approval to issue up to 130,349,792 Consideration Shares to unrelated Vanguard Shareholders under the Proposed Acquisition. Resolution 1 is conditional on Shareholders approving Resolutions 2 and 3.
3.2 Listing Rule 7.1 Listing Rule 7.1 limits the number of securities a company can issue in a 12 month period to 15% of its issued share capital, except for certain issues, including where first approved by Shareholders. The effect of passing Resolution 1 will be to allow the Directors to issue securities in accordance with the Resolution without those securities being included in the 15% limit.
3.3 Information required by Listing Rule 7.3 For the purposes of Listing Rule 7.3, the following information is provided about the issue:
(a) The maximum number of securities to be issued under Resolution 1 is 130,349,792 fully paid ordinary shares in the capital of the Company.
(b) The securities will be issued no later than 3 months after the date of the meeting (or such later date to the extent permitted by any ASX waiver or modification of the Listing Rules) and it is intended that issue will occur on the same date.
(c) The deemed issue price of the securities will be $0.01 per Share. (d) The Shares will be issued to Vanguard Shareholders who are unrelated
For personal use only use personal For parties.
(e) The securities will be fully paid ordinary shares and will be issued on the same terms and conditions as the Company’s existing Shares and rank equally with all other Shares on issue.
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(f) The Shares the subject of Resolution 1 will be issued as consideration under the Proposed Acquisition, and no funds will be raised.
(g) The Shares will be issued on the same date. (h) A voting exclusion statement is included in the Notice.
3.4 Directors’ recommendation The Board other than Mr Somes unanimously recommends that Shareholders vote in favour of Resolution 1. This will allow the Company to issue securities under the Proposed Acquisition whilst preserving the Company’s 15% annual limit permitted by Listing Rule 7.1. Mr Somes is a director of Vanguard and holds approximately 22% of its issued shares, and for that reason has a material personal interest in the outcome of Resolution 2, and both he and his associates will be excluded from voting on Resolution 2. For that reason, Mr Somes declines to make a recommendation.
4 RESOLUTION 2 - ISSUE OF SECURITIES TO RELATED PARTY TO ACQUIRE VANGUARD
4.1 Introduction Resolution 2 seeks Shareholder approval to issue 20,483,332 Consideration Shares to Mr Kevin Somes, a Director, in consideration for the purchase of all Vanguard Shares held by Mr Somes. Mr Somes does not control Vanguard, and it is not a related party of the Company, and the proposed issue is on the same terms as to other Vanguard Shareholders. Approval of Resolution 2 is conditional upon Shareholders approving Resolution 1. A summary of the Proposed Acquisition is provided in section 2.
4.2 Requirement for Shareholder approval – Listing Rule 10.1 Listing Rule 10.1 provides that an entity (or any of its subsidiaries) must not acquire a substantial asset from, or dispose of a substantial asset to a related party or a substantial holder or an associate of a related party or a substantial holder without shareholder approval. The notice of meeting must include an independent expert’s report which opines on the fairness and reasonableness of the transaction. Mr Somes is a related party of the Company by virtue of being a Director. A “substantial asset” is an asset valued at greater than 5% of the equity interests of a company as set out in the latest accounts given to ASX under the Listing Rules.
For personal use only use personal For The net equity interests of the Company as set out in the Company’s 31 December 2015 half yearly accounts lodged with ASX on 14 March 2016 is $3,048,920 of which 5% is $152,446.
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As a Vanguard Shareholder, Mr Somes will be issued 20,483,332 Consideration Shares under the Proposed Transaction. The value of these Consideration Shares (calculated by reference to the Company’s share price as at 22 September 2016) is $389,183. Given the value of the Consideration Shares to be issued to Mr Somes exceeds the 5% threshold in Listing Rule 10.1, the Company seeks Shareholder approval under Listing Rule 10.1 for the Proposed Transaction and provides Shareholders with the Independent Expert’s Report.
4.3 Requirement for Shareholder approval – Listing Rule 10.11 Listing Rule 10.11 requires a listed company to obtain shareholder approval by ordinary resolution prior to the issue of securities to a related party. If shareholder approval is obtained under Listing Rule 10.11, shareholder approval is not required under Listing Rule 7.1. If Resolution 1 is approved, the Shares issued will not count towards the Company’s 15% placement capacity.
4.4 Chapter 2E of the Corporations Act Part 2E.1 of the Corporations Act prohibits the Company from giving a financial benefit to a related party (such as a Director and proposed Director) unless either:
(a) the giving of the financial benefit falls within one of the exceptions in section 210 to 217 of the Corporations Act; or
(b) Shareholder approval is obtained prior to the giving of the financial benefit. Section 210 of the Corporations Act provides an exception for a financial benefit to a related party that would be reasonable in the circumstances if the Company and the related party were dealing on arm’s length terms. The Directors consider that the issue of Consideration Shares to Messrs Somes (a Director) and Kerr (a proposed Director) to be reasonable in the Company’s circumstances as if the parties were dealing at arm’s length terms as the financial benefit is the same as that given to other unrelated Vanguard Shareholders. The Directors therefore consider that Shareholder approval is not required under Part 2E.1 of the Corporations Act.
4.5 Information required by Listing Rule 10.13 For the purposes of Listing Rule 10.13, the following information is provided about the proposed issue:
(a) The securities will be issued to Mr Kevin Somes, a Director of the Company,
or his nominee. For personal use only use personal For (b) The maximum number of securities to be issued to Mr Somes is 20,483,332 Shares.
(c) The securities will be issued no later than 1 month after the date of the meeting (or such later date to the extent permitted by any ASX waiver or
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modification of the Listing Rules) and it is intended that issue will occur on the same date.
(d) The deemed issue price will be $0.01 per Share. The Shares to be issued will be fully paid ordinary shares in the capital of the Company and will be issued on the same terms and conditions as the Company’s existing Shares and rank equally with all other Shares on issue.
(e) A voting exclusion statement is included in the Notice. (f) The Shares the subject of Resolution 2 will be issued as consideration under the Proposed Acquisition, and no funds will be raised.
4.6 Directors’ recommendation The Directors, other than Mr Somes unanimously recommend that Shareholders vote in favour of Resolution 2. Mr Somes declines to make a recommendation to Shareholders in relation to Resolution 2 as he has a material personal interest in the outcome of Resolution 2 and he and his associates will not be entitled to vote on Resolution 2.
5 RESOLUTION 3 - ISSUE SECURITIES UNDER SHARE PLACEMENT
5.1 Introduction Resolution 3 seeks Shareholder approval to issue up to 100,000,000 Shares pursuant to the Share Placement. While the Proposed Acquisition is conditional on the Share Placement, the Share Placement is not conditional on the Proposed Acquisition. Regardless of whether Resolutions 1 and 2 the Company requires funds for the purposes set out at section 5.2(f).
5.2 Information required by Listing Rule 7.3 For the purposes of Listing Rule 7.3, the following information is provided about the issue:
(a) The maximum number of securities to be issued under the Share Placement is 100,000,000 fully paid ordinary shares.
(b) The securities will be issued no later than 3 months after the date of the meeting (or such later date to the extent permitted by any ASX waiver or modification of the Listing Rules) and it is intended that issue will occur on For personal use only use personal For the same date.
(c) The issue price of the securities will be at no less than $0.01 per Share. (d) It is intended that the securities will be issued to new and existing investors at the discretion of the Directors and will not be related parties.
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(e) The securities will be fully paid ordinary shares and will be issued on the same terms and conditions as the Company’s existing Shares and rank equally with all other Shares on issue.
(f) The use (or intended use) of the funds raised is to advance the Company’s projects and for general working capital.
(g) A voting exclusion statement is included in the Notice.
5.3 Directors’ recommendation The Board unanimously recommends that Shareholders vote in favour of Resolution 3. This will allow the Company to issue securities and raise funds whilst preserving the Company’s 15% annual limit permitted by Listing Rule 7.1.
6 RESOLUTION 4 - RATIFICATION OF PRIOR SECURITIES ISSUE
6.1 Introduction On 2 August 2016 the Company issued 24,540,000 Shares to various sophisticated investors to raise $368,100. These securities were issued to unrelated parties of the Company and within the 15% annual limit permitted by Listing Rule 7.1 and therefore without the need for Shareholder approval. The effect of Shareholders passing Resolution 4 and ratifying the issue will be to restore the Company’s ability to issue further capital to the maximum 15% limit during the next 12 months.
6.2 Information required by Listing Rule 7.5 For the purposes of Listing Rule 7.5, the following information is provided about the issue:
(a) The number of securities issued by the Company was 24,540,000 fully paid ordinary shares.
(b) The price at which the securities were issued was $0.015 per Share. (c) The securities were issued on the same terms and conditions as the Company’s existing Shares and rank equally with all other Shares on issue.
(d) The securities were issued to sophisticated investors at the discretion of the Board.
(e) The use (or intended use) of the funds raised is for additional working capital
For personal use only use personal For and to facilitate the acquisition of Vanguard Exploration Limited.
(f) A voting exclusion statement is included in the Notice.
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6.3 Directors’ recommendation The Board unanimously recommends that Shareholders vote in favour of Resolution 4. This will restore the 15% annual limit permitted by Listing Rule 7.1 and allow the Company to issue further securities without Shareholder approval.
For personal use only use personal For
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7 DEFINITIONS In this Notice and Explanatory Memorandum:
ASX means ASX Limited or the Australian Securities Exchange operated by ASX Limited, as the context requires.
Board means the board of Directors.
Chair or Chairperson means the chair of the Company.
Company means Great Western Exploration Limited (ACN 123 631 470).
Completion Date means the date that Completion occurs.
Consideration Shares has the meaning given in section 2.1.
Constitution means the constitution of the Company as amended.
Corporations Act means the Corporations Act 2001 (Cth) as amended.
Director means a director of the Company.
End Date has the meaning given in the Sale Agreement, being 180 days from the date the Sale Agreement is first signed.
Explanatory Memorandum means this explanatory memorandum.
Independent Expert means Bentleys.
Independent Expert’s means the Independent Expert’s report annexed to this Report Notice.
Listing Rule means the listing rules of the ASX.
Meeting means the meeting convened by this Notice (as adjourned from time to time).
Notice means this notice of meeting.
Placement Shares has the meaning given in section 2.3(b)(iii).
For personal use only use personal For Proposed Acquisition has the meaning given in section 2.1.
Proxy Form means the proxy form attached to this Notice.
Resolution means a resolution set out in the Notice.
JB:Final Notice of Meeting Page 16 jrap_031.docx v2
Sale Agreement means the Share Sale Agreement between the Company, Vanguard and Vanguard Shareholders holding more than 51% of Vanguard’s issued shares.
Share means a fully paid ordinary share in the capital of the Company.
Shareholder means a holder of a Share.
Trading Days means a day determined by ASX to be a trading day in accordance with the Listing Rules.
Vanguard means Vanguard Exploration Limited (ACN 138 483 306).
Vanguard Share means a fully paid ordinary share in the capital of Vanguard.
Vanguard Shareholder means a holder of Vanguard Shares.
WST means Western Standard Time.
For personal use only use personal For
JB:Final Notice of Meeting Page 17 jrap_031.docx v2
GREAT WESTERN EXPLORATION LIMITED ABN 53 123 631 470 FOR ALL ENQUIRIES CALL (08) 6555 9500 FACSIMILE (08) 6313 3997 ALL CORRESPONDENCE TO: PO Box 8142, Subiaco East WA 6008 YOUR VOTE IS IMPORTANT FOR YOUR VOTE TO BE EFFECTIVE IT MUST BE RECORDED BEFORE 11.00AM (WST), 23 October 2016.
TO VOTE BY COMPLETING THE PROXY FORM STEP 1 Appointment of Proxy STEP 2 Voting Directions to your Proxy Indicate here who you want to appoint as your Proxy You can tell your Proxy how to vote If you wish to appoint the Chairman of the Meeting as your proxy, To direct your proxy how to vote, place a mark in one of the boxes mark the box. If you wish to appoint someone other than the opposite each item of business. All your securities will be voted in Chairman of the Meeting as your proxy please write the full name of accordance with such a direction unless you indicate only a portion that individual or body corporate. If you leave this section blank, or of voting rights are to be voted on any item by inserting the your named proxy does not attend the meeting, the Chairman of the percentage or number of securities you wish to vote in the Meeting will be your proxy. A proxy need not be a security holder of appropriate box or boxes. If you do not mark any of the boxes on a the company. Do not write the name of the issuer company or the given item, your proxy may vote as he or she chooses. If you mark registered security holder in the space. more than one box on an item your vote on that item will be invalid. Proxy which is a Body Corporate STEP 3 Sign the Form Where a body corporate is appointed as your proxy, the The form must be signed as follows: representative of that body corporate attending the meeting must have provided an ‘Appointment of Corporate Representative’ prior to Individual: This form is to be signed by the security holder. admission. An Appointment of Corporate Representative form can Joint Holding: where the holding is in more than one name, all the be obtained from the company’s securities registry. security holders must sign. Appointment of a Second Proxy Power of Attorney: to sign under a Power of Attorney, you must You are entitled to appoint up to two proxies to attend the meeting have already lodged it with the registry. Alternatively, attach a and vote on a poll. If you wish to appoint a second proxy, an certified photocopy of the Power of Attorney to this form when you additional Proxy Form may be obtained by telephoning the return it. company’s securities registry or you may copy this form. Companies: this form must be signed by a Director jointly with either To appoint a second proxy you must: another Director or a Company Secretary. Where the company has a Sole Director who is also the Sole Company Secretary, this form (a) complete two Proxy Forms. On each Proxy Form state the must be signed by that person. Please indicate the office held by percentage of your voting rights or the number of securities signing in the appropriate place. applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, STEP 4 Lodgement of a Proxy each proxy may exercise half your votes. Fractions of votes will This Proxy Form (and any Power of Attorney under which it is signed) be disregarded. must be received at an address given below at least 48 hours before (b) return both forms together in the same envelope. the commencement of the meeting. Any Proxy Form received after that time will not be valid for the scheduled meeting. BY MAIL - PO Box 8142, Subiaco East WA 6008 BY FAX - 08 6313 3997 IN PERSON - L2, 35 Outram Street, WEST PERTH WA 6005 BY EMAIL - [email protected] Attending the Meeting - If you wish to attend the meeting please bring this form with you to assist registration.
Shareholder Details Name: ......
Address: ......
Contact Telephone No: ...... For personal use only use personal For Contact Name (if different from above): ......
8019638_006.docx
STEP 1 - Appointment of Proxy I/We being a member/s of Great Western Exploration Limited hereby appoint
the Chairman of the If you are not appointing the Chairman of the Meeting (mark with OR Meeting as your proxy please write here the an ‘X’) full name of the individual or body corporate (excluding the registered Security holder) you are appointing as your proxy.
or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy at the General Meeting of Great Western Exploration Limited to be held at The Celtic Club, 48 Ord Street, West Perth WA on Tuesday, 25 October 2016 at 11.00 am (WST) and at any adjournment of that meeting, to act on my/our behalf and to vote in accordance with the following directions or if no directions have been given, as the proxy sees fit.
The Chairman of the Meeting intends to vote undirected proxies in favour of each resolution. In exceptional circumstances, the Chairman of the Meeting may change his/her voting intention on any resolution, in which case an ASX announcement will be made.
Please read the voting instructions carefully.
If two proxies are being appointed , the proportion of voting rights this proxy represents is ______%
STEP 2 - Voting directions to your Proxy – please mark to indicate your directions For Against Abstain
Resolution 1 Issue of Securities to Acquire Vanguard
Resolution 2 Issue of Securities to Related Party to Acquire Vanguard
Resolution 3 Issue of Securities Under Share Placement
Resolution 4 Ratification of Prior Securities Issue
STEP 3 - Please sign here -This section must be signed in accordance with the instructions overleaf to enable your directions to be implemented.
Individual or Security holder 1 Security holder 2 Security holder 3
Sole Director & Sole Company Secretary Director Director/Company Secretary
Contact Name ...... Contact Daytime Telephone ......
Date / /
For personal use only use personal For
8019638_006.docx
For personal use only use personal For
GREAT WESTERN EXPLORATION LTD
INDEPENDENT EXPERT’S REPORT
TABLE OF CONTENTS
1. INTRODUCTION
2. SUMMARY AND OPINION
3. PURPOSE OF THIS REPORT
4. OUTLINE OF THE PROPOSED TRANSACTION
5. PROFILE OF GREAT WESTERN EXPLORATION LTD
6. PROFILE OF VANGUARD EXPLORATION LTD
7. INDUSTRY ANALYSIS
8. BASIS OF EVALUATION
9. ASSESSMENT OF FAIRNESS – COMPARISON OF PRICE AND VALUES
10. ASSESSMENT OF REASONABLENESS
11. CONCLUSIONS
12. INDEPENDENCE
13. QUALIFICATIONS
14. DISCLAIMERS AND CONSENTS
GLOSSARY
APPENDIX A – FINANCIAL SERVICES GUIDE
APPENDIX B - SOURCES OF INFORMATION
APPENDIX C - VALUATION METHODOLOGIES
APPENDIX D – INDEPENDENT TECHNICAL VALUATION – GTE MINING TENEMENTS
APPENDIX E – INDEPENDENT TECHNICAL VALUATION – VANGUARD PROJECTS
For personal use only use personal For
7 September 2016
The Directors Great Western Exploration Ltd Level 2, 35 Outram Street WEST PERTH WA 6005
Dear Sirs
As outlined in Great Western Exploration Ltd’s (‘GTE’ and ‘the Company’) Notice of General Meeting:
Resolution 1 is seeking the approval for the Company to issue shares to acquire all of the issued capital in Vanguard Exploration Ltd (‘Vanguard’);
Resolution 2 is seeking the approval for the Company to issue shares to a related party Mr Kevin Somes (or his nominee);
Resolution 3 is seeking approval for the Company to issue up to 100,000,000 shares at an issue price of at least $0.01 per share.
together referred to as the ‘Proposed Transaction’.
Following completion of the Proposed Transaction, the Vanguard shareholders will then hold 32.5% of GTE’s post completion share capital, with the Non-Associated Shareholders interest in GTE’s share capital reducing from 91.5% prior to the Proposed Transaction to 49.0% following the Proposed Transaction.
We have concluded that the transactions referred to above are NOT FAIR BUT REASONABLE to the non-associated shareholders of the Company as at the date of this report.
1. INTRODUCTION
Great Western Exploration Ltd (‘GTE’ or ‘the Company’) is an Australian company listed on the ASX with 100% interest in the Doolgunna project, which comprises of 1,600 km2 area of the Proterozoic Yerrida Basin with identified nickel and copper targets, GTE also has a 70% earning interest in the Cunyu joint venture (JV) owned by Glencore, which has
For personal use only use personal For gold prospects.
On 26 April 2016 the Company announced it had made an all script offer for unlisted public company Vanguard Exploration Ltd (‘Vanguard’). The offer to acquire 100% of the shares in Vanguard is on the basis of four GTE fully paid ordinary shares for every one Vanguard share, with a total number of 150,833,124 GTE shares being issued to the Vendors of Vanguard (‘Consideration Shares’)
The directors of GTE have engaged Bentleys Corporate Advisory (WA) Pty Ltd (‘BCA’) to prepare an Independent Expert’s Report relating to the Proposed Transaction to determine whether the terms of the transaction are fair and reasonable to Non-Associated Shareholders of GTE.
This report is to accompany the Notice of General Meeting of Shareholders and Explanatory Statement of GTE to be sent to all shareholders to assist them in determining whether or not to approve the Proposed Transaction (‘Notice of General Meeting’). 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.
Our assessment of the Proposed Transaction relies on financial information and instructions provided by the Company and the Directors. As instructed, we have not completed any audit or due diligence of the information which has been provided or of the entities which have been valued. This report does not contain any accounting or taxation advice.
2. SUMMARY AND OPINION
In our opinion the Proposed Transaction is NOT FAIR. However we consider the Proposed Transaction REASONABLE to the non-associated shareholders of GTE as the advantages of approving the Proposed Transaction outweigh the disadvantages to Shareholders.
In the assessment of ‘fairness’ we compared the fair value of a share in GTE on a control basis prior to the Proposed Transaction with the fair value of a share in GTE on a non-control basis immediately following the Proposed Transaction.
We have concluded that the fair value of a share in GTE on a control basis prior to the Proposed Transaction is less than the fair value of a share in GTE on a non-control basis immediately following the Proposed Transaction, therefore the proposals under Resolutions 1, 2 and 3 are not considered to be fair.
In assessing whether the Proposed Transaction is ‘reasonable’, we have considered the likely advantages and likely disadvantages to non-associated shareholders of GTE and whether the likely advantages outweigh the likely disadvantages. We have also considered the impact upon GTE shareholders that the Proposed Transaction as a whole will achieve.
As part of our assessment of whether the Proposed Transaction is reasonable, we have also considered the likely impact upon GTE shareholders if the Proposed Transaction does not proceed.
We concluded that the likely advantages of the Proposed Transaction outweigh the likely disadvantages and
For personal use only use personal For consequently, in our opinion, the non-associated shareholders will be better off if the Proposed Transaction proceeds than if it does not.
The principal factors affecting our opinion are discussed in more detail in section 9 and 10 of this report.
3. PURPOSE OF THIS REPORT
This report has been independently prepared to accompany the Notice of General Meeting of GTE and Explanatory Statement to be sent to its shareholders.
Whilst this report is provided to all shareholders of GTE, its purpose is to provide an independent opinion to the ‘non-associated’ shareholders of GTE. Defined in simple terms, these are shareholders who are not in any other way associated with the parties to the Proposed Transaction, such as the Vendors of Vanguard.
This report is required to express an opinion as to whether the Proposed Transaction is fair and reasonable to non-associated shareholders of GTE.
Scope and Basis of Evaluation
The Company is listed on the ASX, so is subject to the ASX Listing Rules.
Under Listing Rule 10.1 an entity must ensure that it does not acquire a substantial asset from a related party of the entity without the approval of the entity’s security holders. Listing Rule 10.2 defines an asset as substantial if its value is 5% or more of the Company’s equity interests as set out in the latest accounts given to the ASX.
The Company’s latest accounts lodged on the ASX, the 31 December 2015 half year financial report, has net equity interests of $3,048,920 of which 5% is $152,446.
The Company’s Chairman, Mr Kevin Somes is a director of Vanguard and holds 8.4% of shares in GTE and 14% of shares in Vanguard, and is therefore a related party of the Company. Post Proposed Transaction Mr Somes will hold 8.3% in GTE. The value of Mr Somes’ Consideration Shares to be acquired by GTE will be $368,700, based on the Company’s current share price.
Mr Ian Kerr is the Managing Director of Vanguard and is proposed to be appointed as a director of GTE following the Proposed Transaction, and is therefore considered to be a related party of the Company. Mr Kerr currently holds 17% of the shares in Vanguard and none in GTE. Post Proposed Transaction he will hold 4.8% in GTE. The value of Mr Kerr’s Consideration Shares to be acquired by GTE will be $464,550, based on the Company’s current share price.
Given the value of the Consideration Shares to be issued to each of Mr Somes and Mr Kerr exceeds the 5% threshold in Listing Rule 10.1, the Company is seeking shareholder approval under Listing Rule 10.1
Under Listing Rule 10.10.2 the notice of meeting required to be prepared to allow approval by GTE’s security holders must contain a report on the transaction from an independent expert.
The directors of GTE have commissioned this Independent Expert’s Report.
For personal use only use personal For ASIC Regulatory Guide 111 (‘RG 111’)
In preparing our report we have had regard to the guidelines set out in RG 111. The Act does not define the term ‘fair and reasonable’; however RG 111 provides that each of these criteria be assessed individually and not as a compound phrase. RG 111 provides that the Proposed Transaction:
Will be considered ‘fair’ if the value of the consideration to be received by GTE (ie 100% shareholding in Vanguard) is equal to or greater than the value of the consideration proposed to be paid by GTE (ie issue of GTE shares). This comparison is required to be made assuming an arm’s length transaction between knowledgeable and willing, but not anxious parties; Will be considered ‘reasonable’ if it is ‘fair’; and May be considered ‘reasonable’ despite being ‘not fair’, if the expert believes there are other reasons for shareholders to vote in favour of the proposal.
We also have had regard to RG 112, which outlines guidelines with respect to the independence requirements of experts.
Furthermore, we have also compared the likely advantages and disadvantages of the Proposed Transaction proceeding and the implications of the Proposed Transaction not proceeding.
Whilst the terms of ‘fairness’ and ‘reasonableness’ are not defined in the Act, we have considered them in the following context for the purpose of this report:
Is the proposed transaction fair? The Proposed Transaction is fair if the value of a GTE share post the Proposed Transaction on a non-control basis is equal to or greater than the value of a GTE share prior to the Proposed Transaction on a control basis. Is the proposed transaction The Proposed Transaction may be reasonable whether it is reasonable? fair or unfair, as it involves consideration of other significant factors that GTE shareholders might consider prior to voting on the resolution to approve the Proposed Transaction.
Consistent with current policy and regulatory guidelines referred to above, we have assessed the proposals and objectives of the Proposed Transaction taken as a whole, which must be fair and reasonable to the non- associated shareholders of GTE. We have also considered the position of those non-associated shareholders in the event that the Proposed Transaction proceeds, or if it does not.
This report deals with the effect of the Proposed Transaction on GTE as a whole and does not cover the individual positions of each of the non-associated shareholders. Nor does it consider the individual taxation position of non-associated shareholders, which depends upon individual circumstances. Non-associated shareholders should therefore seek their own professional financial and taxation advice.
This report aims to provide an opinion on the fairness and reasonableness of the Proposed Transaction as it impacts upon all non-associated shareholders as a group.
This assignment is a Valuation Engagement as defined by Accounting Professional & Ethical Standards Board professional standard APES 225 ‘Valuation Services’ (‘APES 225’).
For personal use only use personal For A Valuation Engagement is defined by APES 225 as follows:
“an Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Valuer is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Valuer at that time.”
This Valuation Engagement has been undertaken in accordance with the requirements set out in APES 225.
Existing Conditions
It must also be noted that the conclusions reached and opinions expressed in this report are made in the context of the prevailing economic, market and business conditions existing at the date of this report. An assessment of the likelihood of any significant changes in these conditions, which may then impact upon both GTE and Vanguard are outside the scope of this report.
4. OUTLINE OF THE PROPOSED TRANSACTION
As detailed above in section 1, GTE has entered into an agreement with the Vendors of Vanguard to acquire 100% of the issued shares of Vanguard.
The Proposed Transaction involves:
GTE acquiring 100% of the issued shares of Vanguard, resulting in Vanguard becoming a wholly-owned subsidiary of GTE; GTE issuing the Vendors 150,833,124 Shares as consideration for the acquisition, which is based on four GTE shares for one Vanguard Share; GTE raising at least $1 million by the offer of up to 100 million Shares under a Prospectus; GTE’s Non Associated Shareholders approve the issue of the consideration Shares and Capital Raising Shares; and that Mr Ian Kerr, the Managing Director of Vanguard, is appointed as an Executive Director of GTE following the completion of the Proposed Transaction.
Additionally under the Agreement, completion of the Proposed Transaction is subject to the following conditions being satisfied:
GTE being satisfied, in its absolute discretion, with the results of its due diligence investigation of the merits of Vanguard’s tenement holdings, and of the status of Vanguard; GTE obtaining shareholder approval, and all other necessary regulatory approvals for the Proposed Transaction; and Acceptance of the Proposed Transaction by not less than 90% of the shares of Vanguard so that GTE may acquire the balance compulsorily.
Summary of Capital Structure
The table below demonstrates the dilution of GTE’s capital structure prior to the Proposed Transaction compared to after the Proposed Transaction:
For personal use only use personal For
Fully Paid Ordinary Shares of GTE Post Proposed Pre Proposed Transaction Transaction Capital Raising 100
million shares Shareholder No Shares % No Shares %
Mr Kevin Somes and his related/associated entities (Vanguard/GTE) 24,389,572 8.4 44,872,904 8.3
Mr Ian Kerr (Vanguard) - - 25,808,336 4.8
Mr Brian Smith and his related/associated entities (Vanguard) - - 32,333,336 6.0
Other Vendors of Vanguard - - 72,208,120 13.4
Subtotal Vanguard Shareholders 24,389,572 8.4 175,222,696 32.5
Non-Associated Shareholders of GTE 264,251,254 91.6 264,251,254 49.0
Other Shareholders Post-Transaction Capital Raising - - 100,000,000 18.5
Total 288,640,826 100.0 539,473,950 100.0
As per the above table, the Non-Associated Shareholders currently hold 91.6% in GTE prior to the Proposed Transaction.
After the Proposed Transaction, including the Post-Transaction Capital Raising, the Non-Associated Shareholders would decrease from 91.6% to 49.0% which assumes that all the shares issued in the Post- Transaction Capital Raising will be to new investors and none to the Vanguard Vendors or current GTE shareholders.
Collectively the Vanguard Vendors will hold 32.5% in GTE following the Proposed Transaction.
5. PROFILE OF GREAT WESTERN EXPLORATION LTD
Great Western Exploration Ltd (‘GTE’ or ‘the Company’) is a Western Australian based ASX listed company which was incorporated and listed on the ASX in June 2007.
The Company’s current board members and senior management comprise of:
Mr Kevin Somes – Chairman Mr Jordan Luckett – Managing Director Mr Craig Mathieson – Non-Executive Director Mr Terrance Grammer – Non-Executive Director Mr Justin Barton – Company Secretary
Below is a summary of the Company’s mining interests:
Paroo Project (100%) – located 30km from Wiluna and adjacent to the Magellan lead mine. The
Company believes the project is prospective for massive copper sulphide and silver / lead / zinc style For personal use only use personal For mineralisation and has historical based metal anomalies in historic drilling that have not been followed up; Doolgunna Project (100% interest) – located north of Wiluna. The project has identified nickel and massive copper sulphide targets at three prospects; New Springs Project (100%) – the Company is exploring this area for magmatic nickel sulphide.
Cunyu Joint Venture Project (GTE earning 70%) – owned by Glencore. This project comprises two exploration licences covering a total area of 216 km2, and is prospective for gold.
On 26 April 2016 the Company announced it had made an all script offer to acquire 100% of Vanguard Exploration Ltd (‘Vanguard’), which was accepted by the Directors of Vanguard and will be recommended to their shareholders. The offer is on the basis of 4 GTE shares for every 1 Vanguard share, for a total of 150,833,124 GTE shares.
As GTE has stated, the Company’s tenements and Vanguard’s tenements are located in reasonably close proximity and there is some geological “fit” between the two packages. The Vanguard tenements are located within 80km of the Company’s tenements and are prospective for the same style of mineralization that is being targeted by GTE.
Both Vanguard’s and GTE’s tenements are also prospective for a wide range of other metals and industrial minerals that include but are not limited to iron ore, tin, tungsten, graphite, oil shale, phosphate, kaolin, lithium, tantalum and diamonds. The tenements entitle the company to all mineral rights and while the primary focus is on base metals and gold the Company is aware of the opportunity to explore for other metals or minerals if market conditions are favourable for the economic exploitation of these non-core elements.
Further discussion on Vanguard is detailed in section 6 below.
Historical Statement of Financial Position
REVIEWED AUDITED REVIEWED AUDITED GTE GTE GTE GTE 31 December 30 June 31 December 30 June 2015 2015 2014 2014 Cash and cash equivalents 277,433 131,139 35,014 311,457 Trade and other receivables 4,190 12,611 35,921 24,133 Other financial assets 400 400 600 1,000 Other - - 4,431 5,483 Total current assets 282,023 144,150 75,966 342,073 Mineral exploration expenditure 3,404,251 5,522,609 6,003,583 5,541,853 Plant and equipment 6,299 17,880 71,005 85,358 Other financial assets - - 31,616 59,616 Total non-current assets 3,410,550 5,540,489 6,106,204 5,686,827 Total assets 3,692,573 5,684,639 6,182,170 6,028,900 Trade and other payables 443,653 503,244 402,957 240,883 Loan 200,000 - - - Provisions - - 22,110 24,039 Total current liabilities 643,653 503,244 425,067 264,922 Total liabilities 643,653 503,244 425,067 264,922
For personal use only use personal For Net assets 3,048,920 5,181,395 5,757,103 5,763,978 Issued Capital 19,808,911 19,496,573 19,020,005 18,441,819 Reserves 1,682,618 1,682,618 1,855,971 1,828,623 Accumulated losses (18,442,609) (15,997,796) (15,118,873) (14,506,464) Total equity 3,048,920 5,181,395 5,757,103 5,763,978
Source: Audit reviewed financial statements for the six months to 31 December 2015 and 2014, and audited financial statements of GTE for the years ended 30 June 2015 and 2014.
The Company’s auditor has issued an unmodified opinion in the review report in the financial statements with an emphasis of matter on going concern for the six months ended 31 December 2015 and 2014, and audited report for the years ended 30 June 2015 and 2014.
We note the following in relation to GTE’s Statement of Financial Position:
Cash and cash equivalents have varied over the two year period, mainly due to various share issues and receipt of loans funds. The receipt of $200,000 loan funds and $315,000 share issue has contributed to an increased cash position in the last six month period. During the last six month reporting period to 31 December 2015 the Company relinquished two mining tenements which has resulted in a net reduction of mineral exploration expenditure capitalised on the balance sheet from 30 June 2015. Throughout the two year period there have been various share placements and rights issues to raise funds and this has resulted in the steady increase in the value of issued capital.
Historical Statement of Profit or Loss and Other Comprehensive Income
REVIEWED AUDITED REVIEWED AUDITED GTE GTE GTE GTE 6 months to 12 months to 6 months to 12 months to 31 December 30 June 31 December 30 June 2015 2015 2014 2014 Interest revenue 144 4,178 3,763 35,586 Net (loss)/gain on revaluation of financial assets (600) (400) (2,400) Other income 132,495 - - 14,321 Gain on Foreign Exchange - 39,148 - - Employee benefits expense (68,035) (476,965) (254,791) (598,873) Administration expenses (82,643) (350,690) (206,930) (607,569) Directors’ fees (66,250) (119,435) (74,435) (140,000) Depreciation (11,581) (19,906) (12,519) (29,320) Compliance and regulatory (32,436) (75,033) (42,833) (81,277) Impairment of mineral exploration expenditure (2,316,507) (578,997) (24,244) (3,018,062) Impairment of property, plant and equipment - (46,290) - - Profit/(loss) from continuing operations before income tax (2,444,813) (1,624,590) (612,389) (4,427,594) Income tax expense - - - - Net profit/(loss) for the year (2,444,813) (1,624,590) (612,389) (4,427,594) Other comprehensive income items that may be reclassified subsequently to profit or loss:
For personal use only use personal For Exchange differences on translating foreign controlled entities - (43,765) (3,690) 18,061 Total comprehensive income/(loss) for the year (2,444,813) (1,668,355) (616,079) (4,409,533) Source: Audit reviewed financial statements for the six months to 31 December 2015 and 2014, and audited financial statements of GTE for the years ended 30 June 2015 and 2014.
Items to note from GTE’s historical statement of profit or loss and other comprehensive income:
Interest revenue has declined over the two periods in line with reduced cash levels. The other income for the six month period to 31 December 2015 relates to the write back of accrued salary and director fees ($126k) and a refund of tenement expenditure ($6k). Employee benefits expense have reduced during the six months to 31 December 2015 due to reduced positions (receptionist, geologist) employed at the Company. There has also been a reduction in salary for the managing director from 2014 to 2015. Various impairments of mineral exploration assets have occurred over the two year period, with $2.3 million being impaired in the six months to 31 December 2015 due to the relinquishment of two mining tenements during the period.
Capital Structure of GTE
The share structure of GTE as at 30 June 2016 is outlined below:
The total number of Shares on issue as at 30 June 2016 was 264,100,826, held by 1,304 registered Shareholders. 842 shareholders hold less than a marketable parcel, based on the market price of a share as at 30 June 2016. Each Share carries one vote per Share without restriction.
The Company does not have any Options on issue.
A distribution schedule of the number of Shareholders, by size of holding, as at 30 June 2016 is below:
Size of holdings Number of Shareholders 1 – 1000 226 1,001 – 5,000 176 5,001 – 10,000 146 10,001 – 100,000 532 100,001 and over 224 Total 1,304
As at 15 July 2016, the five largest Shareholders were as shown in the following table and held 30.75% of the Company’s shares.
Legal Holder Holding % 1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 24,958,045 9.45 2 MRS JANE ELIZABETH SOMES + MS AMY JANE 17,339,032 6.57 SOMES
3 MR JORDAN ASHTON LUCKETT
For personal use only use personal For 5 BAM NR 1 PTY LTD
6. PROFILE OF VANGUARD EXPLORATION LTD
Vanguard is an unlisted public company that was incorporated in Western Australia on the 24 July 2009. Their central focus is in mining exploration, with key target minerals being gold and copper.
The Company’s current board members and senior management comprise of:
Mr Kevin Somes – Chairman Mr Ian Kerr – Managing Director Mr Brian Smith – Director and Company Secretary
Vanguard has currently two major projects within Western Australia:
The Ives Find Gold project in the Yandal Gold Province. The project area is located approximately 65 kilometres southeast of Wiluna. The exploration focus is for gold mineralisation, however there are also significant silver assays. Exploration conducted by Vanguard has seen multiple gold bearing zones, with most discovering high grade gold.
The Fairbairn project is a potential Proterozoic copper and Archaen lode gold prospect situated within the Jenkins-Goodin Fault Zone region, approximately 170 kilometres north of Wiluna. Vanguard’s geological investigations and explorations have identified key target zones, noting the company’s further plans during the year for fieldwork and drilling.
Vanguard have stated both projects also have potential for lithium mineralisation. There are a number of lithium bearing pegmatites within the Ives Find project area that are related to the granite that hosts the gold mineralisation. Historical reports show that previous exploration at Fairbairn intersected an oxidised green mica rich rock which is consistent with Lepidolite, a lithium ore mineral. Although the company’s primary focus is gold and copper, it still looks to explore and progress these promising lithium opportunities.
Historical Statement of Financial Position
AUDITED AUDITED Vanguard Vanguard year ended year ended 30 June 2015 30 June 2014 Cash and cash equivalents 22,237 18,037 Trade and other receivables 4,493 4,914 Total current assets 26,730 22,951 Total assets 26,730 22,951 Trade and other payables 4,270 13,834 Total current liabilities 4,270 13,834 Total liabilities 4,270 13,834
For personal use only use personal For Net assets 22,460 9,117 Issued Capital 1,124,073 874,270 Accumulated Losses (1,101,613) (865,153) Total equity 22,460 9,117
Historical Statement of Profit or Loss and Other Comprehensive Income
AUDITED AUDITED Vanguard Vanguard year ended year ended 30 June 2015 30 June 2014 Interest income 82 86 Exploration and evaluation expenses (224,289) (122,009) Administrative expenses (12,253) (16,301) Amortisation expense - (141) Loss before income tax (236,460) (138,365) Income tax expense - - Loss after income tax (236,460) (138,365) Other comprehensive income/(loss) - - Total comprehensive loss for the period (236,460) (138,365)
Information noted from the Vanguard financial statements above:
As per Vanguard’s accounting policies, exploration and evaluation expenditure is expensed as incurred, therefore, no asset has been recognised in the statement of financial position for Vanguard’s mineral exploration activities. This has been noted and adjusted for in the fairness analysis performed in section 9, based on the ITV dated 11 June 2016; During 2015 directors fees and other services have paid for by various share issues due to limited cash funds; During 2015 Vanguard completed a share placement to raise $249,803 for working capital.
Capital Structure of Vanguard
As at the date of the offer of the Proposed Transaction on 26 April 2016, Vanguard’s ordinary share capital was held as follows:
Shareholder Vanguard Shares Held % Brian Smith and his related/associated entities 8,083,334 21.4 Ian Kerr 6,452,084 17.1 Kevin Somes and his related/associated entities 5,120,833 13.6 Other 18,052,030 47.9 Total 37,708,281 100
Vanguard currently has 6,000,000 options on issue with an exercise price of $0.20 and an expiry date of 30 September 2016. We have been informed by management that these options will have no effect on the Proposed Transaction as they will all lapse before the Proposed Transaction is finalised and will not be exercised in the time to expiry.
For personal use only use personal For
7. INDUSTRY ANALYSIS
GTE’s main areas of interests include prospective for gold and copper, however there are also prospects of lithium and silver.
Gold prices are at an all-time high with Australia’s weak dollar and low mining and processing costs. 2016 has been a promising year so far, with the Australian gold price reaching A$1,845/oz- the highest it has been since 2011 (A$1806/oz).1 Given that gold is traded in USD, the significant decrease in prices due to the ending of the gold boom in 2012-13/2013-14 was limited by the weak Australian dollar and thus since 2014, the Australian industry has benefited.2 Lower oil and gas prices have reduced the cost of energy in both the mining and processing of gold, and if these costs remain under control, local producers will see bigger margins. Production has increased with the 2015 annual production reaching 285 tonnes, the highest since 2003.1 Production has increased compared with the December quarter, and still remains at a historically high level. Gold ore mining produces a revenue of A$13.9bn, with 69.8% being contributed by Western Australia.2
Australia’s gold export earnings are expected to increase by 3% to 15.5bn in 2016-17, with production to also increase by 2.7%. Although exploration expenditure continues to decline, with Western Australia’s expenditure falling to $11million in the March quarter, they still remain the largest contributor.3
Copper prices have been steadily declining over the past 5 years and have remained low in the first half of 2016. The average London Metal Exchange (‘LME’) price for the first half of 2016 is US$4,735 p/t, which is down 20% year-on year. The softer Australian dollar has helped the price increase to US$4,918 p/t in mid-July4 which is the highest copper prices have been since early May.5 The price is forecasted to slightly increase to about US$4,786 for the remaining of 2016, which will see a 16% drop since 2015. As consumption rises in emerging economies, prices are expected to continue to rise in 2017, forecasted to reach US$5,412.3
Due to these low copper prices, earnings have declined 8% to 7.8 billion, however annual growth is expected to increase 5.2% over 2016-2021. Although the March quarter 2016 saw an increase of 17% in exploration expenditure, which is a 5% increase compared to the 2015 March quarter, exploration remains at historically low levels.3 The Australian production was around 980,000 tonnes in 2015-16, and forecasted to increase by 5% in 2016-2017. World consumption is forecasted to reach 23 million tonnes and increase by a further 3% in 2017 due to strengthening investment in infrastructure, construction and industrial capacity in emerging economies.3
As the growth of China slows down, copper exports to China substantially decrease-32% decrease on the previous quarter. This decrease has played a major part in the 12% decrease of export earnings in the March 2016 quarter, compared to December 2015 quarter, however this has been partially offset by an increase in exports to Japan, South Korea, Taiwan and a 106% increase in exports to the Philippines. Australia’s copper exports (metal content) are forecasted to remain steady at around 1 million tonnes over the 2016-17 period.3
Although the projects are focused on gold and copper, there are also lithium and silver prospects. Silver prices have seen a 46% jump since January.6 Lithium is known as the hottest metal of 2016, with demand expecting 6
For personal use only use personal For to rise in the coming years and prices trebling in the past two years.
1 www.miningnews.net, 2 www.ibisworld.com.au, 3 www.industry.gov.au, Office-of-the-Chief-Economist, Resources and Energy Quarterly June 2016, 4 www.infomine.com, 5 www.economiccalendar.com, 6 www.abc.net.au.
8. BASIS OF EVALUATION
We have referred to RG 111 which provides guidelines in determining whether transactions are fair and reasonable.
The expert should identify the advantages and disadvantages of the proposal to security holders not associated with the transaction.
Fairness
Fairness relates to price, whereas reasonableness includes the consideration of factors other than price.
RG111 notes that an offer is ‘fair’ if the value of the offer price or consideration received is equal to or greater than the value of the securities the subject of the offer and that this comparison should be made (a) assuming a knowledgeable and willing, but not anxious buyer and a knowledgeable and willing, but not anxious, seller acting at arm’s length and (b) assuming 100% ownership of the ‘target’ irrespective of whether the consideration is scrip or cash.
Reasonableness
RG 111 provides that in deciding whether a proposed transaction is ‘reasonable’, factors that an expert might consider include:
the financial situation and solvency of the entity, if the consideration for the financial benefit is cash; opportunity costs; the alternative options available to the entity and the likelihood of those options occurring; the entity’s bargaining position; whether there is selective treatment of any security holder, particularly the related party; any special value of the transaction to the purchaser, such as particular technology or the potential to write off outstanding loans from the target; and the liquidity of the market in the entity’s securities.
An offer is ‘reasonable’ if it is fair. An offer may also be reasonable, if despite not being ‘fair’, there are sufficient grounds for security holders to accept the offer in the absence of any higher bid before the close of the offer. Although in this case the Proposed Transaction of Vanguard is not a takeover offer, we have considered the general principals noted above to determine our opinions on fairness and reasonableness.
Applicability to the Proposed Transaction
In determining whether the Proposed Transaction is fair and reasonable we have addressed the following:
A comparison of the fair value of a share in GTE on a control basis prior to the Proposed Transaction
For personal use only use personal For and the fair value of a share in GTE on a non-control basis immediately following the Proposed Transaction - ‘fairness’. A comparison of other likely advantages and disadvantages, to the non-associated shareholders, of the Proposed Transaction - ‘reasonableness’.
Accepted Valuation Methodologies
RG 111 also notes that it is appropriate for the independent expert to consider various methodologies in forming an opinion as to whether a particular transaction may be considered fair and reasonable. In conducting our assessment, the following techniques, which are commonly used to value a business or shares in a company have been considered:
Discounted cash flow methodology; Capitalisation of future maintainable earnings; Net asset value; Quoted market price methodology; and Comparable market transactions, (recent genuine offers basis).
A summary of each of these methodologies is outlined in Appendix B.
Value of GTE prior to the Proposed Transaction
Different methodologies are appropriate in valuing particular companies, based on the individual circumstances of that company and available information. In our assessment of the value of GTE shares, our consideration of each of the following methodologies is as follows:
We do not have reasonable grounds for the use of forward looking financial information to enable the use of discounted cash flow methodology or capitalisation of future maintainable earnings methodology. GTE does not have a history of operating profits, which can be used to apply the capitalisation of future earnings method, accordingly, it is considered inappropriate to apply this method in valuing GTE. GTE made a loss of $2,444,813 for the six months ended 31 December 2015, a loss of $1,624,590 for the year ended 30 June 2015, a loss of $612,389 for the six months ended 30 June 2014 and a loss of $4,427,594 for the year ended 30 June 2014. A market based assessment is not appropriate in this circumstance - It is possible that a potential take- over bidder for GTE could purchase all or part of the existing shares, however no certainty can be attached to this occurrence. To our knowledge, there are no current bids in the market place and the directors of GTE have formed the view that there are unlikely to be any takeover bids made for GTE in the immediate future. The quoted market price methodology is relevant to consider as GTE’s shares are listed on the ASX. This means there is a regulated and observable market where GTE’s shares can be traded. However, in order for the quoted market price methodology to be considered appropriate, the Company’s shares should be liquid and the market should be fully informed as to GTE’s activities. We have considered these factors in section 9.1 of our Report. As a result of the above methodologies being considered inappropriate we have used the net asset value method to value GTE prior to the Proposed Transaction, by using the most recently prepared unaudited figures from the Company for the year ended 30 June 2016 as well as relied upon an Independent Technical Valuation (‘ITV’) undertaken by Al Maynard & Associates Pty Ltd of the
For personal use only use personal For Company’s exploration tenements. These figures have then been adjusted for various events. Please refer to section 9.1 for details of our assessment.
Value of GTE following the Proposed Transaction
In our assessment of the value of a GTE share following the Proposed Transaction we have chosen to use the net asset value methodology.
Given that Vanguard is also a mineral exploration company, we do not have reasonable grounds for the use of forward looking financial information to enable the use of discounted cash flow methodology or capitalisation of future maintainable earnings methodology. Vanguard is an unlisted public company and valuing the shares on a takeover basis and on a market based approach are not relevant. The shareholders in Vanguard do not have an active market to trade its shares. There are no indications that other parties wished to acquire all of the shares in Vanguard other than GTE.
The following steps were taken in the valuation of GTE following the Proposed Transaction:
The value of GTE prior to the Proposed Transaction; Consolidation of Vanguard based on Vanguard’s unaudited 30 June 2016 financial statements and details from the Proposed Transaction, including adjustments for the value of Vanguard’s mineral exploration assets; The cash raised as a result of the capital raising that is a condition precedent to the Proposed Transaction, net of any costs; Dilution from the issue of shares to Vanguard Vendors as Consideration Shares and the issue of shares pursuant to the Capital Raising; Discount for minority interest range of 17% to 23%
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9. ASSESSMENT OF FAIRNESS – COMPARISON OF PRICE AND VALUES
9.1 VALUATION OF GTE PRIOR TO THE PROPOSED TRANSACTION
Net asset value
We have set out below an unaudited statement of financial position of GTE as at 30 June 2016, adjusted for: The subsequent issue of the Pre-Transaction Capital Raising Shares which occurred on 2 August 2016; incurring estimated transaction costs relating to the Proposed Transaction, as these costs will likely be required to be settled regardless of whether the transaction is approved or not; and adjustment for the value of GTE’s mineral assets based on the GTE Independent Technical Valuation; to show the valuation of GTE prior to the Proposed Transaction.
UNAUDITED GTE GTE GTE GTE Pro-forma Pro-forma Pro-forma 30 June 2016 30 June 2016 30 June 2016 30 June 2016 Notes $ $ Low $ Mid $ High Cash and cash equivalents 1 39,584 339,279 339,279 339,279 Other assets 400 400 400 400 Total current assets 39,984 339,679 339,679 339,679 Exploration and evaluation expenditure 2 3,611,158 3,200,000 3,900,000 4,900,000 Property, plant and equipment 7,642 7,642 7,642 7,642 Total non-current assets 3,618,800 3,207,642 3,907,642 4,907,642 Total assets 3,658,784 3,547,321 4,247,321 5,247,321 Trade and other payables 517,560 517,560 517,560 517,560 Total current liabilities 517,560 517,560 517,560 517,560 Total liabilities 517,560 517,560 517,560 517,560 Net assets 3,141,224 3,029,761 3,729,761 4,729,761 Issued Capital 3 20,242,347 20,592,042 20,592,042 20,592,042 Accumulated losses 4 (17,101,123) (17,562,281) (16,862,281) (15,862,281) Total equity 3,141,224 3,029,761 3,729,761 4,729,761 Shares on issue 5 264,100,826 288,640,826 288,640,826 288,640,826 Net asset value per share $ $0.0119 $0.0105 $0.0129 $0.0164
The net asset (book value) backing per fully paid ordinary GTE share BEFORE the Proposed Transaction as at 30 June 2016 based on the unaudited adjusted pro-forma balance sheet is within a range of $0.0105 to $0.0164 per share.
Note 1 – Cash and cash equivalents $ As at 30 June 2016 39,584 Add – cash from Pre-Transaction Capital Raising 368,100
Less – costs associated with the Pre-Transaction Capital Raising (18,405) For personal use only use personal For Less - costs associated with Proposed Transaction (50,000) Total cash and cash equivalents 339,279
Note 2 – Exploration and evaluation expenditure $ Low $ Midpoint $ High As at 30 June 2016 3,611,158 3,611,158 3,611,158 Revaluation adjustment based on GTE ITV dated 1 August 2016 (411,158) 288,842 1,288,842 Total exploration and evaluation expenditure 3,200,000 3,900,000 4,900,000
Al Maynard & Associates Pty Ltd were engaged by us to prepare an ITV of the Company’s Mining Tenements.
We have considered and reviewed the qualifications and experience of the geological expert who has prepared the ITV and are satisfied that they are appropriate to undertake such work.
The Company owns nine tenements in its own right and a further two in Joint Venture with Glencore. The status of the tenements have been verified by the valuer and are believed to be in good standing at the date of their report (1 August 2016).
The Multiple of Exploration Expenditure (‘MEE’) method has been applied to the available historic expenditures to determine a value range as at 1 August 2016. On this basis they concluded that GTE’s Mining Tenements are worth between a range of $3.2 million and $4.9 million, with a preferred value of $3.9 million.
We have applied the range of values that have been expressed by the valuer in our report as part of our above analysis of fairness of the Proposed Transaction prior to GTE’s proposed acquisition of Vanguard.
Note 3 – Issued Capital $ As at 30 June 2016 20,242,347 Add – issue of Pre-Transaction Capital Raising, 24.54 million shares at $0.015 per share 368,100 Less – Share issue costs of Pre-Transaction Capital Raising (18,405) Total issued capital 20,592,042
Note 4 – Accumulated Losses $ Low $ Midpoint $ High As at 30 June 2016 (17,101,123) (17,101,123) (17,101,123) Less – expenses incurred on costs of Proposed Transaction (50,000) (50,000) (50,000) Revaluation adjustment based on GTE ITV dated 1 August 2016 (411,158) 288,842 1,288,842 Total accumulated losses (17,562,281) (16,862,281) (15,862,281)
Note 5 – Number of shares on issue # As at 30 June 2016 264,100,826 Add – shares issued in Pre-Transaction Capital Raising 2 August 2016 24,540,000 Total number of shares on issue 288,640,826
The financial statements as at 30 June 2016 are in the process of being audited, however management are of the opinion that the financial report of GTE gives a true and fair view of the entity’s consolidated financial For personal use only use personal For position as at that date. We have accepted the GTE amounts as disclosed for all current and non-current assets except for the carrying value of the Company’s interests in its various tenements it holds, as discussed in Note 2.
We note that the market has been informed of all of the current projects and joint ventures arrangements entered into between GTE and other parties. We also note that it is not the intention of the Directors of GTE to sell any assets or liquidate the Company and therefore any theoretical value based upon wind up value or even net book value (as adjusted), would be hypothetical. The shareholders, existing and future, must acquire shares in GTE based on the market perceptions of what the market considers a GTE share to be worth.
Quoted market price
To provide a comparison to the valuation of GTE above we have also assessed the quoted market price for a GTE share. The quoted market value of a company’s shares is reflective of a minority interest. A minority interest is an interest in a company that is not significant enough for the holder to have an individual influence in the operations and value of that company.
RG 111.11 suggests that when considering the value of a company’s shares for the purposes of approval under Item 7 of s611 the expert should consider a premium for control. An acquirer could be expected to pay a premium for control due to the advantages they will receive should they obtain 100% control of another company. These advantages include the following:
control over decision making and strategic direction; access to underlying cash flows; control over dividend policies; and access to potential tax losses.
Whilst Vanguard will not be obtaining 100% of GTE, RG 111 states that the expert should calculate the value of a target’s shares as if 100% control were being obtained. RG 111.13 states that the expert can then consider an acquirer’s practical level of control when considering reasonableness. Reasonableness is considered in section 10.
Share prices in GTE as recorded on the ASX since 1 July 2015 up to and including 20 April 2016 (last trading day before the trading halt was imposed prior to the announcement on 26 April 2016 regarding the proposed acquisition of Vanguard) have been as follows:
Days trading occurred High $ Low $ in the month Volume July 2015 0.013 0.006 7 1,617,132 August 2015 0.015 0.006 4 1,917,522 September 2015 0.013 0.007 6 799,583 October 2015 0.012 0.009 7 3,003,414 November 2015 0.029 0.011 8 3,020,984 December 2015 0.021 0.015 6 1,477,429 January 2016* 0.024 0.017 15 4,889,679 February 2016 0.020 0.005 16 13,499,226
For personal use only use personal For March 2016 0.021 0.007 12 12,857,330 April 2016 (to 20th April) 0.022 0.015 11 2,819,404 * Note that 43,552,600 fully paid ordinary shares at $0.01 per share were issued on 20 January 2016.
For the quoted market price methodology to be reliable there needs to be a ‘deep’ market in the shares. RG 111.69 indicates that a ‘deep’ market should reflect a liquid and active market. The larger volumes that
occurred in February and March 2016 would appear to be on back of the 43.5 million ordinary share issue in January 2016. We calculated that approximately 14.6% of the Company’s current issued capital was traded in a six month period leading up to 20 April 2016 and do not consider this to be representative of a ‘deep’ market.
To provide further analysis of the market prices for a GTE share, we have also considered the volume weighted average market price (VWAP) for 30, 60 and 90 day periods calculated up to 20 April 2016:
Share price per unit 20 April 2016 30 days 60 days 90 days Closing price $0.015 Volume weighted average price (VWAP) $0.012 $0.014 $0.013
Given the variability in share price and the low trading volumes (ie, lack of a ‘deep’ market) leading up to the announcement of the Proposed Transaction, it is difficult to arrive at a fair value of a GTE share based on the quoted market prices alone, however we have assessed a range of values of GTE shares based on market pricing prior to the Proposed Transaction to be between the range of $0.012 and $0.020.
We have noted that subsequent to the announcement of the acquisition, the shares in GTE have traded on ASX mainly between $0.013 and $0.021 with a closing price on 6 September 2016 of $0.017.
Premium for Control – Assessment of Value for GTE
RG 111 refers to a ‘control transaction’ as being the acquisition or increase of a controlling stake in a company. The control premium reflects the benefits an acquirer achieves through holding a controlling interest in contrast to a portfolio shareholding.
The benefits of holding a controlling interest and the reasons a company pays a premium for control may include:
Integration of the acquired entity’s business and/or assets with those of the acquirer; Ability to control the composition of the board of directors; Control over the future direction of the company without the need to consider whether the interests of minority shareholders are prejudiced; Ability to group tax losses; and Full access to cash flows of the entity.
Premiums are paid for reasons that vary from case to case. In some situations the premium paid may be greater than others due to the extent of synergies or other benefits the acquirer expects to realise.
It is generally accepted that premiums for control may vary from 20% to 40% or more depending on many different factors including the nature of the business, the financial position of a company, and shareholding
For personal use only use personal For percentages. It is our view that a control premium in the range of 20% to 30% is appropriate in this instance.
Applying a control premium to GTE’s quoted market share price results in the following quoted market price value including a premium for control:
Low Midpoint High Quoted market price value $0.012 $0.016 $0.020 Control premium 20% 25% 30% Quoted market price valuation including a premium for control $0.014 $0.020 $0.026
It is noted that at the time of negotiation of the Proposed Transaction, the GTE directors considered the fair market value of a GTE ordinary share was $0.01. It is also noted that the Pre-Transaction Capital Raising was priced at $0.015 per share.
Preferred Valuation method of valuing a GTE share
The results of the valuations performed are summarised in the table below:
Low Midpoint High Net asset value $0.0105 $0.0129 $0.0164
Quoted market price valuation including a premium for control $0.0140 $0.0200 $0.0260
In assessing the fair value of a GTE ordinary share prior to the acquisition of Vanguard we have selected the net assets on a going concern methodology as the preferred methodology. Although the shares of GTE are listed, as there is only moderate trading volumes on the ASX and the share prices in recent times may be affected by the lack of cash resources and/or lack of exploration activity, we consider the use of market share prices to value the Company for the purposes of this report is not the most appropriate method to use in this instance. We note share prices as a secondary methodology and have considered share prices in assessing the reasonableness of the proposals with the Vendors of Vanguard.
On the above basis we conclude that the value of a GTE share before the Proposed Transaction is considered to be $0.0129 per share based on the net asset value.
We note that the net asset value may not necessarily reflect the fair values in the current economic circumstances of the Company. All values are dependent on the final sale price achieved (and timing of sales proceeds) relating to the Company’s mining interests which is why we have considered a range of possible share values.
The future value of a GTE share will depend upon, inter alia:
The future success of the exploration and evaluation of Vanguard and GTE’s mining assets; The state of the Australian and overseas stock markets; The strength and performance of the Board and management; Foreign exchange rates and commodity prices; General economic conditions; The liquidity of shares in GTE; and
For personal use only use personal For Possible ventures and acquisitions entered into by GTE in the future.
9.2 VALUATION OF GTE FOLLOWING THE PROPOSED TRANSACTION
We summarise our valuation of a GTE share subsequent to the Proposed Transaction on a net assets basis in the table below, which includes the consolidation of Vanguard.
UNAUDITED UNAUDITED UNAUDITED GTE & Vanguard GTE & Vanguard GTE & Vanguard Consolidated Consolidated Consolidated Pro-forma Pro-forma Pro-forma 30 June 2016 30 June 2016 30 June 2016 Notes $ Low $ Mid $ High Cash and cash equivalents 1 1,356,922 1,831,922 2,306,922 Trade receivables 2 1,330 1,330 1,330 Other assets 400 400 400 Total current assets 1,358,652 1,833,652 2,308,652 Exploration and evaluation expenditure 3 4,337,000 5,522,000 7,008,000 Property, plant and equipment 7,642 7,642 7,642 Total non-current assets 4,344,642 5,529,642 7,015,642 Total assets 5,703,294 7,363,294 9,324,294 Trade and other payables 4 518,663 518,663 518,663 Total current liabilities 518,663 518,663 518,663 Total liabilities 518,663 518,663 518,663 Net assets 5,184,631 6,844,631 8,805,631 Issued Capital 5 23,050,373 23,525,373 24,000,373 Accumulated losses 6 (17,865,742) (16,680,742) (15,194,742) Total equity 5,184,631 6,844,631 8,805,631 Shares on issue 7 539,473,950 539,473,950 539,473,950 Net asset value per share $0.0096 $0.0127 $0.0163 Minority interest discount 8 17% 20% 23% Minority value per share $0.0080 $0.0102 $0.0126
The minority or non-controlling value of a GTE share AFTER the Proposed Transaction is within a range of $0.008 and $0.0126 per share.
The following adjustments were made to the GTE 30 June 2016 pro-forma balance sheet to account for the Proposed Transaction:
Note 1 – Cash and cash equivalents $ Low $ Midpoint $ High As at 30 June 2016 339,279 339,279 339,279 Add – increase due to acquisition of Vanguard 67,643 67,643 67,643 Add – cash from Post-Transaction Capital Raising 100 million shares @ $0.01 (low), $0.015 (mid), $0.02 (high) per share 1,000,000 1,500,000 2,000,000 Less – costs associated with the Post-Transaction Capital Raising (50,000) (75,000) (100,000) Total cash and cash equivalents 1,356,922 1,831,922 2,306,922
GTE have confirmed that they aim to raise up to a maximum of $2 million via a maximum of 100,000,000 shares at a For personal use only use personal For minimum price of $0.01 per share. Hence we have included a minimum share price of $0.01 per share (to raise $1 million), a maximum share price of $0.02 per share (to raise $2 million) and a mid price of $0.015 (to raise $1.5 million).
Note 2 – Trade receivables $ As at 30 June 2016 - Add – increase due to acquisition of Vanguard 1,330 Total trade receivables 1,330
Note 3 – Exploration and evaluation expenditure $ Low $ Midpoint $ High As at 30 June 2016 3,200,000 3,900,000 4,900,000 Add – increase due to acquisition of Vanguard 1,440,461 1,440,461 1,440,461 Revaluation adjustment based on Vanguard ITV dated 11 June 2016 (303,461) 181,539 667,539 Subtotal – value range from ITV of Vanguard 1,137,000 1,622,000 2,108,000 Total exploration and evaluation expenditure 4,337,000 5,522,000 7,008,000
Al Maynard & Associates Pty Ltd were engaged by us to prepare an Independent Technical Valuation (‘ITV’) of Vanguard’s Ives Find and Fairbairn Projects.
Vanguard owns six tenements within Western Australia. The status of the tenements have been verified by the valuer and are believed to be in good standing at the date of their report (11 June 2016).
The Multiple of Exploration Expenditure (‘MEE’) method has been applied to the available historic expenditures to determine a value range as at 11 June 2016. On this basis they concluded that Vanguard’s Mining Tenements are worth between a range of $1.14 million and $2.11 million, with a preferred value of $1.62 million.
We have included the range of values that have been expressed by the valuer in our report as part of our above analysis of fairness of the Proposed Transaction following GTE’s proposed acquisition of Vanguard.
Note 4 – Trade payables $ As at 30 June 2016 517,560 Add – increase due to acquisition of Vanguard 1,103 Total trade payables 518,663
Note 5 – Issued Capital $ Low $ Midpoint $ High As at 30 June 2016 20,592,042 20,592,042 20,592,042 Add – issue of Consideration Shares to acquire Vanguard, 150,833,124 shares @ $0.01 per share 1,508,331 1,508,331 1,508,331 Add – increase due to acquisition of Vanguard 1,406,073 1,406,073 1,406,073 Less – elimination of Vanguard on consolidation (1,406,073) (1,406,073) (1,406,073) Add – issue of Post-Transaction Capital Raising 100 million shares at $0.01 (low), $0.015 (mid), $0.02 (high) per share 1,000,000 1,500,000 2,000,000 Less – Share issue costs of Post-Transaction Capital Raising (50,000) (75,000) (100,000) Total issued capital 23,050,373 23,525,373 24,000,373
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Note 6 – Accumulated Losses $ Low $ Midpoint $ High As at 30 June 2016 (17,562,281) (16,862,281) (15,862,281) Add – increase due to acquisition of Vanguard (1,418,203) (1,418,203) (1,418,203) Less – elimination of Vanguard on consolidation 1,418,203 1,418,203 1,418,203 Revaluation adjustment based on Vanguard ITV dated 11 June 2016 (303,461) 181,539 667,539 Total accumulated losses (17,865,742) (16,680,742) (15,194,742)
Note 7 – Number of shares Low # Midpoint # High # Number of shares on issue prior to Proposed Transaction 288,640,826 288,640,826 288,640,826 Total Consideration Shares 150,833,124 150,833,124 150,833,124 Capital raising 100,000,000 100,000,000 100,000,000 Total shares on issue post Proposed Transaction 539,473,950 539,473,950 539,473,950
Note 8 – Minority interest discount The net asset value of a GTE share following the Proposed Transaction is reflective of a controlling interest. This suggests that the acquirer obtains an interest in the company which allows them to have an individual influence in the operations and value of that company. Therefore, if the Proposed Transaction is approved, Non-Associated Shareholders will become minority interest shareholders in GTE as the Vendors of Vanguard will collectively hold a controlling interest, meaning that their individual holding will not be considered significant enough to have an individual influence in the operations and value of the Company. Therefore we have adjusted our valuation of a GTE share following the Proposed Transaction to reflect a minority interest holding. A minority interest discount is the inverse of a premium for control and is calculated using the formula 1 – (1/1+control premium). As discussed in section 9.1, we consider an appropriate control premium for GTE to be in the range of 20% to 30%, giving rise to a minority interest discount in the range of 17% to 23%.
On the above basis we conclude that the value of a GTE share after the Proposed Transaction is considered to be $0.0102 per share based on the net asset value.
9.3 ASSESSING FAIRNESS
In arriving at our conclusion on fairness, we considered whether the transaction is ‘fair’ by comparing:
Ref Low Midpoint High Value of a GTE share prior to the Proposed Transaction – Control basis 9.1 $0.0105 $0.0129 $0.0164
Value of a GTE share following the Proposed Transaction – Non-control basis 9.2 $0.0080 $0.0102 $0.0126
As can be seen in the above table, if the midpoint value is adopted, the value of a GTE share following the Proposed Transaction is less than the value of a GTE share prior to the Proposed Transaction.
For personal use only use personal For Therefore we conclude that the proposal pursuant to Resolutions 1, 2 and 3 are NOT FAIR.
10. ASSESSMENT OF REASONABLENESS
Likely Advantages and Likely Disadvantages to the Non-Associated shareholders
As part of our assessment of whether the Proposed Transaction is reasonable, we have also considered the likely advantages and the likely disadvantages to the non-associated shareholders of GTE, and whether the likely advantages outweigh the likely disadvantages. We have also considered the impact upon GTE shareholders that the Proposed Transaction as a whole will achieve.
As part of our assessment of whether the Proposed Transaction is reasonable, we have also considered the likely impact upon GTE shareholders if the Proposed Transaction does not proceed.
IF THE PROPOSED TRANSACTION PROCEEDS
Likely Advantages
The Proposed Transaction will provide the following likely advantages:
The Proposed Transaction provides an opportunity for the Company and its shareholders to benefit from any successful exploitation of Vanguard’s prospective gold mining tenements in Yandal province.
The Vanguard projects include additional mineral exploration opportunities in gold and lithium, which means the GTE shareholders’ investment will be more diversified.
The proposed capital raising (a condition precedent of the Proposed Transaction) of a gross amount of at least $1 million, to a maximum of $2 million, will increase the Company’s net asset position and provide working capital for the Company.
The Proposed Transaction and associated Capital Raising (Pre and Post) provide the potential for the Company to increase the scale of its activities and market capitalisation which may in turn increase the liquidity and size of the investor pool that may invest in the Company’s shares.
The Proposed Transaction fits well with the Company’s strategic plans in exploration activity and its current Doolgunna focus and other projects.
The Proposed Transaction will significantly strengthen the GTE balance sheet.
The Proposed Transaction may provide an opportunity for GTE shareholders to experience growth in the value of their investment.
Likely Disadvantages
For personal use only use personal For The Proposed Transaction will provide the following likely disadvantages:
The consideration payable by GTE to the Vendors of Vanguard (or their nominees) will be satisfied by the issue of GTE shares. This along with additional shares which may be issued under the Capital Raisings, will dilute existing shareholders interests in GTE.
The acquisition of Vanguard means that the Company remains in the mineral exploration industry which is a speculative and high risk investment area.
Following the transaction, due to the collective shareholding that the Vanguard Vendors will now hold in GTE (collectively they will hold 32.5% of GTE), this may reduce the likelihood of a third party takeover of GTE, which means the Non-Associated Shareholders of GTE may miss the potential share price premium that is usually associated with takeover offers.
Comparison of Likely Advantages with Likely Disadvantages
After taking into account the advantages and disadvantages listed above we are of the opinion that the advantages to the existing shareholders outweigh the disadvantages and thus the Proposed Transaction as detailed in section 4 and Resolutions 1, 2 and 3 in the Notice of Meeting may be considered to be, on balance, REASONABLE to the existing non-associated shareholders of GTE at the date of this report.
We also note that it is the view of the existing Board of GTE that the investment in Vanguard is in the best interests of all shareholders.
IF THE PROPOSED TRANSACTION DOES NOT PROCEED
If the Proposed Transaction does not proceed, the Company would need to pursue other avenues for acquiring projects. The Board of GTE have stated that they will continue to progress exploration of GTE’s existing tenements, whilst continuing to review any potential acquisitions and opportunities that align with the Company’s strategic direction.
We have noted that depending on the circumstances as to why the transaction does not proceed, the proposed Share Sale Agreement between GTE and Vanguard includes a break fee of $100,000 that may be required to be paid from one entity to another. For example, Vanguard will be liable to pay GTE the break fee if Vanguard does not satisfy certain conditions precedent, such as material breach of warranty or material adverse event due to an act or omission by a Vanguard Vendor. And conversely, GTE will be liable to pay the break fee to Vanguard if GTE does not satisfy certain conditions precedent.
We are not aware of any alternative proposal at the date of this report.
11. CONCLUSIONS
In our opinion the Proposed Transaction is NOT FAIR BUT REASONABLE to the non-associated shareholders of GTE.
Our opinion as to fairness and reasonableness has been determined on the basis of our assessment of all relevant matters and circumstances of the Proposed Transaction.
For personal use only use personal For Our opinion is not only based upon our comparison of the fair value of a share in GTE on a control basis prior to the Proposed Transaction with the fair value of a share in GTE on a non-control basis immediately following the Proposed Transaction, but also after consideration of the overall impact of the Proposed Transaction and the likely advantages and disadvantages to the non-associated shareholders of GTE.
Conclusion Regarding Fairness and Reasonableness
Taking into account the factors summarised above and discussed in further detail in previous sections of our report, we have concluded that the Proposed Transaction is ‘not fair but reasonable’ and the likely advantages to non-associated GTE shareholders outweigh the likely disadvantages of the Proposed Transaction proceeding.
Our opinion is based on economic, market and other conditions prevailing at the date of our report. These conditions can experience rapid change which can have a significant effect on values over a short period of time. This opinion must be read in conjunction with our detailed comments and scope of our report and the information to be sent to GTE shareholders with the Notice of General Meeting.
12. INDEPENDENCE
Bentleys Corporate Advisory (WA) Pty Ltd is entitled to receive a fee of up to $20,000 excluding GST and reimbursement of out of pocket expenses. Except for this fee Bentleys Corporate Advisory (WA) Pty Ltd has not received and will not receive any pecuniary or other benefit whether direct or indirect in connection with the preparation of this report.
Bentleys Audit & Corporate (WA) Pty Ltd, a related entity of Bentleys Corporate Advisory (WA) Pty Ltd, is the external auditor of GTE. The services provided by Bentleys Audit & Corporate (WA) Pty Ltd are independent audit advice, statutory and compliance services by nature and in all cases, Bentleys Corporate Advisory (WA) Pty Ltd and Bentleys Audit & Corporate (WA) Pty Ltd have been engaged as an independent and objective party.
Bentleys Corporate Advisory (WA) Pty Ltd and Bentleys Audit & Corporate (WA) Pty Ltd have not had at the date of this report any relationship which may impair their independence.
We have held discussions with management of GTE regarding the information contained in this report. We did not change the methodology used in our assessment as a result of discussions and our independence has not been impaired in any way.
13. QUALIFICATIONS
Bentleys Corporate Advisory (WA) Pty Ltd is a professional practice company, wholly owned by the Perth practice of Bentleys (WA) Pty Ltd. The firm is part of the National and International network of Bentleys independent firms, and provides a wide range of professional accounting and business advisory services.
Bentleys Corporate Advisory (WA) Pty Ltd holds an Australian Financial Services license to provide financial product advice on securities to retail clients and its principals and owners are suitably professionally qualified, with substantial experience in professional practice.
For personal use only use personal For The director responsible for the signing of this report is Mr Ranko Matic who is a director of Bentleys Corporate Advisory (WA) Pty Ltd and director of Bentleys (WA) Pty Ltd. Mr Matic has over 25 years’ experience as a Chartered Accountant.
At the date of this report neither Mr Matic nor any member or Director of Bentleys Corporate Advisory (WA) Pty Ltd has any interest in the outcome of the Proposed Transaction.
14. DISCLAIMERS AND CONSENTS
Bentleys Corporate Advisory (WA) Pty Ltd has been requested to prepare this report, to accompany the Notice of General Meeting and Explanatory Statement which will be sent to GTE’s shareholders.
Bentleys Corporate Advisory (WA) Pty Ltd consents to this report accompanying the Notice of General Meeting and Explanatory Statement and being referred to in those documents. This report or any reference thereto is not to be included in or attached to any other document, statement or letter without prior consent from Bentleys Corporate Advisory (WA) Pty Ltd.
Bentleys Corporate Advisory (WA) Pty Ltd has not conducted any form of audit or any verification of information provided to us and which we have relied upon in regard to GTE or Vanguard, however we have no reason to believe that any of the information provided, is false or materially incorrect.
The statements and opinions provided in this report are given in good faith and in the belief that they are not false, misleading or incomplete.
Neither Bentleys Corporate Advisory (WA) Pty Ltd nor Mr Matic take any responsibility for nor have they authorised or caused the issue of any part of this report for any third party other than the shareholders of GTE in the context of the scope and purpose defined in section 3 of this report.
The statements and opinions expressed in this report are given in good faith and with reliance upon information generated both independently and internally and with regard to all of the circumstances pertaining to the Proposed Transaction.
In regard to any projected financial information noted in this report, no member or director of Bentleys Corporate Advisory (WA) Pty Ltd has had any involvement in the preparation of the projected financial information.
Furthermore we do not provide any opinion whatsoever as to any projected financial or other results prepared for GTE or Vanguard and in particular do not provide any opinion as to whether or not any projected financial results referred to in the report will or will not be achieved.
Yours faithfully
RANKO MATIC CA Director
For personal use only use personal For Bentleys Corporate Advisory (WA) Pty Ltd
GLOSSARY
In this report, unless the context requires otherwise:
Term Meaning $ Australian Dollars
ASIC Australian Securities and Investments Commission
ASX Australian Securities Exchange or ASX Limited ACN 008 624 691
BCA, we, us, our Bentleys Corporate Advisory (WA) Pty Ltd, ABN 83 108 754 847
Business Day has the meaning given in the Listing Rules
Director a director of GTE
GTE Great Western Exploration Ltd, ACN 123 631 470
ITV Independent Technical Valuation of Vanguard’s Ives Find & Fairbairn Projects dated 11 June 2016 prepared by Al Maynard & Associates Pty Ltd; Independent Technical Valuation of GTE’s Mining Tenements dated 1 August 2016 prepared by Al Maynard & Associates Pty Ltd
Listing Rules the official listing rules of ASX and includes the business rules of ASX
Post-Transaction Capital The issue of up to 100,000,000 GTE shares at an issue price of at least $0.01, to raise a minimum Raising of $1 million and a maximum of $2 million
Pre-Transaction Capital The issue of 24,540,000 GTE shares at an issue price of $0.015 on 2 August 2016 Raising
Register the register of members of GTE shareholders or option holders, as the case requires
The Proposed Transaction The proposed acquisition of 100% of the shares in Vanguard for consideration comprising the issue of 150,833,124 GTE shares
The Vendors Shareholders of Vanguard, who are selling their shares in Vanguard to GTE
Vanguard Vanguard Exploration Ltd, ACN 138 483 306
For personal use only use personal For VWAP the volume weighted average share price of a Great Western Exploration Ltd share in Australian dollars
APPENDIX A
FINANCIAL SERVICES GUIDE Australian Financial Services License No. 277313 7 September 2016
BENTLEYS CORPORATE ADVISORY (WA) PTY LTD (‘BCA’) ABN 83 108 754 847 (‘we’ or ‘us’ or ‘ours’ as appropriate) has been engaged by Great Western Exploration Ltd (‘GTE’) to provide an independent expert’s report on the proposal to acquire 100% of the issued capital of Vanguard Exploration Ltd (‘Vanguard’). You will be provided with a copy of our report as a retail client because you are a shareholder of GTE.
Financial Services Guide In the above circumstances we are required to issue to you, as a retail client, a Financial Services Guide (‘FSG’). This FSG is designed to assist retail clients make a decision as to their use of any general financial product advice and to ensure that we comply with our obligations as financial services licensees.
This FSG includes information about: Who we are and how we can be contacted; The services we are authorised to provide under our Australian Financial Services License, License No. 277313; Remuneration that we and/or our staff and any associates receive in connection with the general financial product advice; Any relevant associations or relationships we have; and Our internal and external complaints handling procedures and how you may access them.
Information about us Bentleys Corporate Advisory (WA) Pty Ltd is a member firm of the Bentleys network in Australia, a national association of separate entities. Bentleys Australia is a member of Kreston International, a global network of independent accounting firms. The financial product advice in our report is provided by Bentleys Corporate Advisory (WA) Pty Ltd and not by Bentleys or its related entities. Bentleys and its related entities provide services primarily in the areas of audit, tax, consulting and financial advisory services.
We do not have any formal associations or relationships with any entities that are issuers of financial products. However you should note that we and Bentleys (and its related entities) might from time to time provide professional services to financial product issuers in the ordinary course of business.
Financial services we are licenced to provide Our Australian financial services licence allows us to carry on a financial services business to provide general financial product advice in relation to securities to retail and wholesale clients.
When we provide the authorised financial services we are engaged to provide expert reports in connection with the financial product of another person. Our reports indicate who has engaged us and the nature of the report we have been engaged to provide. When we provide the authorised services we are not acting for you.
General Financial Product Advice We only provide general financial product advice, not personal financial product advice. Our report does not take into account your personal financial product advice. Our report does not take into account your personal objectives, financial situation or needs. You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice.
Fees, commissions and other benefits we may receive We charge fees to produce reports, including this report. These fees are negotiated and agreed with the entity which engages BCA to provide a report. Fees are charged on an hourly basis or as a fixed amount depending on the terms of the agreement with the person who engages us. The fee payable to BCA for this engagement is up to $20,000 plus GST.
Except for the fees referred to above, neither BCA nor its directors, employees or related entities receive any pecuniary benefit
For personal use only use personal For or other benefit, directly or indirectly, for or in connection with the provision of the report.
Remuneration or other benefits received by our employees All of our employees receive a salary and do not receive any commissions or other benefits arising directly from services provided to our clients. We have received a fee from GTE for our professional services in providing this report. That fee is not linked in any way with our opinion as expressed in this report.
Associations and Relationships From time to time BCA 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. Bentleys Audit & Corporate (WA) Pty Ltd, a related entities of BCA, is the external auditor of GTE. The services provided by Bentleys Audit & Corporate (WA) Pty Ltd are independent audit advice, statutory and compliance services by nature and in all cases, BCA and Bentleys Audit & Corporate (WA) Pty Ltd have been engaged as an independent and objective party.
BCA is not an associate of GTE. The signatories to the Report do not hold any shares in GTE and no such shares have ever been held by the signatories.
Referrals We do not pay commissions or provide other benefits to other parties for referring customers to us in connection with the reports that we are licenced to provide.
Complaints resolution Internal complaints resolution process As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing addressed to The Complaints Officer, Bentleys Corporate Advisory (WA) Pty Ltd, PO Box 7775, Cloisters Square Perth WA 6850.
When we receive a written complaint we will record the complaint, acknowledge receipt of the complaint within 15 days and investigate the issues raised. As soon as practical, and not more than 45 days after receiving the written complaint, we will advise the complainant in writing of our determination.
Referral to External Dispute Resolution Scheme A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Ombudsman Service (‘FOS’). FOS is an independent organisation that has been established to provide free advice and assistance to consumers to help in resolving complaints relating to the financial service industry. FOS will be able to advise you as to whether or not they can be of assistance in this matter. Our FOS membership number is 12451. Further details about FOS are available at the FOS website www.fos.org.au or by contacting them directly via the details set out below:
Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Free call: 1800 367 287 (9am-5pm AEST weekdays) Fax: 03 9613 6399 Email: [email protected]
Contact details BCA’s address and other contact details are Level 3, 216 St Georges Terrace, Perth WA 6000. Ph: 08 9226 4500. Fx: 08 9226 4300.
For personal use only use personal For
APPENDIX B
SOURCES OF INFORMATION
In preparing this report we have had access to the following principal sources of information:
Annual and Half Year Reports for GTE.
Publicly available information in relation to share prices for GTE.
ASX announcements for GTE.
Information for GTE, including but not limited to unaudited financial information as at 30 June 2016, internally prepared management accounts and pro-forma financial statements.
Information for Vanguard, including but not limited to unaudited financial statements as at 30 June 2016, audited financial statements as at 30 June 2015 and shareholders register.
Independent Technical Valuation of Vanguard’s Ives Find & Fairbairn Projects dated 11 June 2016 prepared by Al Maynard & Associates Pty Ltd.
Independent Technical Valuation of GTE’s Mining Tenements dated 1 August 2016 prepared by Al Maynard & Associates Pty Ltd.
Agreements between GTE and the Vendors of Vanguard.
Draft Notice of General Meeting of Shareholders for GTE and Explanatory Statement.
Publically available information relating to the status of the resources sector.
Representations made by Directors and Management of GTE. For personal use only use personal For
APPENDIX C
VALUATION METHODOLOGIES
Valuation Methodologies and Approaches
Discounted Cash Flow Method
Discounted cash flow methods estimate fair market value by discounting a company’s future cash flows to their net present value. These methods are appropriate where a forecast of future cash flows can be made with a reasonable degree of confidence. Discounted cash flow methods are commonly used to value early stage companies or projects with a finite life.
Capitalisation of Maintainable Earnings Method
The capitalisation of maintainable earnings method estimates ‘fair market value’ or ‘enterprise value’, by estimating a company’s future maintainable earnings and dividing this by a market capitalisation rate. The capitalisation rate represents the return an investor would expect to earn from investing in the company which is commensurate with the individual risks associated with the business.
It is appropriate to apply the capitalisation of maintainable earnings method where there is an established and relatively stable level of earnings which is likely to be sustained into the foreseeable future.
The measure of earnings will need to be assessed and can include, net profit after taxes, (NPAT), earnings before interest and taxes (EBIT and earnings before interest, taxes, depreciation and amortisation (EBITDA).
The capitalisation of maintainable earnings method can also be considered a market based methodology as the appropriate capitalisation rate or ‘earnings multiple’ is based on evidence of market transactions involving comparable companies.
An extension of the capitalisation of maintainable earnings method involves the calculation of share value of an entity. This process involves the calculation of the enterprise value, which is then adjusted for the net tangible assets of the entity.
Orderly Realisation of Assets
The orderly realisation of asset method estimates fair market value by determining the amount that would be distributed to shareholders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the company is wound up in an orderly manner.
Liquidation of assets - The Liquidation method is similar to the orderly realisation of asset method except the liquidation method assumes the assets are sold in a shorter time frame.
Net asset value – The net assets method is based on the value of the assets of a business less certain liabilities at book values, adjusted to a market value.
The asset based approach, as a general rule, ignores the possibility that a company’s value could exceed the realisable value of its assets as they ignore the value of intangible assets such as customer lists, management, supply arrangements, and goodwill.
The asset based approach is most appropriate when companies are not profitable, a significant proportion of assets are liquid, or for asset holding companies.
Cost Based Approach - The cost based approach involves determining the fair market value of an asset by deducting the accumulated depreciation from the asset’s replacement cost at current prices.
Like the asset based approach, the cost based approach has a number of disadvantages, primarily that the cost of an asset does not necessarily reflect the assets ability to generate income. Accordingly this approach is only useful in limited circumstances, usually associated with intangible asset valuation.
For personal use only use personal For
Quoted Market Price Methodology
The method relies on the pricing benchmarks set by sale and purchase transactions in a fully informed market the ASX which is subject to continuous disclosure rules aimed at providing that market with the necessary information to make informed decisions to buy or to sell.
Consequently, this approach provides a ‘fair price’, independently determined by a real market. However the question of a fair price for a particular transaction requires an assessment in the context of that transaction taken as a whole.
In taking a quoted market price based assessment of the consideration to both parties to the proposed transaction, the overall reasonableness and benefits to the non participating shareholders must be carefully evaluated.
Comparable Market Based Approach
The market based approach estimates a company’s fair market value by considering the market prices of transactions in its shares or the market value of comparable companies.
This includes, consideration of any recent genuine offers received by the target for an entire entity’s business, or any business units or asset as a basis for the valuation of those business units or assets
For personal use only use personal For
APPENDIX D
INDEPENDENT TECHNICAL VALUATION – GTE MINING TENEMENTS
For personal use only use personal For
AL MAYNARD & ASSOCIATES Pty Ltd Consulting Geologists www.geological.com.au ABN 75 120 492 435 9/280 Hay Street, Tel: (+618) 9388 1000 Mob: 04 0304 9449 SUBIACO, WA, 6008 Fax: (+618) 9388 1768 [email protected] Australia Australian & International Exploration & Evaluation of Mineral Properties
INDEPENDENT TECHNICAL VALUATION
OF
GREAT WESTERN EXPLORATION LIMITED’S
MINING TENEMENTS
WESTERN AUSTRALIA
PREPARED FOR
BENTLEYS CORPORATE ADVISORY (WA) PTY LTD
Author: Brian J. Varndell, BSc(Spec.Hons.), FAusIMM. Peer Review: Allen J Maynard BAppSc(Geol), MAIG, MAusIMM Company; Al Maynard & Associates Pty Ltd st For personal use only use personal For Date: 1 August, 2016
Valuation of the Great Western Exploration Limited Projects - Western Australia
EXECUTIVE SUMMARY
This Independent Technical Valuation Report (“ITV”) of the Great Western Exploration Limited mining tenements in Western Australia has been prepared by Al Maynard & Associates (“AM&A”) at the request of Mr R. Matic of Bentleys Corporate Advisory (WA) Pty Ltd (“Bentleys”) for inclusion in their Independent Expert’s Report (“IER”). This report provides an independent technical valuation of the eleven Exploration Licences (“EL”) as at 1st August, 2016. The AM&A report has been prepared in accordance with the guidelines of the Valuation of Mineral Assets and Mineral Securities for Independent Expert’s Reports 2012 (the “Valmin Code”) as adopted by the Australian Institute of Geoscientists (“AIG”) and the Australasian Institute of Mining and Metallurgy (“AusIMM”). Great Western Exploration Limited (“Great Western”) is a public company listed on the Australian Stock Exchange (“ASX Code: GTE”) and its principal business is mineral exploration. The Company owns nine tenements outright and a further two in the Cunyu Joint Venture with Glencore Plc. The Company’s tenements cover a total area of 1,415 km2 of the Proterozoic Yerrida Basin in Western Australia with four main prospects delineated to date; New Springs, Chisel, Finlayson and Goodin (fig 1). The New Springs prospect is located 90 km to the northwest of Wiluna covering the Cunyu Mafic Sill. The Cunyu Sill was first recognised as being prospective for magmatic nickel sulphides from whole rock geochemistry carried out by the Geological Survey of Western Australia (“GSWA”) and Rio Tinto. Furthermore the Cunyu Sill has many of the same geological characteristics as the recent Nova magmatic nickel discovery in the Fraser range region of WA. The Chisel prospect is located 35 km to the northwest of Wiluna and 7 km north of the Magellan lead deposit. Recent drilling completed by Great Western at the Chisel prospect demonstrated favourable geochemistry for the formation of VHMS style base metal mineralisation. The Finlayson prospect is part of the Cunyu JV where drilling completed by Great Western gold intersected gold mineralisation within a wide zone of shearing in basalt approximately 75km along strike of the Wiluna gold deposits. The Goodin prospect is located from 25 km to 17 km south east of Degrussa and Monty copper-gold deposits respectively. The company has eight remaining untested EM anomalies which occur at or near the Johnson Cairn – mafic volcanic contact which is a similar geological setting to Degrussa. In addition to these EM anomalies there is also an exploration target comprising a co-incident a gravity & copper geochemical anomaly located on lineament that can be traced approximately 30 km northeast along strike to the Monty deposit. This valuation appraises these projects using the Multiple of Exploration Expenditure
(“MEE”) method for each project. No relevant comparable transactions were located. For personal use only use personal For Given the relevance of the assumptions and factors underlying the development and conceptual prospectivity for resources of the project, AM&A has concluded that it is reasonable to rely on this data for the purposes of this report and the derivation of a current valuation accordingly based on that information. AM&A has relied on the technical data
Great Western Exploration Limited Independent Technical Valuation Report – AM&A Executive Summary 1
Valuation of the Great Western Exploration Limited Projects - Western Australia
supplied by Great Western and accepted that data in reaching our conclusions, unless AM&A expressly states otherwise. The summary of the valuation conclusions is presented in Table 7. This current valuation has used a form of the MEE Method applied to expenses that are relevant to the present day tenement holding. This Report concludes that the cash value of 100% of the Great Western tenement portfolio in Western Australia, as at 1th August, 2016, is ascribed at $3.9 million from within the range of $3.2 million to $4.9 million.
Figure 1. Western Australia map showing location of Prospects
For personal use only use personal For
Great Western Exploration Limited Independent Technical Valuation Report – AM&A Executive Summary 2
Valuation of the Great Western Exploration Limited Projects - Western Australia
CONTENTS PAGE
1.0 Introduction 3 1.1 Scope and Limitations ...... 3 1.2 Statement of Competence ...... 5 2.0 Valuation of the Mineral Assets – Methods and Guides 5 2.1 General Valuation Methods ...... 5 2.2 Discounted Cash Flow/Net Present Value ...... 5 2.3 Joint Venture Terms ...... 6 2.4 Similar or Comparable Transactions ...... 6 2.5 Multiple of Exploration Expenditure ...... 6 2.6 Ratings System of Prospectivity (Kilburn) ...... 7 2.7 Empirical Methods (Yardstick – Real Estate) ...... 7 2.8 General Comments ...... 7 2.9 Environmental implications ...... 7 2.10 Indigenous Title Claims ...... 8 2.11 Commodities-Metal prices ...... 8 2.12 Resource/Reserve Summary ...... 8 2.13 Previous Valuations ...... 8 2.14 Encumbrances/Royalty...... 8 3.0 Background Information 8 3.1 Introduction ...... 8 3.2 Specific Valuation Methods ...... 9 3.3 Tenement Holding ...... 9 3.4 Cunyu Joint Venture ...... 11 4.0 Yerrida Exploration 11 4.1 Introduction ...... 11 4.2 Regional Geology ...... 12 4.3 Previous Exploration ...... 14 4.3.1 1970 to 1986 Various Explorers 14 4.3.2 1986 to 1997 RGC Exploration Magellan Project 15 4.3.3 1990 to 1991 Western Mining Corporation (“WMC”) Terrabubba Project 15 4.3.4 1996 to 2000 GSWA Report 60 Yerrida Basin 15 4.3.5 2000 to 2002 Exco Resources NL/Rio Tinto Cunyu Project 15 4.3.6 2007 to 2013 Jubilee Mines NL/Xstrata/Glencore Cunyu Project 16 4.4 Recent Exploration 16 5.0 Current Prospects 19 5.1 New Springs ...... 19 5.2 Chisel Prospect ...... 23 5.3 Finlayson Gold Prospect ...... 24 5.4 Goodin Prospect ...... 26 6.0 Valuation of the Project 28 6.1 Selection of Valuation Methods ...... 28 6.2 Valuation – MEE Method...... 28 6.3 Valuation Conclusions ...... 29
7.0 References 31 For personal use only use personal For 8.0 Glossary of Technical Terms and Abbreviations 36 Appendix 1: Details of Valuation Estimates. 38
Great Western Exploration Limited Independent Technical Valuation Report – AM&A Contents i
Valuation of the Great Western Exploration Limited Projects - Western Australia
List of Figures Figure 1. Western Australia map showing location of Prospects ...... 2 Figure 2. Location of Great Western tenements and prospects within the Yerrida Basin ...... 12 Figure 3.Location of historical drilling before 2009 in the Yerrida Basin ...... 14 Figure 4. Map showing interpreted major structural corridors of the eastern Yerrida basin ...... 17 Figure 5. Plan showing work completed by Great Western at Yerrida ...... 18 Figure 6. GSWA regional geology showing the layered dolerite-gabbro-pyroxenite stratigraphy ...... 20 Figure 7. Regional surface geochemistry at New Springs ...... 21 Figure 8. Regional aeromagnetic map at New Springs ...... 22 Figure 9. Airborne EM plate models at New Springs...... 22 Figure 10. VHMS target area at Chisel...... 24 Figure 11. CNRC005 mineralised shear zone ...... 25 Figure 12. Plan showing Surface geochemistry and airborne EM anomalies at Goodin ...... 26 Figure 13. Map Showing exploration target along at Goodin along strike from the Monty Deposit ...... 27
List of Tables Table 1: Typical PEM Factors ...... 6 Table 2: Great Western - Native Title Status of Tenements...... 8 Table 3: Great Western - Items Relating to Tenement Acquisition and Dealings...... 9 Table 4: Great Western – Tenement Details ...... 10 Table 5. Work completed by Great Western at Yerrida ...... 17 Table 6. Comparisons with of New Springs with Nova nickel deposit ...... 20 Table 7. Summary Range of Current Values ...... 29
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Great Western Exploration Limited Independent Technical Valuation Report – AM&A Contents ii
Valuation of the Great Western Exploration Limited Projects - Western Australia
The Directors, 1st August, 2016 Bentleys Corporate Advisory (WA) Pty Ltd Level 3, 216 St. George’s Terrace Perth, WA 6000 Australia
Dear Sirs, VALUATION OF GREAT WESTERN EXPLORATION LTD’s TENEMENTS IN WA
1.0 Introduction This Independent Technical Valuation Report (“ITV”) of the Great Western Exploration Limited (“Great Western”; “the Company”) mining tenements in Western Australia, has been prepared by Al Maynard & Associates (“AM&A”) at the request of Mr R. Matic of Bentleys Corporate Advisory (WA) Pty Ltd (“Bentleys”) for inclusion in the Independent Expert’s Report (“IER”) being prepared by Bentleys for the purpose of the acquisition of Vanguard by Great Western. Great Western is a public company listed on the Australian Stock Exchange (“ASX Code:GTE”) and its principal business is mineral exploration. The Company owns nine tenements outright and a further two tenements in the Cunyu Joint venture with Glencore. These tenements cover an area of 1,415 km2 and are situated in the Proterozoic Yerrida Basin located in Western Australia. This report provides an independent technical valuation of the Great Western tenements in Western Australia, as at 1st August, 2016. The report has been prepared in accordance with the guidelines of the Valuation of Mineral Assets and Mineral Securities for Independent Expert’s Reports 2012 (the “Valmin Code”) as adopted by the Australian Institute of Geoscientists (“AIG”) and the Australasian Institute of Mining and Metallurgy (“AusIMM”) and specifically:-
ASIC Regulatory Guideline 42 - Independence of Experts’ Reports (“RG 42”); ASIC Regulatory Guideline Note 43 - Valuation Reports and Profit Forecasts (“RG 43”); ASIC Regulatory Guideline 111 – Content of expert’s Reports (“RG 111”)
ASIC Regulatory Guideline 112 – Independence of Experts (“RG 112”); and AusIMM’s Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports (“the Valmin Code”). The assets valued in this report are the tenements owned or operated by Great Western located in Western Australia.
1.1 Scope and Limitations This Report is valid as of 1st August, 2016 which is the date of the latest review of the data and technical information and there have been no material changes to this data or valuation since that date. The valuation can be expected to change over time having regard to political,
economic, market and legal factors. The valuation can also vary due to the success or For personal use only use personal For otherwise of any mineral exploration that is conducted either on the mineral assets concerned or by other explorers on prospects in the near environs. The valuation could also possibly be affected by the consideration of other exploration data from adjacent licences with production history affecting the mineral assets which have not been made available to the writers.
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Valuation of the Great Western Exploration Limited Projects - Western Australia
In order to form an opinion as to the value of any mineral asset, it is necessary to make assumptions as to certain future events, which might include economic and political factors and the likelihood of exploration success. The authors have taken all reasonable care in formulating these assumptions to ensure that they are appropriate to the case. These assumptions are based on the writers’ technical training and 40 years’ experience in the exploration and mining industry. Whilst the opinions expressed represent the writers’ professional opinion at the time of this Report, these opinions are not however, forecasts as it is never possible to predict accurately the many variable factors that need to be considered in forming an opinion as to the value of any mineral asset. The information presented in this Report is based on technical reports provided by Great Western supplemented by our own inquiries as to the reasonableness of the supplied data. At the request of AM&A, copies of relevant technical reports and agreements were readily made available. There is also information available in the public domain and relevant references are listed in Section 7.0 –References. No recent site visit was undertaken since the writers are familiar with the terrane from visits to other similar environs and sufficient technical information is provided to enable an informed opinion to be derived. Great Western will be invoiced and expected to pay a fee, estimated between $7,000 and $9,000 for the preparation of this Report. This fee comprises a normal, commercial daily rate plus expenses. Payment is not contingent on the results of this report. Except for these fees, neither the writer nor any family members nor Associates have any interest, nor the rights to any interest in Great Western nor any interest in the mineral assets reported upon. Great Western has confirmed in writing that all technical data known it was made available to the writer. The valuation presented in this Report is restricted to a statement of the fair value of the mineral asset package. The Valmin Code defines fair value as “The estimated amount of money, or the cash equivalent of some other consideration, for which, in the opinion of the Expert reached in accordance with the provisions of the Valmin Code, the mineral asset or security shall change hands on the Valuation date between a willing buyer and a willing seller in an arms’ length transaction, wherein each party had acted knowledgeably, prudently and without compulsion”. It should be noted that in all cases, the fair valuation of the mineral assets presented is analogous with the concept of “valuation in use” commonly applied to other commercial valuations. This concept holds that the assets have a particular value only in the context of the usual business of the company as a going concern. This value will invariably be significantly higher than the disposal value, where there is not a willing seller. Disposal values for mineral assets may be a small fraction of going concern values. In accordance with the Valmin Code, we have prepared the “Range of Values” as shown in Table 7, section 6. Regarding the Project it is considered that sufficient geotechnical data has been provided from the reports covering the previous exploration of the relevant area to
For personal use only use personal For enable an understanding of the geology. This provides adequate information to enable an informed opinion as to the current value of the mineral assets.
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1.2 Statement of Competence This Report has been prepared by Allen J. Maynard and Brian J. Varndell. Maynard is the Principal of AM&A, a qualified geologist, a Member of the Australasian Institute of Mining & Metallurgy (“AusIMM”) (No 104986) and a Member of the Australian Institute of Geoscientists (“AIG” #2062). He has had over 35 years of continuous experience in mineral exploration and evaluation and more than 30 years’ experience in mineral asset valuation. Brian J. Varndell BSc (SpecHonsGeol), FAusIMM (No111022), is a geologist with over 40 years in the industry and 35 years in mineral asset valuation. The writers each hold the appropriate qualifications, experience and independence to qualify as an independent “Expert” and “Competent Person” under the definitions of the Valmin Code. 2.0 Valuation of the Mineral Assets – Methods and Guides With due regard to the guidelines for assessment and valuation of mineral assets and mineral securities as adopted by the AusIMM Mineral Valuation Committee on 17th February, 1995 – the Valmin Code (recently updated 2012). AM&A has derived the estimates listed below using the Yardstick method for the current technical value of the mineral assets. The ASIC publications “Regulatory Guides 111 & 112” have also been referred to and duly considered in relation to the valuation procedure. The subjective nature of the valuation task is kept as objective as possible by the application of the guideline criteria of a “fair value”. This is a value that an informed, willing, but not anxious, arms’ length purchaser will pay for a mineral (or other similar) asset in a transaction devoid of “forced sale” circumstances.
2.1 General Valuation Methods The Valmin Code identifies various methods of valuing mineral assets, including:-
Discounted cash flow, Joint Venture and farm-in terms for arms’ length transactions, Precedents from similar comparable asset sales/valuations, Multiples of exploration expenditure, Ratings systems related to perceived prospectivity, Real estate value and rule of thumb or yardstick approach.
2.2 Discounted Cash Flow/Net Present Value This method provides an indication of the value of a mineral asset 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. Net present value (‘NPV’) is determined from discounted cash flow (‘DCF’) analysis where reasonable mining and processing parameters can be applied to an identified ore reserve. It is
a process that allows perceived capital costs, operating costs, royalties, taxes and project For personal use only use personal For financing requirements to be analysed in conjunction with a discount rate to reflect the perceived technical and financial risks and the depleting value of the mineral asset over time. The NPV method relies on reasonable estimates of capital requirements, mining and processing costs.
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2.3 Joint Venture Terms The terms of a proposed joint venture agreement may be used to provide a market value based upon the amount an incoming partner is prepared to spend to earn an interest in part or all of the mineral asset. This pre-supposes some form of subjectivity on the part of the incoming party when grass roots mineral assets are involved.
2.4 Similar or Comparable Transactions When commercial transactions concerning mineral assets in similar circumstances have recently occurred, the market value precedent may be applied in part or in full to the mineral asset under consideration.
2.5 Multiple of Exploration Expenditure 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 mineral asset with or without future committed 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 take into account the valuer's judgment of the prospectivity of the mineral asset and the value of the database. PEMs can typically range between ‘zero’ to 3.0 and occasionally up to 5.0 where very favourable exploration results have been achieved, applied to previous exploration expenditure to derive a dollar value. Typical PEM Factors are shown in Table 1.
Table 1: Typical PEM Factors
PEM Criteria Range
0.1 – 0.5 Exploration (past and present) has downgraded the tenement prospectivity, no mineralisation identified
0.5 – 1.0 Exploration potential has been maintained (rather than enhanced) by past and present activity from regional mapping
1.0 – 1.3 Exploration has maintained, or slightly enhanced (but not downgraded) the prospectivity
1.3 – 1.5 Exploration has considerably increased the prospectivity (geological mapping, geochemical or geophysical)
1.5 – 2.0 Scout Drilling has identified interesting intersections of mineralisation
2.0 – 2.5 Detailed Drilling has defined targets with potential economic interest.
2.5 – 3.0 A resource has been defined at Inferred Resource Status, no feasibility study has been completed
3.0 – 4.0 Indicated Resources have been identified that are likely to form the basis of a prefeasibility study For personal use only use personal For
4.0 – 5.0 Indicated and Measured Resources
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2.6 Ratings System of Prospectivity (Kilburn) The most readily accepted method of this type is the modified Kilburn Geological Engineering/Geoscience Method and is a rating method based on the basic acquisition cost (‘BAC’) of the mineral asset that applies incremental, fractional or integer ratings to a BAC cost with respect to various prospectivity factors to derive a value. Under the Kilburn method the valuer is required to systematically assess four key technical factors which enhance, downgrade or have no impact on the value of the mineral asset. The factors are then applied serially to the BAC of each mineral asset in order to derive a value for the mineral asset. 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.
2.7 Empirical Methods (Yardstick – Real Estate) The market value determinations may be made according to the independent expert’s knowledge of the particular mineral asset. This can include a discount applied to values arrived at by considering conceptual target models for the area. The market value may also be rated 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 mineral asset based on current market prices for equivalent assets, existing or previous joint venture and sale agreements, the geological potential of the mineral assets, regarding possible potential resources, and the probability of present value being derived from individual recognised areas of mineralisation. This method is termed a “Yardstick” or a “Real Estate” approach. Both methods are inherently subjective according to technical considerations and the informed opinion of the valuer.
2.8 General Comments The aims of the various methods are to provide an independent opinion of a “fair value” for the mineral asset under consideration and to provide as much detail as possible of the manner in which the value is reached. It is necessarily subjective according to the degree of risk perceived by the mineral asset valuer in addition to all other commercial considerations. Efforts to construct a transparent valuation using sophisticated financial models are still hindered by the nature of the original assumptions where no known resource exists and are not applicable to mineral assets without an identified resource or reserve. The values derived for this Report have been concluded after taking into account the general geological environment for the mineral assets under consideration with respect to the exploration potential of each tenement.
2.9 Environmental implications Information to date is that there are no identified existing material environmental liabilities on the mineral assets. Accordingly, no adjustment was made during this Report for environmental
implications. For personal use only use personal For
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2.10 Indigenous Title Claims Native Title claims and/or determinations for each tenement that have been indicated to AM&A are listed in Table 2. Table 2: Great Western - Native Title Status of Tenements.
Lease Federal Court No Claimant Name Heritage Agreement
Granted Tenements
E51/1324 WAD6132_98 Yugunga Nya (NTC)WC99/046 2010.07.15 E51/1330 WAD6132_98 Yugunga Nya (NTC)WC99/046 2010.03.16 E51/1560 WAD6132_98 Yugunga Nya (NTC)WC99/046 RSHS dated1 July 2014 E53/1712 WAD6132/1998 Yugunga Nya (NTC)WC99/046 no 2% overlap E53/1712 WAD6164/1998 Wiluna (NTC)WC1999/024 RSHS dated 26 February 2013 E53/1713 WAD6164/1998 Wiluna (NTC)WC1999/024 RSHS dated 26 February 2013 E53/1730 WAD6164/1998 Wiluna (NTC)WC1999/024 26/09/14 - EP Applies no agreement. E53/1730 WAD248/2007 Tarlpa (NTC)WC2007/003 26/09/14 - EP Applies no agreement. E53/1740 WAD6164/1998 Wiluna (NTC)WC1999/024 05/11/14 - EP Applies no agreement. Applications
E51/1727 Not Advertised under NTA as EP yet
E51/1728 Advertised under NTA as EP
2.11 Commodities-Metal prices Where appropriate, current metal prices are used sourced from the usual metal market publications or commodity price reviews (e.g.” Kitco.com” or “Metalprices.com”).
2.12 Resource/Reserve Summary There are no JORC Code (2012) compliant resource estimates declared for either of the Projects.
2.13 Previous Valuations No previous valuations of the tenement package are known to the authors.
2.14 Encumbrances/Royalty The Projects may be subject to government royalties as stipulated by the Government where ever applicable. No royalty payments are considered in this valuation as no mining is yet occurring.
For personal use only use personal For 3.0 Background Information
3.1 Introduction This valuation has been provided by way of a detailed study of existing information and field data provided by Great Western regarding operations completed at the projects to date. Since
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no JORC Code (2012) compliant resource estimates have been attempted to date; AM&A has been supplied with available historical expenditures which form the basis for this valuation.
3.2 Specific Valuation Methods There are various methods acceptable for the valuation of a mineral prospect ranging from the most favoured DCF analysis of identified Proved & Probable Reserves to the more subjective rule-of-thumb assessment when no Reserves have yet been calculated but Resources may exist. These are discussed above in Section 2.0. For the Great Western projects the MEE Method has been applied to the available historic expenditures to determine a value range as at 1st August, 2016 and a preferred or most likely value ascribed within that range.
3.3 Tenement Holding Great Western owns nine tenements in its own right and a further two in Joint Venture with Glencore all of which are situated within the Yerrida Basin in Western Australia (Fig 2). The Company provided the full tenement details to AM&A. We have checked the tenement holding on the Tengraph website (DMP operated). The status of the tenements has been verified based on examination of open-source files accessed on Tengraph pursuant to paragraphs 67 and 68 of the VALMIN Code. The tenements are believed to be in good standing at the date of this valuation as represented by Great Western. Table 3 lists tenements with items relating to tenement acquisition and/or dealings and Table 4 lists the details for all the tenements.
Table 3: Great Western - Items Relating to Tenement Acquisition and Dealings.
Tenement Agreement Agreement Company Description Comments No Type Date
Xstrata agreed to E51/1234 Memorandum of Xstrata Nickel Agreement for GTE to extend the phase 1 Understanding 20/05/2010 Australasia Earn up to 70% Earn date to ("MoU") Operations Pty Ltd E51/1238 20/05/2017
For personal use only use personal For
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Table 4: Great Western – Tenement Details
Tenement License Area Expenditure Expenditure Status Name Start Date End Date Rent No Type (km2) 2016 2017
Great Western - Granted (100%)
E 51/1324 Exploration Granted Great Western Exploration Limited 29/11/2010 28/11/2020 204 $70,000 $105,000 $17,447
E 51/1330 Exploration Granted Great Western Exploration Limited 19/05/2010 18/05/2020 102 $110,000 $66,000 $14,539
E 51/1560 Exploration Granted Great Western Exploration Limited 04/06/2014 03/06/2019 68 $22,000 $22,000 $2,756
E 53/1712 Exploration Granted Great Western Exploration Limited 11/06/2013 10/06/2018 216 $70,000 $105,000 $13,640
E 53/1713 Exploration Granted Great Western Exploration Limited 01/10/2015 30/09/2020 194 $63,000 $63,000 $7,891
E 53/1730 Exploration Granted Great Western Exploration Limited 02/10/2014 01/10/2019 28 $20,000 $20,000 $1,127
E 53/1740 Exploration Granted Great Western Exploration Limited 12/12/2014 11/12/2019 77 $25,000 $25,000 $3,131
E 51/1728 Exploration Application Great Western Exploration Limited 176 0 0 0
E 51/1727 Exploration Application Great Western Exploration Limited 135 0 0 0
Sub Total 1,199 $380,000 $406,000 $60,531
Cunyu JV Tenements (earning 70%)
E 51/1234 Exploration Granted Xstrata Nickel Australasia Operations Pty Ltd 10/07/2009 09/07/2019 108 $70,000 $105,000 $18,116
E 51/1238 Exploration Granted Xstrata Nickel Australasia Operations Pty Ltd 10/07/2009 09/07/2019 108 $70,000 $105,000 $18,116 Sub Total 216 $140,000 $210,000 $36,232
Total 1,415 $520,000 $616,000 $96,763
For personal use only use personal For
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3.4 Cunyu Joint Venture Great Western entered into a Memorandum of Understanding (“MoU”) with Xstrata Nickel Australasia Operations Pty Ltd (now owned by Glencore plc) on the 20th May 2013 to earn into the Cunyu Project, currently comprising of E51/1234 and E51/1238. The terms of the agreement are as follows: 1. Minimum expenditure before Great Western can withdraw is $250,000 2. Great Western can earn 70% by spending a total of $2.5 million on exploration in two stages a. Stage 1: A total of $1.5 million over three years to earn 50% b. Stage 2: The company can elect to spend an additional $1 million for a further 20% The JV is subject to a clawback clause as follows: 1. Glencore Xstrata has the right to clawback to 80% of the Cunyu Project each time a JORC compliant inferred resource is established by compensating GTE three times total exploration expenditure on the project. GTE will retain a 20% free carried interest to BFS. 2. If Glencore Xstrata elects not to clawback on the deposit, it is annexed from the JV. The annexed deposit is no longer subject to any future clawback and can be progressed to BFS by GTE. Great Western has met the minimum expenditure requirement and has spent approximately $1.4 million on the project to date. Glencore has agreed to extend the period for Stage 1 earn-in for a further 12 months to 20th May 2017. 4.0 Yerrida Exploration
4.1 Introduction Great Western Exploration Limited has focused its Western Australian exploration predominantly on the Yerrida basin where it currently has 11 exploration licenses for a total of 1,415 km2 area (Fig 2). The Yerrida Basin is a Palaeoproterozoic aged basin situated on the northern margin of the Archaean Yilgarn block located approximately 750 km northeast of Perth within an area that extends from Meekatharra to the west and Wiluna to the east and approximately 80 km north from the Goldfields Highway that links both towns (fig 1). In 2009, after the discovery the initial discovery of the nearby Degrussa copper-gold deposit,
the company initiated an extensive review of the Palaeoproterozoic rocks of the Northern For personal use only use personal For Yilgarn that may also be prospective for base metals and gold based upon similarities in host rocks, structures and age. The company recognised that the Yerrida Basin, as host to the Magellan Lead Deposit and Thaduna copper deposit, might also be prospective for VHMS base metal mineralisation
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similar to Degrussa. Furthermore the Company recognised that the northern area of the Yerrida Basin has had very little previous exploration.
Figure 2. Location of Great Western tenements and prospects within the Yerrida Basin.
Initially the company acquired 10 exploration licences for 1,400 km2 area and increased this area to over 3,200 km2 before reducing the area back to its current 1,415 km2. The company has identified four main prospects to date; New Springs, Finlayson, Chisel and Goodin (fig 2).
4.2 Regional Geology The Palaeoproterozoic Yerrida Basin was first recognised by the Geological Survey of Western Australia (“GSWA”) in 1998 following a detailed study (Pirajno et al. 2000, GSWA
For personal use only use personal For Report 60,) of the former Glengarry Basin Group which resulted in the division of this group into the Yerrida, Bryah and Padbury Basins. The Yerrida Basin is part of the Capricorn Orogen, a zone of low- to high-grade metamorphic rocks, magmatic belts, and low-grade volcano-sedimentary basins that were formed as a result of the oblique collision between the Pilbara and Yilgarn Cratons at about 1.8 Ga. The
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Yerrida Basin was probably formed at approximately 2.2 Ga and was affected by the Capricorn Orogeny. The Yerrida Basin has a faulted contact with the Bryah Basin in the west (Goodin Fault) and the Marymia Inlier in the north, and is unconformably overlain by rocks of the Earaheedy Basin in the east. Rocks that have accumulated in the Yerrida Basin are assigned to the Yerrida Group (formerly part of the Glengarry Group). The Yerrida Group is divided into the Windplain and Mooloogool Subgroups. The Windplain Subgroup contains the Juderina and Johnson Cairn Formations, which include siliciclastic rocks, evaporites, argillites, and locally turbidites. The Degrussa deposit is located on the contact of the Johnson Cairn Formation. The Mooloogool Subgroup was deposited in a high-energy environment, probably in a widening rift structure, surrounded by uplifted Archaean rocks of the Marymia and Goodin Inliers. The Subgroup comprises four formations: the Doolgunna, Thaduna, Killara, and Maraloou Formations. The Killara Formation contains continental tholeiitic basalts that were erupted along northeasterly, easterly, and northwesterly trending structures, a few of which contain dolerite dykes. The Doolgunna, Thaduna, and Killara Formations interdigitate, suggesting that sedimentation and volcanism were contemporaneous. The end of volcanism is marked by the deposition of chert units (Bartle Member), and sedimentological, textural, and petrographic data suggest that they were formed in a playa lake environment, with hot springs. The final phase of rifting is represented by sulfidic shale and laminated siltstone of the Maraloou Formation. Known mineralisation consists of shear zone-hosted copper deposits, quartz veins containing base metals, black shale-hosted barium, copper, platinum-group elements, and a large lead– carbonate deposit (Magellan) in the southeast. This lead deposit is present in the upper units of the Juderina Formation and the lower units of the Yelma Formation (Earaheedy Group), which are preserved as scattered outliers in the region. The geodynamic evolution of the Yerrida Basin is interpreted as having commenced as a pull- apart opening related to sinistral strike-slip faulting. Subsequent to this opening, a rift phase occurred during which the continental tholeiitic lavas of the Killara Formation were erupted. The life of the Yerrida Basin concluded with the formation of an intracontinental lake and the deposition of lacustrine sediments.
For personal use only use personal For
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4.3 Previous Exploration Prior to 1990 there was very little or no exploration carried out within much of the Yerrida Basin with only basic state-wide government regional scale geological mapping, aeromagnetic and gravity surveys. Figure 3 shows all historic drilling prior to 2009.
Figure 3.Location of historical drilling before 2009 in the Yerrida Basin. 4.3.1 1970 to 1986 Various Explorers Between 1970 and 1986, several companies undertook exploration activities in the Yerrida Basin. They explored for a range of metals including Cu, Au, and base metals (initially shale-hosted base metal deposits). Early work included aeromagnetic and gravity surveys and surface geochemical sampling and limited RAB, RC and diamond drilling.
In 1983 a diamond hole was completed by a private company to test an For personal use only use personal For aeromagnetic bullseye anomaly at Quartermaine Well. The hole was drilled to a depth of 300 m and intersected ultramafic basement.
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4.3.2 1986 to 1997 RGC Exploration Magellan Project RGC Exploration developed an interest in the Glengarry Basin in 1987 and explored initially for Au. In 1990, they began to explore for base metals and defined an area anomalous in lead-zinc at Limestone Bore. A 312 hole RAB drilling program in June 1991 resulted in the discovery of the Magellan prospect. RGC recognised the potential for weathered host carbonates in the Yandil and Finlayson Formations in the SE corner of the Glengarry Basin ("Base Metals Corner") and applied for several licences. Rock chip sampling programs in 1991 identified the Pizarro and Cortez prospects (up to 0.5% Zn and 0.48% Pb) and stream sediment sampling (up to 120 ppm Pb) initially defined the Drake prospect. Follow up work in 1992 and 1993 included an airborne magnetic survey, a 400 m x 400 m gravity survey over Diaz and the "Base Metals Corner" and RC drilling at Magellan, Cortez, and Pizarro. In 1994 Amdel Ltd reported a favourable preliminary metallurgical assessment on the Magellan mineralisation. A 20 hole diamond-drilling program was undertaken at Magellan to upgrade the resource estimate and provide further material for metallurgical test work. This resulted in an Indicated and Inferred resource of 7.89Mt at 6.4% Pb using a 3% cut-off (Pascoe and Edgar, 1995). A 58 hole RC program at Magellan and other prospects was undertaken in 1995 to explore for primary and oxidised base-metal mineralisation and to assist with upcoming tenement relinquishment decisions (McQuitty, 1995). A decision was made to joint venture the Magellan Project and other base-metal exploration targets in July 1995. RGC entered into a farm-in agreement in January 1997. 4.3.3 1990 to 1991 Western Mining Corporation (“WMC”) Terrabubba Project In 1991 WMC completed 9 shallow (<60 m) RC drillholes into the Terrabubba magnetic anomaly which intersected shallow Archaean ultramafic rocks in two holes near surface. These holes were not assayed for gold. 4.3.4 1996 to 2000 GSWA Report 60 Yerrida Basin In 1996, to encourage exploration into the region, the GSWA commenced a 1:250 000 scale regional geochemical and detailed mapping project of the then Glengarry Group which resulted in the publication of Report 60 ‘Yerrida Basin’. This report identified a number of regional geochemical anomalies and a gabbro sequence at
Cunyu that had potential for magmatic nickel sulphide mineralisation. For personal use only use personal For 4.3.5 2000 to 2002 Exco Resources NL/Rio Tinto Cunyu Project In 2001 Rio Tinto entered into a JV with Exco to explore their Cunyu Project. Rio Tinto carried out a broad spaced (800 m) Tempest survey identifying several EM
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anomalies and drill tested two of these anomalies. A single diamond hole was drilled into northern area referred to as the Diamond Well prospect and a second diamond hole was drilled to the west of the project referred to as the Oval prospect. The two drill holes intersected black shales with mafic sills not reaching basement. In 2002 Exco completed 21 shallow aircore holes (843 m) at the Curra prospect 4.3.6 2007 to 2013 Jubilee Mines NL/Xstrata/Glencore Cunyu Project In 2007 Jubilee Mines NL’s subsidiary Sir Samuel Mines NL carried out a lag soil sampling survey, to identify anomalous soil targets containing anomalous base metals. Great Western Joint Ventured into this project in 2013. 4.4 Recent Exploration Great Western Exploration first acquired large areas of the Yerrida Basin in 2009. The Company was one of the first movers into the region following the discovery of the Degrussa copper deposit and has subsequently has identified four prospects; the Chisel (copper) prospect; the Finlayson (gold) Prospect, the New Springs (nickel-copper) Prospect, and the Goodin (copper) Prospect (fig 2). The Company has stated it used the geological and geochemical data published in the GSWA Report 60 to identify similar stratigraphy that host the Degrussa VHMS and also focussed on regional scale lineaments identified by previous studies and/or in the available geophysical data. Previous workers have at different times proposed that north-west trending regional lineaments observed in the Yerrida basin are the continuation of the Keith Kilkenny fault zone (Rio Tinto 2001 & 2002), Perseverance fault (RGC 1994 & 1995; pmdCRC 2004), Bardoc Fault Zone (pmdCRC 2004) and Mt Ida fault zone (GSWA Report 135, 2014 and pmdCRC 2004) all of which are significant regional faults that are known to be the first order control and/or host many of the largest nickel, copper and gold deposits in the northern Yilgarn. The Company has stated it believes these faults are the first order (structural) control for the mineralisation seen on the eastern side of the Capricorn Orogeny where the majority of the copper and gold deposits occur that includes Degrussa, Monty, Thaduna, Plutonic, Magellan and Wiluna deposits. These lineaments represent crustal scale Archaean fault zones that were reactivated during the Capricorn Orogeny. The company has interpreted these main fault zones as the Waroonga-Ida, Bardoc and Perseverance fault zones after mainly the pmdCRC, 2004 (fig 4). The second order controls are north-east trending faults that formed during the Capricorn Orogeny that localise the mineralisation at or near the intersection of the re-activated Archaean first order fault zones. Examples of the second order control are the Goodin and Jenkins faults Because the majority of the Yerrida Basin has been subject to little or no previous exploration there was not the extensive existing databases to utilise that are normally available over much of the Yilgarn area. As a result the Company had to initially carry out regional scale program so that further
prospective areas could be identified. These regional program identified the current prospects New For personal use only use personal For Springs, Finlayson, Chisel and Goodin (Fig 2 & Fig 4). Work completed by Great Western is summarised in table 5 and shown in figure 5.
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Figure 4. Map showing interpreted major structural corridors of the eastern Yerrida basin.
Table 5. Work completed by Great Western at Yerrida.
Work Program Amount Units
Airborne EM 2 355 Line km Gravity 2 982 Stations Soil Sampling 2 318 Sample RC Drilling 6 735 Metres 1:20 000 Scale Geological Mapping 800 Km2
For personal use only use personal For
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Airborne EM (2 355 line km) Gravity (2 982 stations)
Surface Soil Geochemistry (2 318 Samples) RC Drilling (50 holes for 6,735m) For personal use only use personal For Figure 5. Plan showing work completed by Great Western at Yerrida
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5.0 Current Prospects
5.1 New Springs The New Springs nickel prospect is 100% owned by Great Western and is located in the Palaeoproterozoic Yerrida basin approximately 85 km northwest of the Wiluna and is prospective for magmatic nickel sulphide mineralisation. This style of mineralisation accounts for approximately 60 percent of the world’s Ni production and are also a major source of chromium, cobalt, copper and PGEs. According to the United States Geological Survey (“USGS”) geology model and exploration guide for the discovery of economic magmatic Ni-Cu±PGE sulfide deposits the New Springs prospect exhibits all the main characteristics for this style of mineralisation which include:
Large volume of mafic volcanic sequences with evidence of primitive Mg-rich melts and large volumes of tholeiitic magmatic rocks occurring on or near the edges of ancient cratons.
Province boundaries, rifts, and deeply penetrating faults that can allow for efficient transport of magma through the crust.
Small- to medium-sized differentiated mafic and (or) ultramafic dykes and sills, Deposits are generally not hosted in thick, large-layered intrusions.
Sulphur-bearing crustal rocks into which the layered mafic rocks are intruded. The prospect is located within a mafic – ultramafic (gabbro-pyroxenite) sequence that forms a part of the Killara volcanic unit within the Yerrida basin that has been emplaced along the margin of the Yilgarn Craton during the Proterozoic (fig 6). Further positive evidence is provided by the whole rock geochemical analysis completed by the GSWA on the Killara volcanics (GSWA Report 60, 2000) which is consistent with sulphur saturation that is a key geological process that can lead to the formation and segregation of a nickel – copper bearing sulphide mineralisation from the parent magma which is essential for the formation of nickel sulphide deposits. Further analysis of this data by Rio Tinto also concluded that the sequence had similar geochemistry to the Norilsk host rocks. The Company has also highlighted similarities with the Nova deposit which is also hosted in a Proterozoic gabbro-pyroxenite sequence emplaced along the margin of the Yilgarn Craton prior to the metamorphic overprinting that is a characteristic of the Fraser Range Complex. These similarities are listed it table 6. As magmatic nickel sulphides mineralisation forms prior to any regional metamorphism the USGS study concluded no obvious correlation between the metamorphic grade of the host rocks and the formation of magmatic nickel sulphides deposits. The New Springs prospect is strongly anomalous (> 20 times background) in nickel, copper, For personal use only use personal For cobalt, gold and PGEs with the peak nickel values of 574 ppm and 221 ppm and maps out a broad area that is enriched in nickel, copper, cobalt, gold and PGEs co-incident with the layered mafic – ultramafic sequence (Fig 7).
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Table 6. Comparisons with of New Springs with Nova nickel deposit.
Description Nova New Springs Similar rocks (layered gabbro-pyroxenite intrusion) Proterozoic age Located on margin of Yilgarn craton (271 ppm (221 ppm Regional geochemical Ni anomaly NI) Ni) Similar sized “eye” setting (~2.5km) Similar size EM plate model (~800m) Metamorphic grade High Low
Pyroxenite
For personal use only use personal For Figure 6. GSWA regional geology showing the layered dolerite-gabbro-pyroxenite stratigraphy.
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Pyroxenite Nickel Response ratio ( x background)
Gabbro
Figure 7. Regional surface geochemistry at New Springs. The regional geochemical response compares favourably with the Nova nickel deposit where a similar regional geochemical survey was completed that identified a nickel anomaly with a peak value of 271ppm that ultimately led to its discovery. The Nova deposit is also hosted in gabbro-pyroxenite sequence with a similar whole rock geochemical signature. There is currently 200 m VTEM (airborne EM) and 300 m line spaced HeliTEM (airborne EM) that cover parts of the prospect area and broad 400 m spaced regional government aeromagnetic data that covers the entire region. The broad spaced nature of the aeromagnetic data is only reliable for identifying larger regional features and lacks the detail required for working at a local scale. However the company has identified some features of interest that are co-incident with the regional geochemical anomalies which may represent smaller distinct layers or intrusions within a larger intrusive body (fig 8). There are number of EM anomalies where the airborne surveys have covered areas within the dolerite-gabbro-pyroxenite sequences that are of interest to the Company. Three of these anomalies were selected for detailed plate modelling on the basis of the proximity to the pyroxenite outcrop and elevated nickel, copper and gold in the regional soil sampling along
For personal use only use personal For strike of these anomalies (fig 9).
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Pyroxenite
Gabbro
Figure 8. Regional aeromagnetic map at New Springs. The company has stated that further work required included ground EM surveys and drill testing of the EM anomalies.
For personal use only use personal For Figure 9. Airborne EM plate models at New Springs.
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5.2 Chisel Prospect The Chisel prospect is located approximately 40 km northwest of Wiluna and 13 km north of the Magellan lead mine. The company is targeting VHMS and silver - lead -zinc mineralisation. Most of the exploration in the region was completed by RSG in the early to mid-1990s that resulted in the discovery of the Magellan lead mine. There are a number of base metal anomalies delineated by the RSG work that are yet to be followed up. The company completed three RC holes this year to determine the nature of the base metal anomalism intersected in an historical diamond hole completed by RGC in in 1994. The hole intersected 2 m @ 3.2% copper, 8 g/t silver, 0.296 g/t gold and 0.12% zinc from 146 m depth and also 2 m @ 0.67 g/t gold, 8 g/t silver and 0.4% zinc from 98 m depth. There was no further drilling completed. The main interest in the historical diamond drill hole was the juxtaposition of base metal mineralisation and “peperite” which is a diagnostic feature of Degrussa and Monty style massive copper mineralisation. The hole was logged as a sequence of mafic volcanics (dolerite, basalt) interbedded with altered siltstone and shales with the mineralisation occurring along and near the contact where “graded clasts have been ripped off the base” which closely matches the description of peperite. It has been reported that peperite has an important relationship with the mineralisation seen at both Monty and Degrussa. This sequence at Chisel is very similar to what Talisman Mining Limited reported after the initial discovery of Monty by JV partner Sandfire Resources Limited in an announcement dated 25th June 2015:- “In TLDD0004A, the host unit itself comprises rapidly alternating (centimetre-scale) interlayered sandstone, siltstone and shale sedimentary rocks. The upper half of the sedimentary package has been intruded by basalt intrusive rocks that exhibit peperite contact zones. Peperites are created when magma (basalt) intrudes, and mixes with, wet sediments. Very similar features have been documented at the DeGrussa mine where, in the Conductor 5 deposit, massive sulphide mineralisation often occurs in the peperite contact zone between basalt sills and inter-layered sandstone, siltstone and shale.” The RC drilling completed by Great Western confirmed the geology described in the original diamond hole where mafic volcanics have erupted and/or intruded into a sedimentary sequence forming peperite and extensive hydrothermal alteration. The drilling intersected wides zones (>50m) of strongly altered medium and fine grained basaltic (mafic) volcanic sequences with locally intense carbonate and pyrite alteration which is indicative of a large hydrothermal system. This is similar to what has been observed at Degrussa where the mafic volcanics are similarly altered and with strong carbonate alteration peripheral to the main lodes (Hawkes et al, 2015). Four potential VHMS horizons have been identified using path finder geochemistry where there has been a combination is barium, silver, cobalt, copper, manganese, iron, molybdenite
For personal use only use personal For and zinc enrichment. Previously RGC interpreted that the Perseverance fault is located 1km to the east and orientated northwest. This is a major regional fault that hosts some of WA’s largest nickel and gold mines to the southeast. Great Western has interpreted this as a possible first order control that would have been re-activated during the formation of the Yerrida basin. The fault
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can be traced in the regional magnetics and gravity along strike to the northwest as far as the Monty deposit. In addition approximately 3.5 km to the southwest RGC recognised a structurally complex area where there are northeast trending faults crosscutting the Perseverance fault that has a co-incident gravity anomaly. The company is interpreting this as a prime VHMS target that requires further work (fig 10). In addition approximately 6km to the south of Chisel an historical drill hole intersected 2 m @ 85 g/t silver from 44 m (bottom of hole) that also requires further follow-up work (fig 10).
Chisel Drilling
Historical drillhole 2m @ 85 g/t silver
Figure 10. VHMS target area at Chisel.
5.3 Finlayson Gold Prospect The Finlayson gold prospect is within the Cunyu JV project and is located approximately 70 km northwest of the Wiluna gold deposits. The Cunyu JV project is a Joint Venture between Glencore and Great Western whereby the Company is earning 70% by funding and managing exploration within the project area. Details of the Joint Venture can be seen in section 3.4 of
this document. For personal use only use personal For Historical drilling initially confirmed the presence Archaean greenstone comprising of mafic – ultramafic sequences with traces of nickel sulphides along strike to the north west of some of WA’s largest nickel deposits (Honeymoon Well, Mt Keith, and Yakabindie) that are located
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southeast of Wiluna. Furthermore a number of regional interpretations show the extension of the Bardoc and/or Perseverance faults through to the prospect area. The regional gravity data indicates the Archaean Wiluna greenstone belt continues under cover of the younger Palaeoproterozoic Yerrida Basin sequences. A single historical diamond drill hole at Quartermaine located 5 km west of the Finlayson prospect (further within the Yerrida basin) intersected Archaean greenstone at 300 m depth validating the gravity data. The regional Government maps show the Eastern margin of the Wiluna belt covered by the Finlayson member which is the basal unit of the Yerrida basin and is been mapped between 10m and 60m thick. At the Finlayson prospect nine shallow RC holes drilled by WMC in the 1990s to test the Terrabubba magnetic anomaly intersected mafic –ultramafic at depths from several metres to 20 m which is consistent with the thickness of the Finlayson member providing further evidence that the Wiluna belt is a under thin cover along the eastern margin of the Yerrida basin. The Company then developed the conceptual model where the faults and rock types that host the Wiluna gold deposits continue along strike to the northwest through to the Cunyu JV project under a thin cover of between 10 m to 60 m of the Palaeoproterozoic Finlayson unit. This thin cover of predominantly sandstone would also make surface geochemical sampling mostly ineffective. To test this conceptual model the company completed nine broadly spaced RC holes for a total of 1,529 m. The drilling demonstrated that there was greenstone basement from 20 m to 180 m depth. The drilling was also successful in demonstrating that the Finlayson prospect is prospective for gold intersecting a hydrothermally altered mafic shear zone in hole CNRC005 that contains anomalous gold mineralisation and associated pathfinder elements including bismuth, silver and tellurium (fig 11).
For personal use only use personal For
Figure 11. CNRC005 mineralised shear zone.
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The shear zone has a downhole width of 15 metres with peak gold anomalism that includes 1 metre intervals of 157ppb (0.16g/t Au) and 155ppb (0.16g/t Au) from 144 m and 150 m depth respectively. The gold anomalism along with the important pathfinder elements is strong evidence of a gold bearing hydrothermal system. The discovery of a mineralised shear zone within a greenstone sequence is a significant development at this early stage of drilling.
5.4 Goodin Prospect The Goodin prospect is located from 25 km to 17 km south east of the Degrussa copper mine and the Monty deposit respectively. To date the company has completed surface soil sampling, 1:20.000 scale geological mapping, airborne EM (HeliTEM) over approximately half of the prospect area and two RC drill holes for 400m.
Copper response ratio (x background)
Further follow-up areas
1. Enrichment of copper along NW fault above density anomaly, prospective area for further follow- up. No EM completed over this area yet. 2. Unexplained enrichment of copper. Requires further follow-up. No EM completed over this area yet
3. Unexplained moderate copper enrichment co-incident with strong gold enrichment. Requires further follow-up. No EM completed over this area. For personal use only use personal For Figure 12. Plan showing Surface geochemistry and airborne EM anomalies at Goodin.
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The Company identified 12 late-time airborne EM conductors co-incident with surface geochemical anomalies that occur in the vicinity of the Johnson Cairn unit which is the unit that forms the footwall at the Degrussa deposit (Fig 12). Five of these conductors have been plate modelled. The drilling at Goodin consisted of two RC holes for 400 metres to test two airborne EM plate models. The drilling intersected a zone of approximately 20 metres of disseminated sulphides in shale at both targets that the company believes explains the EM anomalies. The drilling also confirmed the stratigraphic sequence The company has eight remaining untested EM anomalies at Goodin prospect which occur at or near the Johnson Cairn – mafic volcanic contact along the western half of the projects. The company also recently recognized a second Monty trend in both the aeromagnetic and regional soils dataset and has so far identified two high priority structural targets with copper & gold enrichment in soils co-incident with gravity anomalies along this trend (fig 13).
Monty Trend Goodin Prospect
High Priority Target
Figure 13. Map Showing exploration target along at Goodin along strike from the Monty Deposit.
For personal use only use personal For
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6.0 Valuation of the Project When valuing any mineral asset/project it is important to consider as many factors as possible that may either assist or impinge upon the current cash value estimates of the mineral asset under consideration. In this Report AM&A considers that the primary features to be taken into account are the Tenement Security; Available Infrastructure; Relevant Expenditure on development, Resource Estimations/Prospectivity and the general Geological Setting. Basically, these “Boxes are Ticked” as described above with regards to tenement security, infrastructure, previous exploration concepts and a favourable geological environment.
6.1 Selection of Valuation Methods The following valuation methods, as described above in section 2, are not considered applicable for the respective reasons provided:
The Discounted Cash Flow method cannot be used for the Project as the lack of mineral reserve estimates precludes a DCF;
The Kilburn ‘prospectivity’ method - as the range of values generated is typically too wide to be realistic.
Comparable transactions – with the recent general demise of the exploration industry, through lack of ‘high-risk funds’, this has curtailed much activity thus no similar recent relevant transactions could be located for similar projects.
Real estate value which is usually based on a value ascribed to varying areas of tenement holdings which may consequently become unrealistic due to the varying areas of projects. The Empirical method was deemed not applicable since there are not yet any JORC Code (2012) compliant resource estimates. Accordingly the MEE method for the project has been adapted as the overriding basis for the estimation of the value. The MEE method was applied to the supplied historical expenditures for the project with the value ranges as shown in Appendix 1.
6.2 Valuation – MEE Method The historical expenditures were supplied by Great Western and deemed applicable. The Reserve Bank Inflation Calculator was used to inflate the expenditures to a 2016 basis for the valuation workings. In most other parts of the Yilgarn where there has been a long history of exploration many areas have already been eliminated allowing the explorer to focus only on known areas. This is not the case in the Yerrida basin where there is little historic exploration and therefore the ‘greenfields’ nature of the projects requires regional surveys. This means that work carried out
For personal use only use personal For that results in eliminating areas can be as valuable as work that demonstrates prospectivity of other areas. To reflect this PEM factors of between 0.3 and 1.5 have been allocated to each individual tenement, whether it is still active or subsequently surrendered, on the following basis:
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a) A PEM > 1.0 if the work completed on the tenement increased its prospectivity. b) A PEM = 1.0 if the work completed maintained its prospectivity c) A PEM < 1.0 if the work resulted in the elimination of the tenement area as being prospective All details of the workings are summarised in Appendix 1.
6.3 Valuation Conclusions The summary result for the method is presented in Table 7. As stated above the MEE method was selected as the most appropriate method for valuation estimate purposes.
Table 7. Summary Range of Current Values A$M Method Low High Preferred MEE $3,203,470 $4,917,712 $3,934,170 Rounded $3,200,000 $4,900,000 $3,900,000
This Report concludes that the cash value of 100% of the Great Western tenements in Western Australia at 1th August, 2016, is ascribed at $3.9M from within the range of $3.2M to $4.9M. Yours faithfully,
Allen J. Maynard Brian J. Varndell BAppSc (Geol), MAIG, MAusIMM. BSc (SpecHonsGeol), FAusIMM.
For personal use only use personal For
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Competent Persons Statement
The information in this report which relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Allen Maynard, who is a Member of the Australian Institute of Geosciences (“AIG”), a Corporate Member of the Australasian Institute of Mining & Metallurgy (“AusIMM”) and independent consultant to the Company. Mr Maynard is the Director and principal geologist of Al Maynard & Associates Pty Ltd and has over 35 years of exploration and mining experience in a variety of mineral deposit styles. Mr Maynard has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for reporting of Exploration Results, Exploration Targets, Mineral Resources and Ore Reserves”.(JORC Code). Mr Maynard consents to inclusion in the report of the matters based on this information in the form and context in which it appears.
Competent Persons Statement
The information in this report which relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Brian Varndell, who is a Fellow of the Australasian Institute of Mining and Metallurgy and independent consultant to the Company. Mr Varndell is an associate of Al Maynard & Associate Pty Ltd and has over 40 years of exploration and mining experience in a variety of mineral deposit styles including iron ore mineralisation. Mr Varndell has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for reporting of Exploration Results, Exploration Targets, Mineral Resources and Ore Reserves”.(JORC Code). Mr Varndell consents to inclusion in the report of the matters based on this information in the form and context in which it appears.
For personal use only use personal For
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7.0 References Valuation AusIMM - JORC Code, 2012. Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserve, prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australasian Institute of Geoscientists and Minerals Council of Australia (JORC), 2012 Edition. AusIMM. (2005): "Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (the VALMIN Code)" 2005 Edition. ClM, (2003): - "Standards and Guidelines for Valuation of Mineral Properties. Final Version, February 2003". Special Committee of the Canadian Institute of Mining, Metallurgy and Petroleum on Valuation of Mineral Properties (CIMVAL). Oxford Dictionary of Current English; for any terms not covered in the Glossary: Oxford University Press. Rudenno, V. 2009: "The Mining Valuation Handbook" 3rd Edition. Technical Abeysinghe, P.B., and Hocking, R.M., 2005. Mineralisation and geology of the Earaheedy area (scale 1:500 000): GSWA, report 96 Adamides, N. G,1998. Geology of the Doolgunna 1:100 000 sheet: GSWA, 1:100 000 Geological Series - Explanatory Notes Blewett R. S. and Hitchman A. P.,2004. 3D Geological models of the eastern Yilgarn Craton: pmdCRC, Project Y2 CrawfordR. A., Faulkner J. A., Sanders A. J., Lewis J. D., and Gozzard J. R.,1996. Geochemical Mapping of the Glengarry 1:250 000 Sheet: GSWA, 1:250 000 Geochemical Series - Explanatory Notes Dentith, M.C., Johnson, S.P., Evans, S., Aitken, A.R.A., Joly, A., Thiel, S., Tyler, I.M.,2014. A Magnetotelluric Traverse across the Eastern Part of the Capricorn Orogen: GSWA, Report 135 Farrel, T. R., 2001, ,2001. Wiluna , W.A. (2nd edition): GSWA, 1:250 000 Geological Series - Explanatory Notes Gee, R. D., and Grey, K.,1993. Proterozoic rocks on the Glengarry 1:250 000 sheet — stratigraphy, structure, and stromatolite biostratigraphy: GSWA, Report 41 Gee, R.D.,1987. Peak Hill Western Australia: GSWA, 1:250 000 Geological Series – Explanatory Notes. Hawke, M.L., Meffre, S., Stein, H. , Hilliard, P., Large, R., Gemmell J. B.,2015. 2015 Geochronology of the DeGrussa volcanic-hosted massive sulphide deposit and associated mineralisation of the Yerrida, Bryah and Padbury Basins, Western Australia: Precambrian For personal use only use personal For Research 267 (2015), pp250–284 Jones, J.A., Pirajno, F., Hocking, R.M., and Grey, K. ,2000. Annual Review GSWA Revised stratigraphy for the Earaheedy Group implications for the tectonic evolution and mineral potential of the Earaheedy Basin: GSWA
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Morris P. A., Sanders A. J, Pirajno, F., Faulkner J. A. and Coker J.,1998. Regional Scale Regolith Geochemistry: Identification of Metalloid Anomalies and the extent of bedrock in the Archean and Proterozoic of Western Australia.: CRC Leme, Monograth Regolith 98 Morris, P.A.,2002. Regolith materials Wiluna WA, Sheet SG 51-9: GSWA, 1:250 000 Regolith Geochemistry Series MYERS, J. S., 1990, ,1990. Capricorn Orogen, in Geology and mineral resources of Western Australia: GSWA, Memoir 3, p. 197–198 Pirajno, F.,1996. Models for the geodynamic evolution of the Palaeoproterozoic Glengarry Basin Western Australia: GSWA, 1995–96 Annual Review Pirajno, F., Adamides, N.G.,1998. Geology of the Thaduna 1: 100 000 sheet: GSWA, 1: 100 000 Geological Series – Explanatory Notes Pirajno, F., and Adamides, N. G, 2000. Geology and mineralisation of the Palaeoproterozoic Yerrida Basin, Western Australia: GSWA, Report 60 Pirajno, F., Occhipinti, S.,2000. Three Palaeoproterozoic basins – Yerrida, Bryah and Padbury – Capricorn Orogen, Western Australia: Aust. J. Earth Sci. 47, 675–688 Pirajno, F., Occhipinti, S.A., Swager, C.P.,2000. Geology and Mineralisation of the Palaeoproterozoic Bryah and Padbury Basins Western Australia: GSWA, Report 59 Subramanya J. A., Faulkner J. A., Sanders A. J., and Gozzard J. R.,1995. Geochemical Mapping of the Peak Hill 1:250 000 Sheet: GSWA 1:250 000 Geochemical Series - Explanatory Notes Tyler, I. M., and Hocking, R. M.,2001. Tectonic units of Western Australia (scale 1:2 500 000): GSWA Great Western Exploration Limited Company Reports & ASX Announcements
Year Title 2009 Annual Report to Shareholders 2010 Annual Report to Shareholders 2011 Annual Report to Shareholders 2012 Annual Report to Shareholders 2012 Doolgunna Project 2012 Combined Annual Report C196/2012 2013 Annual Report to Shareholders 2013 Neds Creek Combined Annual Report C191/2012 2013 Cunyu JV Combined Annual Report C151/2009 2013 Doolgunna Project 2013 Combined Annual Report C196/2013 2014 Annual Report to Shareholders 2014 Cunyu Exploration Update: ASX Announcement 17/12/2014 2014 Cunyu Project JV Report: , Internal Technical Report
For personal use only use personal For 2014 Exciting New Prospect at Doolgunna: ASX Announcement 18/08/2014 2014 Quarterly Report to Shareholders - March 2014 2014 Quarterly Report to Shareholders - June 2014 2014 Quarterly Report to Shareholders - September 2014 2014 Quarterly Report to Shareholders - December 2014
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2014 Doolgunna Project 2014 Combined Annual Report C196/2014 2014 Paroo Project 2014 Annual Report E53/1712 2014 Paroo Project 2014 Annual Report E53/1728 2015 Annual Report to Shareholders 2015 Exciting New Nickel Sulphide Prospect Identified at Yerrida: ASX Announcement 24/02/2015 2015 Monty Style Mineralisation Identified at Chisel Prospect: ASX Announcement 09/11/2015 2015 Quarterly Report to Shareholders - March 2015 2015 Quarterly Report to Shareholders - June 2015 2015 Quarterly Report to Shareholders - September 2015 2015 Quarterly Report to Shareholders - December 2015 2016 Chisel Exploration Update: ASX Announcement 05/02/2016 2016 Quarterly Report to Shareholders - March 2016 2016 Quarterly Report to Shareholders - June 2016
WAMEX Reports
Year Report # Title Operator Wiluna - Twelve Mile Pool Project, Non-statutory Report: Progress Report as 1977 A7394 Samantha Mines NL at 17th January 1977, MC53/4935-4940 & 5036-5040.
Lake Gregory Project, Annual Report for the period 27th March 1981 to 26th 1982 A11004 Esso Exploration Aust Inc March 1982, TR70/8251H. Wiluna Project, Non-statutory Report: Progress Report, June 1985, E53/2 ,3 Aust Consolidated Minerals 1985 A16005 & 37. Ltd 1986 A18944 Final (surrender) report, Quartermaine Well Project, E51/12 Amoco Minerals Aust Co 1987/1988 Annual Report on E 51/146-148, 52/212-214, 218, 220, 222, 224, 1988 A27730 CRA Exploration Pty Ltd 226 and 295 Ruby Bore, SG-50-08 Peak Hill, Western Australia EL53/69, Mount Wilkinson West, Annual Report for the period ending 1989 A27664 Chevron Exploration Corp March 13 1989. 1990 A31082 Glengarry Project, Final Surrender Report, June 1990, E51/219. ACM Gold Ltd Corktree Well Project, 1990/1991 Final Surrender Report for the period 1991 A33860 Hallmark Gold NL ending 16th March 1991, E51/254 & 255. Ruby Bore Project, Non-statutory Report: Final Report for E51/146-148, 1991 A33952 E52/212, 218 & 295; Partial Surrender Report for E52/213,214,220, 222, CRA Exploration Pty Ltd 224, & 226. Terabubba Project, Final Surrender Report for the period 14th November Western Mining 1991 A34775 1990 to 28th November 1991, E51/295. Corporation Ltd
Annual Report for the Period 15/08/91 to 28/02/93 Yandil Pb project 1993 A37813 (E51/325 to E51/327, E53/285, E53/315, E53/327, E53/362, E53/334 to RGC Exploration Pty Ltd E53/335, E53/402 and E53/429 to E53/430 RGC Exploration
1994 A40646 Annual report for the period 09/92-09/93 Ruby Bore-Good Pool Project CRA Exploration Pty Ltd
Annual Report for the period 01/01/93 to 31/12/93 Yandil Pb project 1994 A40888 (E51/325 to E51/327, E53/285, E53/315, E53/327, E53/362, E53/334 to RGC Exploration Pty Ltd
For personal use only use personal For E53/335, E53/362, E53/402, and E53/429 to E53/430 RGC Exploration
1994 A44020 Annual report for the period 09/93-09/94 Ruby Bore-Good Pool Project CRA Exploration Pty Ltd
1994 A44020 Annual report for the period 09/93-09/94 Ruby Bore-Good Pool Project CRA Exploration Pty Ltd
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Paroo Project, Annual Report Exploration Licences E51/373-376, E53/382- 1995 A43658 RGC Exploration Pty Ltd 383 for the period 01/01/1994 to 31/12/1994.
Annual report Yandil exploration for 1/1/94 to 31/12/94 E51/325 to 1995 A43660 E51/327, E53/285, E53/315, E53/327, E53/334, E53/335, E53/362, E53/402, RGC Exploration Pty Ltd E53/429, E53/430, E53/511 and E53/518 RGC Exploraton Annual report for the period 09/94-09/95 Ruby Bore-Good Pool Project 1995 A45882 E51/321 E51/357 E51/367 E57/391 E52/554-557 E52/587 E52/668 E52/670 CRA Exploration Pty Ltd E52/712 E52/732 Surrender Report for the period to 27/10/95 Yandil Project E51/325 1996 A46726 RGC Exploration Pty Ltd E53/335 1996 A46727 Paroo project, Surrender report, E51/373, 374, 375, 376, E53/382, 383 RGC Exploration Pty Ltd Killara Project, Surrender Report January 1996, E51/329, 330, 51/377-380 , 1996 A46747 RGC Exploration Pty Ltd 51/386 ,51/435.
Yandil Project, Surrender Report for the period 19/01/1992 to 11/07/1996, 1996 A48263 RGC Exploration Pty Ltd E53/334, 511, 518.
Yandil E51/325 to E51/327, E53/285, E53/315, E53/327, E53/334, E53/335, 1996 A48417 E53/362, E53/402, E53/429, E53/430, E53/511 and E53/518. Annual report RGC Exploration Pty Ltd 01/01/95 to 31/12/95 RGC Exploration
Bulla Gum Project, Final Surrender Report for period July 1996 to June 1997, 1997 A52353 Perilya Mines NL E51/544-547, E51/601-602. 1997 A53288 Yandil, E51/327, 285, 315, 644 Exploration Licence 01/01/97 - 31/12/97 Renison Ltd 1998 A54293 Surrender Report , Yandil, E53/362, 429 April 1998. RGC Exploration Pty Ltd Cunyu Project 1997 Annual Report to D.o.M.E. on ELs 53/658 to 53/663 Ref: 1998 A55121 Wiluna Mines Ltd 3-184-98.WJ Magellan Project, Glengarry Basin, WA (Report No:R03.99) 1998 Annual 1999 A57485 report for the period 01/01/98-31/12/98 (E53/285 E53/315 E53/327 Magellan Mining Pty Ltd E53/644 E53/694 E53/695) Annual and Surrender Report for the period 18 August 1998 to 17 August 1999 A57813 1999 Parker range Project (E77/48, E77/501, P77/2845 to 2848, P77/2860) Abador Gold NL Southern Cross Mineral Field,WA
Joint Annual Report For the Period 1/01/1998 to 31/12/1998 1999 A58606 E53/259,399,414,443,459,504,506,536,559,609,624,674,701,729 Wiluna Mines Ltd GML53/753,M53/6,24=27,30,32,34,38-45,49,50,52-54 Joint Annual Report: Wiluna C132/1994 for the Period 01/01/1999 to 2000 A60487 Great Central Mines Ltd 31/12/1999. Wiluna / Jundee / Lake Violet / Barwidgee Project[s], Partial Surrender Report for the period ending 30th September 2000 for E53/129,674,729,& Normandy Yandal 2000 A61555 Final Surrender Report for E53/325,504,559,574,742, Operations Ltd M53/225...... M53/470; P53/852....P53/884. Wiluna / Jundee / Lake Violet / Barwidgee Project[s], Partial Surrender Report for the period ending 30th September 2000 for E53/129,674,729,& Normandy Yandal 2000 A61555 Final Surrender Report for E53/325,504,559,574,742, Operations Ltd M53/225...... M53/470; P53/852....P53/884. Wiluna / Jundee / Lake Violet / Barwidgee Project[s], Partial Surrender Report for the period ending 30th September 2000 for E53/129,674,729,& Normandy Yandal 2000 A61555 Final Surrender Report for E53/325,504,559,574,742, Operations Ltd M53/225...... M53/470; P53/852....P53/884.
For personal use only use personal For Wiluna / Jundee / Lake Violet / Barwidgee Project[s], Partial Surrender Report for the period ending 30th September 2000 for E53/129,674,729,& Normandy Yandal 2000 A61555 Final Surrender Report for E53/325,504,559,574,742, Operations Ltd M53/225...... M53/470; P53/852....P53/884. Combined Partial Surrender Report on exploration for period ended 30 Normandy Yandal 2000 A62186 September 2000 for E53/129, E53/674 and E53/729. Operations Ltd
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Valuation of the Great Western Exploration Limited Projects - Western Australia
Combined Partial Surrender Report on exploration for period ended 30 Normandy Yandal 2000 A62186 September 2000 for E53/129, E53/674 and E53/729. Operations Ltd
First Annual Report for the period ending 18th January 2001 E51/792 Cunyu 1, E51/793 Cunyu 2, E51/845 Cunyu 3, E52/1375 Cunyu 4, E51/893 Cunyu 5, Rio Tinto Exploration Pty 2001 A62239 Yerrida Programme, Wiluna SG51-12, Glengarry SG50-12, Nabberu SG51-05, Ltd Wiluna SG51-09 Western Australia,
Critch Bore Project, [2nd] Partial Surrender Report for the period 27/03 Normandy Yandal 2001 A62491 /1997 to 27/03/2001, E53/674. Operations Ltd Annual Report for the Period March 2000 - November 2001 E51/792 Cunyu 1, E51/793 Cunyu 2, E51/845 Cunyu 3, E52/1375 Cunyu 4, E51/893 Cunyu 5, Rio Tinto Exploration Pty 2002 A64750 Cunyu JV Peak Hill SF50-08, Glengarry SG50-12, Nabberu SG51-05, Wiluna Ltd SG51-09 Western Australia Peak Hill, Surrender Report Exploration License: E51/893 9th March 2000 to 5th April 2002 A65148 Exco Resources NL 2002 Cunyu Project Western Australia
Annual Report 18th November 2001 to 17th November 2002 Cunyu Project, 2003 A65970 Exco Resources NL Western Australia Combined Reporting No C47/200 E51/792 and E51/793.
Annual Report for the period 1 January 2002 to 31 December 2002 Cunyu 2003 A66060 WMC Resources Ltd Exploration Project E52/1375, E51/845, E69/1637, E69/1732 and E69/1705
Mooloogool Project, Annual Report for the period 7th March 2006 to 6th 2007 A75270 Washington Resources Ltd March 2007, E51/1059.
SURRENDER REPORT Doolgunna E52/1954, E52/1953, E52/2013, E52/2014, 2008 A80486 AURORA MINERALS LTD E51/1193 and E51/1194 Combined Annual Report Number C46/2008
Partial Surrender Report for the Havelock Tenement (E53/1130) for the 2008 A80783 ABRA MINING LTD period 20-Jul-05 to 23-Dec-08 EMERGENT RESOURCES 2009 A82400 NORTH POOL PROJECT E53/977 RELINQUISHMENT REPORT LTD Annual Report for the Havelock Tenement (E53/1130) for the period 20-Jul- 2009 A84273 ABRA MINING LTD 2008 to 19-Jul-2009 EMERGENT RESOURCES 2010 A86799 North Pool Project E53/977 WA Relinquishment Report LTD Yerrida Project E53/1492, E53/1497 & E53/1498 2011, Annual Report Period 2011 A90508 SIPA EXPLORATION NL 1 May 2010 to 30 April 2011
Annual Report on Exploration Completed on Exploration Licence 51/1312 2011 A92196 ROSANE PTY LTD for the period 23 September 2010 to 22 September 2011
Yerrida Project Annual Report for the Period 1 May 2011 to 30 April 2012, 2012 A94114 SIPA EXPLORATION NL C129/2010, E53/1492, E53/1497 & E53/1498
For personal use only use personal For
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Valuation of the Great Western Exploration Limited Projects - Western Australia
8.0 Glossary of Technical Terms and Abbreviations Anomaly Value higher or lower than the expected or norm. Base metal Generally a metal inferior in value to the precious metals, e.g. copper, lead, zinc, nickel. Complex An assemblage of rocks or minerals intricately mixed or folded together. Diamond drill Rotary drilling using diamond impregnated bits, to produce a solid continuous core sample of the rock. Dip The angle at which a rock layer, fault of any other planar structure is inclined from the horizontal. Fault A fracture in rocks on which there has been movement on one of the sides relative to the other, parallel to the fracture. Intercept The length of rock or mineralisation traversed by a drillhole. JORC Joint Ore Reserves Committee- Australasian Code for Reporting of Identified Resources and Ore Reserves. Mineralisation In economic geology, the introduction of valuable elements into a rock body. Ore A mixture of minerals, host rock and waste material which is expected to be mineable at a profit. Outcrop The surface expression of a rock layer (verb: to crop out). Peperite A sedimentary rock that contains fragments of igneous material and is formed when magma comes into contact with wet sediments Primary Mineralisation which has not been affected by near surface mineralisation oxidising process. Quartz A very common mineral composed of silicon dioxide-SiO2. RAB Rotary Air Blast (as related to drilling)—A drilling technique in which the sample is returned to the surface outside the rod string by compressed air. RC Reverse Circulation (as relating to drilling)—A drilling technique in which the cuttings are recovered through the drill rods thus minimising sample losses and contamination. Reconnaissance A general examination or survey of a region with reference to its main features, usually as a preliminary to a more detailed survey. Remote Sensing Geophysical data obtained by satellites processed and presented Imagery as photographic images in real or false colour combinations. Reserve In-situ mineral occurrence which has had mining parameters applied to it, from which valuable or useful minerals may be recovered. Resource In-situ mineral occurrence from which valuable or useful minerals may be recovered, but from which only a broad knowledge of the geological character of the deposit is based on relatively few samples or measurements. Shear (zone) A zone in which shearing has occurred on a large scale so that the rock is crushed and brecciated. Stratigraphy The succession of superimposition of rock strata. Composition, sequence
For personal use only use personal For and correlation of stratified rock in the earth’s crust. Strike The direction or bearing of the outcrop of an inclined bed or structure on a level surface.
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Valuation of the Great Western Exploration Limited Projects - Western Australia
Abbreviations
g gram m3 cubic metre kg kilogram mm millimetre km kilometre M million km2 square kilometre oz troy ounce m metre t tonne m2 square metre
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Valuation of the Great Western Exploration Limited Projects - Western Australia
Appendix 1: Details of Valuation Estimates.
PEM Factor Value A$ 000s Tenement 2009 2010 2011 2012 2013 2014 2015 2016 Total Low High Pref. Low High Preferred MEE Inf Factor 1.15 1.12 1.08 1.07 1.04 1.02 1.00 1.00
Cunyu E51/1279 Exp $ $0 $0 $33,570 $7,414 $27,928 $41,498 $0 $0 $110,410 0.30 0.50 0.40 $33,123 $55,205 $44,164 E53/1341 Exp $ $0 $21,976 $12,031 $21,333 $32,526 $115,673 $67,926 $0 $271,464 0.30 0.50 0.40 $81,439 $135,732 $108,586 E51/1234 Exp $ $0 $82,264 $18,153 $24,223 $140,060 $110,350 $159,084 $0 $534,133 1.00 1.50 1.20 $534,133 $801,199 $640,960 E51/1238 Exp $ $0 $22,796 $21,628 $22,362 $139,862 $118,257 $158,979 $0 $483,885 1.00 1.50 1.20 $483,885 $725,827 $580,661 Total Exp $ $0 $127,036 $85,382 $75,331 $340,376 $385,777 $385,989 $0 $1,399,891 $1,132,580 $1,717,963 $1,374,371 Doolgunna E51/1322 Exp $ $0 $0 $78,497 $74,668 $69,636 $48,165 $0 $0 $270,966 0.30 0.50 0.40 $81,290 $135,483 $108,386 E51/1323 Exp $ $0 $0 $82,987 $73,384 $69,747 $44,878 $0 $0 $270,996 0.30 0.50 0.40 $81,299 $135,498 $108,398 E51/1324 Exp $ $0 $0 $99,395 $74,368 $76,957 $113,700 $123,233 $0 $487,653 1.00 1.50 1.2 $487,653 $731,480 $585,184 Total Exp $ $0 $0 $260,878 $222,420 $216,340 $206,744 $123,233 $0 $1,029,615 $650,242 $1,002,460 $801,968
Finlayson Range E53/1774 Exp $ $0 $0 $0 $0 $0 $0 $20,438 $0 $20,438 0.30 0.50 0.40 $6,131 $10,219 $8,175 E53/1775 Exp $ $0 $0 $0 $0 $0 $0 $20,438 $0 $20,438 0.30 0.50 0.40 $6,131 $10,219 $8,175 E53/1776 Exp $ $0 $0 $0 $0 $0 $0 $31,040 $0 $31,040 0.30 0.50 0.40 $9,312 $15,520 $12,416 E53/1713 Exp $ $0 $0 $0 $0 $0 $0 $0 $0 $0 0.30 0.50 0.40 $0 $0 $0 Total Exp $ $0 $0 $0 $0 $0 $0 $71,916 $0 $71,916 $21,575 $35,958 $28,766 Neds Creek E51/1320 Exp $ $0 $0 $79,056 $27,422 $30,088 $55,995 $36,550 $0 $229,111 0.30 0.50 0.40 $68,733 $114,556 $91,644 E51/1321 Exp $ $0 $0 $77,206 $73,758 $27,790 $103,807 $55,266 $0 $337,828 0.30 0.50 0.40 $101,348 $168,914 $135,131 E51/1333 Exp $ $0 $0 $101,417 $110,735 $68,928 $121,443 $0 $0 $402,524 0.30 0.50 0.40 $120,757 $201,262 $161,010 E51/1355 Exp $ $0 $0 $47,368 $22,802 $33,115 $31,878 $0 $0 $135,162 0.30 0.50 0.40 $40,549 $67,581 $54,065 E51/1330 Exp $ $0 $0 $530,907 $65,392 $32,372 $101,976 $46,408 $0 $777,055 1.00 1.50 1.20 $777,055 $1,165,583 $932,466 Total Exp $ $0 $0 $835,955 $300,109 $192,293 $415,099 $138,224 $0 $1,881,680 $1,108,443 $1,717,895 $1,374,316
Paroo E51/1540 Exp $ $0 $0 $0 $0 $0 $0 $23,657 $37,878 $61,535 0.30 0.50 0.40 $18,461 $30,768 $24,614 E53/1722 Exp $ $0 $0 $0 $0 $0 $0 $0 $0 $0 0.30 0.50 0.40 $0 $0 $0 E51/1560 Exp $ $0 $0 $0 $0 $0 $0 $24,703 $0 $24,703 1.00 1.50 1.20 $24,703 $37,055 $29,644 E53/1712 Exp $ $0 $0 $0 $0 $0 $74,600 $46,371 $0 $120,971 1.00 1.50 1.20 $120,971 $181,456 $145,165 Total Exp $ $0 $0 $0 $0 $0 $74,600 $94,731 $37,878 $207,209 $164,134 $249,278 $199,422 Other E53/1621 Exp $ $0 $0 $0 $88,228 $0 $0 $0 $0 $88,228 0.30 0.50 0.40 $26,468 $44,114 $35,291 E53/1646 Exp $ $0 $0 $0 $0 $0 $0 $0 $0 $0 0.30 0.50 0.40 $0 $0 $0
only use personal For E53/1728 Exp $ $0 $0 $0 $0 $0 $42,031 $0 $0 $42,031 1.00 1.50 1.20 $42,031 $63,047 $50,437 E53/1730 Exp $ $0 $0 $0 $0 $0 $0 $25,138 $0 $25,138 1.00 1.50 1.20 $25,138 $37,707 $30,166 E53/1740 Exp $ $0 $0 $0 $0 $0 $0 $0 $32,860 $32,860 1.00 1.50 1.20 $32,860 $49,290 $39,432 Total Exp $ $0 $0 $0 $88,228 $0 $42,031 $25,138 $32,860 $188,257 $126,498 $194,158 $155,326
Total $0 $127,036 $1,182,214 $686,088 $749,009 $1,124,251 $839,231 $70,738 $4,778,568 $3,203,470 $4,917,712 $3,934,170
Great Western Independent Technical Valuation Report – AM&A Page 38
APPENDIX E
INDEPENDENT TECHNICAL VALUATION – VANGUARD PROJECTS
For personal use only use personal For
AL MAYNARD & ASSOCIATES Pty Ltd Consulting Geologists www.geological.com.au ABN 75 120 492 435 9/280 Hay Street, Tel: (+618) 9388 1000 Mob: 04 0304 9449 SUBIACO, WA, 6008 Fax: (+618) 9388 1768 [email protected] Australia Australian & International Exploration & Evaluation of Mineral Properties
INDEPENDENT TECHNICAL VALUATION
OF THE
IVES FIND & FAIRBAIRN PROJECTS
WESTERN AUSTRALIA
PREPARED FOR
BENTLEYS CORPORATE ADVISORY (WA) PTY LTD
Author: Brian J. Varndell, BSc(Spec.Hons.), FAusIMM. Peer Review: Allen J Maynard BAppSc(Geol), MAIG, MAusIMM Company; Al Maynard & Associates Pty Ltd
Date: 11th June, 2016 For personal use only use personal For
Valuation of the Vanguard Projects - Western Australia
EXECUTIVE SUMMARY
This Independent Technical Valuation Report (“ITV”) of the Vanguard Exploration Ltd (“Vanguard”) mining tenements in Western Australia, has been prepared by Al Maynard & Associates (“AM&A”) at the request of Mr R. Matic of Bentleys Corporate Advisory (WA) Pty Ltd (“Bentleys”) for inclusion in their Independent Expert’s Report (“IER”). The tenements concerned cover 425.2 km2 within the Murchison and Wiluna Districts in Western Australia. This report provides an independent technical valuation of the eight Exploration Licences (“EL”) as at 7th June, 2016. The AM&A report has been prepared in accordance with the guidelines of the Valuation of Mineral Assets and Mineral Securities for Independent Expert’s Reports (the “Valmin Code”) (2005) as adopted by the Australian Institute of Geoscientists (“AIG”) and the Australasian Institute of Mining and Metallurgy (“AusIMM”). Vanguard is a public unlisted company and its principal business is involved in mineral exploration. Vanguard owns the tenements situated northeast of Meekatharra and southeast of Wiluna that are prospective for copper, lithium and gold. The Ives Find Project comprises a single EL (53/1369) located approximately 65 km southeast of Wiluna that is prospective for gold, lithium and tungsten. The historic Ives Find gold mining centre occupies the northeastern section of the tenement where total historic production of 2,019 tonnes of ore for a total of 740 ounces of gold recovered (average production grade: 11.4 g/t Au) has been recorded. Reverse Circulation drilling (“RC”) completed by Vanguard at Ives Find underneath the old workings intersected high grade veins that remain open at depth. The RC drilling also discovered another two high grade veins not previously known along strike to the southeast at the Duck and Duckling prospects. Also observed at Ives Find are large volumes of pegmatite veining that may be prospective for lithium and skarns that may be prospective for tungsten. The seven EL Fairbairn Project is located 170 km north of Wiluna. The primary exploration target is porphyry copper where sulphide mineralisation up to 4m at 2.43% copper was intersected during exploration by Northling Pty Ltd (“Northling”) in 1993 while searching for diamonds on what is now E52/2314. This mineralised interval is in aircore drillhole DH3 and is from 58m to the end of the hole at 62m. In 2010, Quadrio Resources Pty Ltd (“Quadrio”) explored the Fairbairn area
surrounding DH3 for copper. Exploration included soil sampling, a ground magnetic For personal use only use personal For survey, an electromagnetic/induced polarisation (EM/IP) survey and three RC drillholes.
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Valuation of the Vanguard Projects - Western Australia
This valuation appraises the projects using the Multiple of Exploration Expenditure (“MEE”) method for both projects and mentions the Exploration Target Potential at Ives Find. Given the relevance of the assumptions and factors underlying the development and conceptual prospectivity for resources of the project, AM&A has concluded that it is reasonable to rely on this data for the purposes of this report and the derivation of a current valuation accordingly based on that information. AM&A has relied on the technical data supplied by Vanguard and accepted that data in reaching our conclusions, unless AM&A expressly states otherwise. The summary of the valuation conclusions is presented in Table 8. This current valuation has used a form of the MEE Method applied to expenses that are relevant to the present day tenement holding. This Report concludes that the cash value of 100% of the Vanguard tenement portfolio in Western Australia, as at 7th June, 2016, is ascribed at $1.6M from within the range of $1.1M to $2.1M.
For personal use only use personal For Figure 1: Vanguard Exploration Limited’s Location of Projects.
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CONTENTS PAGE
1.0 Introduction 3 1.1 Scope and Limitations ...... 3 1.2 Statement of Competence ...... 5 2.0 Valuation of the Mineral Assets – Methods and Guides 5 2.1 General Valuation Methods ...... 5 2.2 Discounted Cash Flow/Net Present Value ...... 6 2.3 Joint Venture Terms ...... 6 2.4 Similar or Comparable Transactions ...... 6 2.5 Multiple of Exploration Expenditure ...... 6 2.6 Ratings System of Prospectivity (Kilburn) ...... 7 2.7 Empirical Methods (Yardstick – Real Estate) ...... 7 2.8 General Comments ...... 8 2.9 Environmental implications ...... 8 2.10 Indigenous Title Claims ...... 8 2.11 Commodities-Metal prices ...... 8 2.12 Resource/Reserve Summary ...... 9 2.13 Previous Valuations...... 9 2.14 Encumbrances/Royalty ...... 9 3.0 Background Information 9 3.1 Introduction ...... 9 3.2 Specific Valuation Methods ...... 9 3.3 Tenement Holding ...... 9 4.0 Ives Find Project, Western Australia 11 4.1 Introduction ...... 11 4.2 Location and Access ...... 12 4.3 Regional Geological Setting...... 12 4.4 Local Geological Setting ...... 13 4.5 Yandal Greenstone Belt – Significant Gold Deposits ...... 15 4.6 Previous Exploration ...... 16 4.7 Recent Exploration ...... 20 4.7 Exploration Potential ...... 23 4.7.1 Gold 23 4.7.2 Lithium, Tantalum and Tungsten 25 5.0 Fairbairn Project 26 5.1 Introduction ...... 26 5.2 Location and Access ...... 26 5.3 Regional Geology ...... 27 5.4 Local Geological Setting ...... 28 5.5 Regional Mineralisation ...... 30 5.6 Previous Exploration ...... 32 5.7 Recent Vanguard Exploration ...... 35 5.8 Exploration Potential ...... 36 6.0 Valuation of the Project 36 6.1 Selection of Valuation Methods ...... 36 For personal use only use personal For 6.2 Valuation – MEE Method ...... 37 6.3 Valuation Conclusions...... 37 7.0 References 39 8.0 Glossary of Technical Terms and Abbreviations 44 Appendix 1: Details of Valuation Estimates. 46 Appendix 2: Ives Find Project - List of all Vanguard RC drillhole Collars 47
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Valuation of the Vanguard Projects - Western Australia
List of Figures
Figure 1: Vanguard Exploration Limited’s Location of Projects ...... 2 Figure 2: Ives Find Project – Regional Geology and Nearby Major Deposits ...... 11 Figure 3: Ives Find Project – Local Geology with Tenement Outline...... 14 Figure 4: Ives Find Project - -Pegmatite Outcrop ...... 15 Figure 5: Ives Find Project – Historic Gold Mining Leases Zones...... 16 Figure 6: Ives Find Project – Mary Queen Reward Lease Production ...... 17 Figure 7: Ives Find Project – Sabre’s RC drillhole locations at May Queen Reward ...... 18 Figure 8: Ives Find Project – No2 Shaft Area All Drillhole Collars...... 21 Figure 9: Ives Find Project – Section D-D’ No2 Shaft Vanguard RC Drilling ...... 21 Figure 10: Ives Find Project – Further RC Drill targets for gold mineralisation ...... 24 Figure 11: Fairbairn Project - Local Geology with Tenement Outlines...... 29 Figure 12: Fairbairn Project – Cu Mineralisation in Historical Drilling ...... 30 Figure 13: Fairbairn Project – Regional Geology and Mineralisation ...... 31 Figure 14: Fairbairn Project – Copper Contour Plan ...... 34 Figure 15: Fairbairn Project – E52/2314 Soil Sample Traverses...... 35
List of Tables
Table 1: Typical PEM Factors ...... 7 Table 2: Vanguard - Projects Native Title Status ...... 8 Table 3: Vanguard - Tenement Holdings ...... 10 Table 4: Vanguard - Items Relating to Tenement Acquisition and Dealings...... 10 Table 5: Ives Find Project – Sabre Resources NL (1987-88) Significant RC Drill Results...... 19 Table 6: Ives Find Project – Vanguard Significant RC Drill Results (> 0.5 g/t gold) ...... 22 Table 7: Summary Range of Current Values...... 37
For personal use only use personal For
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Valuation of the Vanguard Projects - Western Australia
The Directors, 11th June, 2016 Bentleys Corporate Advisory (WA) Pty Ltd Level 3, 216 St. George’s Terrace Perth, WA 6000 Australia
Dear Sirs, VALUATION OFTHE VANGUARD EXPLORATION LTD PROJECTS IN WESTERN AUSTRALIA
1.0 Introduction
This Independent Technical Valuation Report (“ITV”) of the Vanguard Exploration Ltd (“Vanguard”) mining tenements in Western Australia, has been prepared by Al Maynard & Associates (“AM&A”) at the request of Mr R. Matic of Bentleys Corporate Advisory (WA) Pty Ltd (“Bentleys”) for inclusion in the Independent Expert’s Report (“IER”) being prepared by Bentleys for the purpose of the acquisition of Vanguard by Great Western. Vanguard is a public unlisted company and its principal business is involved in mineral exploration. Vanguard owns tenements that cover 425.2 km2 situated northeast of Meekatharra and southeast of Wiluna that are considered prospective for copper and gold based upon previous exploration results. This report provides an independent technical valuation of the Vanguard projects in Western Australia, as at 7th June, 2016. The report has been prepared in accordance with the guidelines of the Valuation of Mineral Assets and Mineral Securities for Independent Expert’s Reports (the “Valmin Code”) (2005) as adopted by the Australian Institute of Geoscientists (“AIG”) and the Australasian Institute of Mining and Metallurgy (“AusIMM”) and specifically:- ASIC Regulatory Guideline 42 - Independence of Experts’ Reports (“RG 42”); ASIC Regulatory Guideline Note 43 - Valuation Reports and Profit Forecasts (“RG 43”); ASIC Regulatory Guideline 111 – Content of expert’s Reports (“RG 111”) ASIC Regulatory Guideline 112 – Independence of Experts (“RG 112”); and AusIMM’s Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports (“the ValMin Code”). The assets valued in this report are the tenements owned by Vanguard located in Western
Australia. For personal use only use personal For 1.1 Scope and Limitations This Report is valid as of 11th June, 2016 which is the date of the latest review of the data and technical information and there have been no material changes to this data or valuation since that date. The valuation can be expected to change over time
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Valuation of the Vanguard Projects - Western Australia
having regard to political, economic, market and legal factors. The valuation can also vary due to the success or otherwise of any mineral exploration that is conducted either on the mineral assets concerned or by other explorers on prospects in the near environs. The valuation could also possibly be affected by the consideration of other exploration data from adjacent licences with production history affecting the mineral assets which have not been made available to the writers. In order to form an opinion as to the value of any mineral asset, it is necessary to make assumptions as to certain future events, which might include economic and political factors and the likelihood of exploration success. The authors have taken all reasonable care in formulating these assumptions to ensure that they are appropriate to the case. These assumptions are based on the writers’ technical training and 40 years’ experience in the exploration and mining industry. Whilst the opinions expressed represent the writers’ professional opinion at the time of this Report, these opinions are not however, forecasts as it is never possible to predict accurately the many variable factors that need to be considered in forming an opinion as to the value of any mineral asset. The information presented in this Report is based on technical reports provided by Vanguard supplemented by our own inquiries as to the reasonableness of the supplied data. At the request of AM&A, copies of relevant technical reports and agreements were readily made available. There is also information available in the public domain and relevant references are listed in Section 7.0 –References. No site visit was undertaken since the writers are familiar with the terrane from visits to other similar environs and sufficient technical information is provided to enable and informed opinion to be derived. Vanguard will be invoiced and expected to pay a fee, estimated between $10,000 and $13,000 for the preparation of this Report. This fee comprises a normal, commercial daily rate plus expenses. Payment is not contingent on the results of this report. Except for these fees, neither the writer nor any family members nor Associates have any interest, nor the rights to any interest in Vanguard nor any interest in the mineral assets reported upon. Vanguard has confirmed in writing that all technical data known it was made available to the writer. The valuation presented in this Report is restricted to a statement of the fair value of the mineral asset package. The Valmin Code defines fair value as “The estimated amount of money, or the cash equivalent of some other consideration, for which, in the opinion of the Expert reached in accordance with the provisions of the Valmin Code, the mineral asset or security shall change hands on the Valuation date between a For personal use only use personal For willing buyer and a willing seller in an arms’ length transaction, wherein each party had acted knowledgeably, prudently and without compulsion”. It should be noted that in all cases, the fair valuation of the mineral assets presented is analogous with the concept of “valuation in use” commonly applied to other
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commercial valuations. This concept holds that the assets have a particular value only in the context of the usual business of the company as a going concern. This value will invariably be significantly higher than the disposal value, where there is not a willing seller. Disposal values for mineral assets may be a small fraction of going concern values. In accordance with the Valmin Code, we have prepared the “Range of Values” as shown in Table 7, section 6.3. Regarding the Project it is considered that sufficient geotechnical data has been provided from the reports covering the previous exploration of the relevant area to enable an understanding of the geology. This provides adequate information to enable an informed opinion as to the current value of the mineral assets. A recent site visit was not undertaken since the authors are familiar with the terrane type from visits to other similar nearby environs over previous years for other clients. 1.2 Statement of Competence This Report has been prepared by Allen J. Maynard and Brian J. Varndell. Maynard is the Principal of AM&A, a qualified geologist, a Member of the Australasian Institute of Mining & Metallurgy (“AusIMM”) (No 104986) and a Member of the Australian Institute of Geoscientists (“AIG” #2062). He has had over 35 years of continuous experience in mineral exploration and evaluation and more than 30 years’ experience in mineral asset valuation. Brian J. Varndell BSc (SpecHonsGeol), FAusIMM (No111022), is a geologist with over 40 years in the industry and 35 years in mineral asset valuation. The writers each hold the appropriate qualifications, experience and independence to qualify as an independent “Expert” and “Competent Person” under the definitions of the Valmin Code.
2.0 Valuation of the Mineral Assets – Methods and Guides
With due regard to the guidelines for assessment and valuation of mineral assets and mineral securities as adopted by the AusIMM Mineral Valuation Committee on 17th February, 1995 – the Valmin Code (updated 1999 & 2005). AM&A has derived the estimates listed below using the Yardstick method for the current technical value of the mineral assets as applied to the JORC Code (2004) compliant resources estimates declared for the tenement. The ASIC publications “Regulatory Guides 111 & 112” have also been referred to and duly considered in relation to the valuation procedure. The subjective nature of the valuation task is kept as objective as possible by the application of the guideline criteria of a “fair value”. This is a value that an informed, willing, but not anxious, arms’ length purchaser will For personal use only use personal For pay for a mineral (or other similar) asset in a transaction devoid of “forced sale” circumstances. 2.1 General Valuation Methods The Valmin Code identifies various methods of valuing mineral assets, including:-
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Discounted cash flow, Joint Venture and farm-in terms for arms’ length transactions, Precedents from similar comparable asset sales/valuations, Multiples of exploration expenditure, Ratings systems related to perceived prospectivity, Real estate value and rule of thumb or yardstick approach. 2.2 Discounted Cash Flow/Net Present Value This method provides an indication of the value of a mineral asset 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. Net present value (‘NPV’) is determined from discounted cash flow (‘DCF’) analysis where reasonable mining and processing parameters can be applied to an identified ore reserve. It is a process that allows perceived capital costs, operating costs, royalties, taxes and project financing requirements to be analysed in conjunction with a discount rate to reflect the perceived technical and financial risks and the depleting value of the mineral asset over time. The NPV method relies on reasonable estimates of capital requirements, mining and processing costs. 2.3 Joint Venture Terms The terms of a proposed joint venture agreement may be used to provide a market value based upon the amount an incoming partner is prepared to spend to earn an interest in part or all of the mineral asset. This pre-supposes some form of subjectivity on the part of the incoming party when grass roots mineral assets are involved. 2.4 Similar or Comparable Transactions When commercial transactions concerning mineral assets in similar circumstances have recently occurred, the market value precedent may be applied in part or in full to the mineral asset under consideration. 2.5 Multiple of Exploration Expenditure 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 mineral asset with or without future committed 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 For personal use only use personal For results a MEE multiplier can be selected that take into account the valuer's judgment of the prospectivity of the mineral asset and the value of the database. PEMs can typically range between ‘zero’ to 3.0 and occasionally up to 5.0 where very favourable
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exploration results have been achieved, applied to previous exploration expenditure to derive a dollar value. Typical PEM Factors are shown in Table 1.
Table 1: Typical PEM Factors
PEM Range Criteria Exploration (past and present) has downgraded the tenement prospectivity, no mineralisation 0.1 – 0.5 identified Exploration potential has been maintained (rather than enhanced) by past and present activity from 0.5 – 1.0 regional mapping 1.0 – 1.3 Exploration has maintained, or slightly enhanced (but not downgraded) the prospectivity Exploration has considerably increased the prospectivity (geological mapping, geochemical or 1.3 – 1.5 geophysical) 1.5 – 2.0 Scout Drilling has identified interesting intersections of mineralisation
2.0 – 2.5 Detailed Drilling has defined targets with potential economic interest.
2.5 – 3.0 A resource has been defined at Inferred Resource Status, no feasibility study has been completed
3.0 – 4.0 Indicated Resources have been identified that are likely to form the basis of a prefeasibility study
4.0 – 5.0 Indicated and Measured Resources
2.6 Ratings System of Prospectivity (Kilburn) The most readily accepted method of this type is the modified Kilburn Geological Engineering/Geoscience Method and is a rating method based on the basic acquisition cost (‘BAC’) of the mineral asset that applies incremental, fractional or integer ratings to a BAC cost with respect to various prospectivity factors to derive a value. Under the Kilburn method the valuer is required to systematically assess four key technical factors which enhance, downgrade or have no impact on the value of the mineral asset. The factors are then applied serially to the BAC of each mineral asset in order to derive a value for the mineral asset. 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. 2.7 Empirical Methods (Yardstick – Real Estate) The market value determinations may be made according to the independent expert’s knowledge of the particular mineral asset. This can include a discount applied to values arrived at by considering conceptual target models for the area. The market
value may also be rated in terms of a dollar value per unit area or dollar value per unit For personal use only use personal For of resource in the ground. This includes the range of values that can be estimated for an exploration mineral asset based on current market prices for equivalent assets, existing or previous joint venture and sale agreements, the geological potential of the
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mineral assets, regarding possible potential resources, and the probability of present value being derived from individual recognised areas of mineralisation. This method is termed a “Yardstick” or a “Real Estate” approach. Both methods are inherently subjective according to technical considerations and the informed opinion of the valuer. 2.8 General Comments The aims of the various methods are to provide an independent opinion of a “fair value” for the mineral asset under consideration and to provide as much detail as possible of the manner in which the value is reached. It is necessarily subjective according to the degree of risk perceived by the mineral asset valuer in addition to all other commercial considerations. Efforts to construct a transparent valuation using sophisticated financial models are still hindered by the nature of the original assumptions where no known resource exists and are not applicable to mineral assets without an identified resource or reserve. The values derived for this Report have been concluded after taking into account the general geological environment for the mineral assets under consideration with respect to the exploration potential of each tenement. 2.9 Environmental implications Information to date is that there are no identified existing material environmental liabilities on the mineral assets. Accordingly, no adjustment was made during this Report for environmental implications. 2.10 Indigenous Title Claims Native Title claims and/or determinations for each tenement that have been indicated to AM&A are listed in Table 2. Table 2: Vanguard - Projects Native Title Status.
Items relating to Native Title Claims and Dealings Reference Tenement Federal Court No Claimant Name Heritage Agreement E52/2314 WAD6002_03 Gingirana Yes E52/2517 (NTC)WC06/002 None Held E69/3193 None Held A E69/3196 Yes E52/3428 Negotiation E69/3442 Negotiation E69/3443 Negotiation B E53/1369 n/a n/a None Held
For personal use only use personal For 2.11 Commodities-Metal prices Where appropriate, current metal prices are used sourced from the usual metal market publications or commodity price reviews (e.g.” Kitco.com” or “Alibaba”).
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2.12 Resource/Reserve Summary There are no JORC Code (2012) compliant resource estimates declared for either of the Projects. 2.13 Previous Valuations No previous valuations of the tenement package are known to the authors. 2.14 Encumbrances/Royalty The Projects may be subject to government royalties as stipulated by the Government where currently applicable. No royalty payments are considered in this valuation as no mining is yet occurring.
3.0 Background Information
3.1 Introduction This valuation has been provided by way of a detailed study of existing information and field data provided by Vanguard regarding operations completed at the projects to date. Since no JORC Code (2012) compliant resource estimates have been attempted to date; AM&A has been supplied with available historical expenditures which forms the basis for this valuation. 3.2 Specific Valuation Methods There are various methods acceptable for the valuation of a mineral prospect ranging from the most favoured DCF analysis of identified Proved & Probable Reserves to the more subjective rule-of-thumb assessment when no Reserves have yet been calculated but Resources may exist. These are discussed above in Section 2.0. For the Vanguard projects the MEE Method has been applied to the available historic expenditures to determine a value range as at 11th June, 2016 and a preferred or most likely value ascribed within that range. 3.3 Tenement Holding Vanguard in its own right holds six tenements within Western Australia (Tables 3 & 4). The Company provided the full tenement details to AM&A. We have checked the tenement holding on the Tengraph website (DMP operated). The status of the tenements has been verified based on examination of open-source files accessed on Tengraph pursuant to paragraphs 67 and 68 of the VALMIN Code. The tenements are believed to be in good standing at the date of this valuation as represented by Vanguard.
For personal use only use personal For
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Table 3: Vanguard - Tenement Holdings.
Tenement Location / Registered Area Rent Commitment Date Granted Expiry Date ID Project Holder (km2) (AUD) (AUD)
Ives E53/1369 Vanguard 25/09/2008 24/09/2018 24.5 $4,140.80 $70,000 Find Fairbairn E52/2314 Vanguard 14/01/2010 13/01/2020 59.0 $9,834.40 $50,000 Central Nabberu Money,Drew E52/2517 01/09/2010 31/08/2020 6.2 $528.70 $30,000 01 Griffin Diamond Nabberu E69/3193 Resources 05/03/2013 04/03/2019 43.5 $2,820.30 $20,000 East Ltd Old E69/3196 Vanguard 25/03/2014 24/03/2019 68.4 $4,431.90 $22,000 Marymia Fairbairn E52/3428 Vanguard Application 118.0 0 0 West Fairbairn E69/3442 Vanguard Application 12.4 0 0 Creek Fairbairn E69/3443 Vanguard Application 93.2 0 0 Hills TOTALS 425.2 $21,756.10 $192,000
Table 4: Vanguard - Items Relating to Tenement Acquisition and Dealings.
Items relating to Tenement Acquisition and Dealings
E52/2314 Tenement subject to a Split Commodity Agreement with Diamond E52/2517 Resources Ltd, whereupon Diamond Resources Ltd has the right to all 1 E69/3193 diamond mineralisation and Vanguard Exploration Ltd has the right to all other E69/3196 minerals, except diamonds. Subject to the terms of the Split Commodity Agreement with Diamond Resources E52/2517 Ltd, Diamond is responsible for maintaining the tenement in good standing, 2 E69/3193 including but not limited to, payment of annual rates, rents and expenditure obligations etc. Subject to the terms of the Split Commodity Agreement with Diamond Resources E52/2314 Ltd, a cross transaction 1% Net Smelter Return Royalty shall apply and be payable to 3 E69/3196 Vanguard with respect to all diamond mineralisation mined by Diamond Resources Ltd on Vanguard tenure. Subject to the terms of the Split Commodity Agreement with Diamond Resources E52/2517 Ltd, a cross transaction 1% Net Smelter Return Royalty shall apply and be payable 4 E69/3193 to Diamond with respect to all non-diamond mineralisation mined by Vanguard Exploration Ltd on Diamond
tenure. For personal use only use personal For
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4.0 Ives Find Project, Western Australia 4.1 Introduction The Ives Find Project is located approximately 65 km SE of Wiluna within the Yandal Greenstone Belt. The project consists of a single Exploration License (E53/1369) with an area of 24.5 km2 that is prospective for gold, lithium and tungsten. The Yandal Greenstone Belt hosts a number of major gold deposits that include the world class Jundee & Bronzewing gold deposits located 60 km NW and 55 km SW respectively from the project (fig 2).
Figure 2: Ives Find Project – Regional Geology and Nearby Major Deposits Gold was discovered at Ives Find (also known as Collavilla) around 1910 and mining was mainly carried out from 1910 to 1913 with some further small scale mining from 1940 to 1946. The gold workings extend over a strike length approximately 1.6km and historical production records indicate a total of 2,019t of ore was mined producing 740
ounces of gold which equates to an average ore grade of 11.5 g/t gold. For personal use only use personal For The historic Ives Find gold mining centre occupies the northeast section of the tenement and includes the Main Shaft, Bell Miner workings and the satellite deposits Honeycomb Mine to the north, May Queen East Mine, and the Duck and Duckling gold
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prospects to the south, that in total extend the line of workings to approximately 1.6 km in a north-south orientation. In addition to gold the Geological Survey of Western Australia (“GSWA”) has noted large volumes of pegmatite and some skarns within the project area. Pegmatites are prospective for lithium and tantalum while skarns are prospective for tin & tungsten. Pegmatites over an area of approximately 4 km in length and up to 250 m in width have been noted along the western side of the licence. 4.2 Location and Access Exploration licence E53/1369 is located on the Lake Violet 1:100,000 geological map sheet 3044 (part of the Wiluna 1:250,000 map sheet SG 51-9), and the Sir Samuel 1:250,000 geological map sheet SG 51-13. The tenement is about 65 km SE of the town of Wiluna in the North Eastern Goldfields region of WA. The project is located approximately 6 km from unsealed rural arterial roads accessed either from Wiluna to the NE or from the Bronzewing mine from the SE. These roads are suitable for road train use and are maintained by the various local councils. This road can be periodically closed during periods of heavy rain. Local access within the project is by station tracks that allow good access for heavy machinery such as drill rigs. The climate is arid to semi-arid, with an average annual rainfall of only 250 mm. However, rainfall can vary widely from year to year, with droughts followed by very wet years, usually as a result of the spin-off from tropical cyclones and lows. Five classes of vegetation are recognised in the district, viz: mulga woodlands, acacia and tea-tree scrub, grasslands with scattered trees, succulents and salt-lake communities. Variations in vegetation can generally be attributed to changes in regolith, bedrock and rainfall. There are two gold treatment plants in the district, one located at Wiluna approximately 60km northwest of the project and the other at Bronzewing which is approximately 55km southeast from the project. 4.3 Regional Geological Setting. The prospect is located within the western (also referred to as lower) sequence of the Yandal Greenstone Belt. The western sequence consists of basalt, with smaller amounts of high magnesium basalt, ultramafic rock, fine grained sedimentary rocks, felsic volcanic rocks, banded iron formation (“BIF”) and chert. The BIF forms prominent ridges along the western margin of the greenstone belt to
For personal use only use personal For the north of the prospect area. Granitic rocks, including pegmatites, outcrop along the western boundary and in many places can be seen to intrude the greenstone sequence.
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There are several major northwest trending crustal scale faults interpreted along the western margin of the Yandal greenstone belt that transect the project area. One of these faults hosts the Mt McClure gold mine (>1 million ounces) which is located approximately 60km along strike to the south. 4.4 Local Geological Setting The Ives Find gold mining area is located in the southern area of the western sequence of the Archaean Yandal Greenstone Belt. In this general area the greenstone sequence consists of chert, BIF, fine grained sedimentary rocks, basalt, amphibolite and ultramafic rocks. Granite, with associated pegmatites, has extensively intruded the greenstones, resulting in rafts of greenstone within the intrusive granite mass. These rafts are generally elongated in a north-northwest direction and are up to 3 km in length. In the immediate vicinity of the gold workings the rocks consist of granite in which numerous rafts of remnant greenstone are present. The greenstone consists mainly of amphibolite with minor BIF and felsic rocks. Locally the area is structurally complex with several regional scale north-northwest trending shears intersecting east-northeast trending lineations and foliations. There is significant amounts of quartz veining associated with both orientations. The known gold mineralisation is associated with quartz veins within the granite intrusion. These veins appear to be en echelon within a north-northwest trending shear. There is significant silver mineralisation associated with the gold. The gold and silver grade of the veins increases significantly when the host shear intersects narrow discontinuous attenuated amphibolite bodies within the granite. The reason why there is amphibolite within the granite is unclear but it may represent xenoliths of the adjoining greenstone caught up in the shear zone. The area of known mineralisation has a complex structural history. Two generations of shearing and faulting have resulted in combined rotational, strike- oblique and dip slip movements producing northerly, northwest and northeast orientated quartz reefs with variably moderate to steep dips. A number of generations of quartz veins are present. Older, auriferous veins form discontinuous, northerly trending units along shear zones within a north-northwest en- echelon pattern. Younger non-auriferous veining is present as persistent linear bodies. Historical production reports indicate the main gold reef was approximately 2.5m wide, varied in dip from vertical to 45 degrees, was mined to a depth of 19.8m and minor For personal use only use personal For cross cutting northwest to north-northwest trending faults and northeast striking shears disrupt the mineralized zone. A 1913 report by the Mines Department stated that at the No2 shaft the orebody had been exposed to a depth of 29.6 m below the surface and at the bottom of the shaft the reef was 1.4 m wide. A total of 2,019t of ore was mined to a
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depth of 19.8m (to the water table) producing 740 ounces of gold which equates to an average ore grade of 11.5 g/t gold.
Figure 3: Ives Find Project – Local Geology with Tenement Outline. The granite which hosts the gold workings has been mapped by the Geological Survey of Western Australia (“GSWA”) as a rare type of peraluminous granite enriched with high field strength elements (“HFSE”) that includes elements tantalum, REEs, tin, tungsten, niobium and titanium. The GSWA also mapped a large area of pegmatite outcrop within the project area (fig 3). It was also noted that the pegmatites contained Spessartine garnets, manganese and green muscovite This pegmatite outcrop has been confirmed in the field as well a number of additional pegmatite outcrops up to 250m wide over strike length of approximately 6km. Minerals
For personal use only use personal For that have been observed in hand specimen include spessartine (Mn rich garnet), green muscovite, white k-feldspar. There are additional minerals that are either tourmaline and/or tantalite as well as fluorite and/or spodumene.
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Figure 4: Ives Find Project - -Pegmatite Outcrop. There is also abundant manganese oxide coating of the host basalts adjacent to the pegmatite intrusions. 4.5 Yandal Greenstone Belt – Significant Gold Deposits The Yandal greenstone belt is one of the richest gold districts in Australia and contains numerous gold occurrences as well as number of major gold deposits that include Jundee, Bronzewing, Mt McClure, Darlot and Centenary. In addition to these major deposits there have been several recent discoveries that include the Julius and Horse Well deposits. The Jundee mine is located approximately 65 km NW of the Project. The mine has produced over 7 million ounces to date since opening in 1995 and is currently owned and operated by Northern Star Resources which has reported current gold production as approximately 220,000 ounces per annum. The Bronzewing gold mine and treatment plant are located approximately 55 km to the SE of the Project. A total of over 5Moz has been mined from the Bronzewing area generally, with the majority of production coming from the Discovery, Central and Mt
For personal use only use personal For McClure Deposits. The mine is currently on care and maintenance. The Darlot and Centenary gold deposits are located near each on the southeastern side of the Yandal Greenstone Belt and both are owned and operated by Goldfields. A total of over 2 million ounces has been mined from both deposits to date with both still
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in production as underground operations; treating about 800,000 tonnes of ore per year to produce around 80,000 ounces of gold per year. The Julius gold deposit is located 25 km NW from the project area. It was recently discovered by Echo Resources Ltd which are currently completing economic studies for the commencement of production. The resource has been reported as 4.16 Mt at 1.69 g/t gold for a total of 220,000 ounces. Alloy Resources Ltd, in Joint Venture with Doray Minerals Ltd, also reports the significant gold mineralisation within their Horse Well Project and resource drilling is currently being completed. This project is located on the northern limb of the Yandal Greenstone Belt and is located approximately 50 kilometres from the Jundee Gold Mine. 4.6 Previous Exploration Gold was discovered at Ives Find (also known as Collavilla) around 1910 (fig 5). Production for the period 1910 to 1913 is recorded as 1,528 tonnes of ore for 500 ounces of gold. During 1941- 46 small scale mining recommenced mining 491 tonnes
of ore for 240.75 ounce of gold. For personal use only use personal For
Figure 5: Ives Find Project – Historic Gold Mining Leases Zones.
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From 1912-13, the bulk of production was from the May Queen Reward Lease from workings that extend in a north-northeast direction for a distance of approximately 300m (fig 6). Minor cross cutting northwest to north-northwest trending faults and northeast striking shears disrupt the mineralised zone. Most underground development is restricted to two zones of workings at the Main shaft and the No 2 shaft. The Main shaft workings are located within the northern part of the lease and comprise two open stopes and surrounding waste dumps contain altered mafic rocks, quartz and granite. Records from 1911-13 state that the reef was up to 2.4 m wide, varied in dip from vertical to 45o, and that the shaft had been sunk to a depth of 19.8 m “in good ore”. A 1913 report by the Mines Department stated that at the No. 2 shaft the orebody had been exposed to a depth of 29.6 m below the surface and at the bottom of the shaft the reef was 1.4 m wide.
For personal use only use personal For
Figure 6: Ives Find Project – Mary Queen Reward Lease Production.
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In 1983 Northpac explored the tenements covering the Ives Find workings. Work included geological mapping, rock chip sampling and structural interpretation. . Northpac also mapped and collected 18 channel samples from the 9m level at the Mary Queen Mine with 11 of these samples assaying greater than 1.0 g/t Au and the highest being 17.7 g/t Au During 1987-88 Kalbara Mining NL explored the adjacent Harris Find gold workings east of the Ives Find project area with reconnaissance sampling and geophysics. This survey did not include the Ives Find workings but did include a small area of the current Vanguard project area. From 1987 to 1988 Sabre Resources NL (“Sabre”) explored the Ives Find gold workings and carried out detailed geological mapping, rock chip sampling and 19 reverse circulation (“RC”) drillholes for 759 m.
For personal use only use personal For
Figure 7: Ives Find Project – Sabre’s RC drillhole locations at May Queen Reward.
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Sabre’s RC drilling intersected significant gold and silver mineralisation beneath the shallow historic workings. Seven of the holes intersected gold values greater than 1 g/t Au, with the best intersection being 7.0 m at 7.37 g/t Au from 32 - 39 m downhole depth in drillhole CRC12. Details of all intersections greater than 1.0 g/t Au are presented in Table 5. The underlay No 2 shaft provided access to the 9 m first level which was developed on three different shoots; the west, central and east shoots. Sable drilled 9 RC holes in total (CRC 11 - 19) to test the ore potential beneath these workings (fig 7).
Table 5: Ives Find Project – Sabre Resources NL (1987-88) Significant RC Drill Results.
Hole From Depth To Depth Interval Grade Number (m) (m) (m) (g/t Au)
CRC 04 30 31 1 3.00
CRC 10 27 28 1 3.21
CRC 12 32 39 7 7.37
CRC 13 30 35 5 4.63
CRC 14 42 45 3 10.27
CRC 16 29 30 1 20.62
CRC 17 18 20 2 1.08
CRC 18 24 28 4 6.90
CRC 19 30 31 1 2.30
The west shoot is a quartz reef that strikes in a northeast direction and dips at between 55-70o to the southeast. The central shoot strikes approximately east- northeast and dips at about 55 degrees south. This shoot is truncated to the west by a possible reverse fault that links to the east shoot with a northeast strike dipping southeast, and to the east by a northwest striking fault dipping steeply to the east. The east shoot has been exposed over a distance of about 6 m with a north-northwest strike and is composed of two zones of quartz separated by mafic rock. Sabre concluded that the May Queen ore zone had the best potential for development and that sampling and drill results suggested that approximately 5,000 t of ore at a grade of 7-10 g/t gold may be present to a depth of 40 m. In 1991 Cyprus Gold Australia Corporation explored tenements to the north of Ives
For personal use only use personal For Find. Exploration included a soil and rock chip sampling program and a low level airborne magnetic survey. A total of 77 soil samples and two rock chip samples were collected. The results for the soil samples were between 0.25 - 4.4 ppb gold.
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Asarco Australia Ltd explored an area at Bullock Well to the south east of Ives Find in 1991. Exploration included air photo interpretation and geochemical sampling, collecting 713 samples. Some targets were generated but follow-up is not reported. From 1995-99 Great Central Mines (“GCM”) explored a large group of tenements, some of which overlapped with the Ives Find project area. GCM’s regional exploration programme which included part of the Ives Find project included geological mapping, geochemical sampling, geophysical surveying, and RAB drilling. Work completed at Ives Find included stream sampling, rock chip sampling and RAB drilling. The best drilling results were 4 m at 0.12 g/t Au from 24 - 28 m in drillhole ICRB16, and 2 m at 0.34g/t Au from 20 - 22 m in ICRB121. In 2005-06 Great Australian Resources investigated the Ives Find workings. Work included a review of previous exploration and a rock chip sampling program. A total of 41 samples were collected from quartz veins, wall rocks, battery sands and waste dumps from old workings. The sampling results showed mineralised quartz veins over a strike length of 1.3 km, with the best result of 47.4 g/t. 4.7 Recent Exploration Work completed by Vanguard since 2014 includes rock chip sampling, soil sampling and a ground magnetic survey over the main workings as well as 52 RC drillholes for a total of 2,609 m. The majority of the Vanguard drilling was shallow RC targeting gold mineralisation mostly in and around the main No 2 shaft workings (fig 8) with eight of the RC holes drilled into targets identified in the geophysical and geochemical ground surveys away from the main workings. See Appendix 2 for the drillhole collar summary for all the Vanguard RC drillholes completed at Ives Find. Many of the drillholes intersected significant gold mineralisation with results greater than 0.5 g/t Au listed in table 6. The drilling confirmed that the high grade gold mineralisation at the main working remains open at depth (fig 9) and it also identified two new prospects (Duck and Duckling) along strike to the southeast of the main workings where there has been no previous work.
For personal use only use personal For
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Figure 8: Ives Find Project – No2 Shaft Area All Drillhole Collars.
For personal use only use personal For
Figure 9: Ives Find Project – Section D-D’ No2 Shaft Vanguard RC Drilling.
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Table 6: Ives Find Project – Vanguard Significant RC Drill Results (> 0.5 g/t gold).
Hole No From To Au (g/t) Ag (g/t) IFRC001 43 44 6.14 4.50 IFRC002 36 37 0.55 7.00 38 39 1.75 5.50
IFRC003 34 35 2.99 22.00 35 36 4.77 10.00
36 37 4.88 9.50
37 38 1.54 6.00
38 39 1.12 6.00
39 40 1.11 7.00
40 41 1.26 7.50
IFRC004 38 39 19.70 27.50 39 40 12.20 22.00
40 41 2.16 9.00
41 42 0.63 1.50
IFRC005 34 35 41.53 24.00 35 36 114.90 162.00
36 37 1.16 3.50
IFRC012 25 26 3.16 1.00 IFRC014 49 50 0.82 22.00 IFRC015 47 48 22.40 9.00 IFRC016 33 34 4.39 4.00 34 35 0.91 3.00
IFRC017 54 55 0.57 1.50 55 56 27.90 61.00
56 57 4.45 19.50
57 58 0.80 9.50
59 60 0.65 1.50
IFRC022 10 11 1.90 0.80 11 12 1.72 0.85
IFRC023 11 12 6.78 3.00 12 13 1.37 1.55
IFRC024 19 20 0.94 3.15 IFRC026 4 5 0.95 0.80 IFRC028 6 7 2.32 0.65 IFRC029 6 7 0.50 0.50 7 8 3.93 2.60
8 9 2.52 2.40
IFRC030 2 3 0.58 1.60 5 6 1.08 0.70
For personal use only use personal For IFRC032 17 18 4.98 1.55 18 19 6.27 2.00
19 20 3.95 1.60
IFRC034 12 13 1.70 1.30 IFRC036 6 7 0.76 0.20
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Hole No From To Au (g/t) Ag (g/t) 8 9 6.32 0.50
9 10 1.66 0.45
10 11 0.82 0.25
11 12 1.95 0.40
12 13 0.79 0.30
13 14 0.64 0.25
24 25 1.32 2.40
IFRC039 10 11 1.52 0.75 IFRC040 15 16 1.88 1.15 16 17 1.82 0.95
IFRC044 12 13 25.10 11.40 13 14 1.41 4.10
IFRC045 13 14 1.13 0.85 IFRC046 18 19 0.65 4.40 IFRC047 5 6 0.87 0.25 18 19 5.96 5.90
IFRC052 42 43 1.23 2.10 44 45 0.55 0.90
IFRC069 32 33 1.03 7.60 33 34 22.17 60.40
34 35 0.60 2.40
35 36 0.84 8.20
IFRC072 29 30 3.60 8.50 33 34 0.80 2.50
4.7 Exploration Potential The Ives Find project is prospective for both gold and lithium for the following reasons: 4.7.1 Gold The limited RC drilling completed beneath historic mine workings has demonstrated that the gold mineralisation continues below the depth of the historic mining, and that the lode structures are of a sufficient grade and width to suggest that the mineralisation will continue for some distance below the limit of drilling. Also the gold mineralisation intersected in drilling at the newly discovered Duck and Duckling prospects is of similar grade and thickness as observed at the main workings and also remains open in all directions. Accordingly, it is reasonable to expect that further detailed exploration of these For personal use only use personal For areas will identify additional gold mineralisation.
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Figure 10: Ives Find Project – Further RC Drill targets for gold mineralisation. In addition to the possible extensions of the known gold mineralisation the granite- greenstone interface is also a prospective exploration target. This contact is sheared and altered and can be mapped within 50m of the Duck and Duckling prospects and is about 150m from the main workings (fig 10). It has been observed in the drilling that the gold grade increases significantly where there is amphibolite in contact with the gold bearing veins. This is common observation for gold mineralisation in general as amphibolite is a known catalyst for gold precipitation. Therefore where the mineralised structure(s) intersect the granite – greenstone contact, either at depth or along strike, significant gold mineralisation may occur. There are other examples within the Yandal greenstone belt where this style of gold mineralisation occurs. At the Julius gold deposit located 25km to the NE the majority of the gold occurs along the granite-greenstone contact. Gold is also
known to occur within some granites and along the some of the granite-greenstone For personal use only use personal For contacts at the Jundee mine located 55km to the northwest. The granite-greenstone interface at Ives Find has not been subject to any previous exploration.
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4.7.2 Lithium, Tantalum and Tungsten The granite type that occurs at Ives Find are known economic sources of tin and tungsten as well as rare – element pegmatites. Rare-element pegmatites are important economic sources of lithium and tantalum (also known as LCT pegmatites). There is a large area of pegmatite outcrop mapped by the GSWA within the project area. Furthermore pegmatites have been observed in number of locations over strike length of approximately 6km. Minerals that have been observed in hand specimen include spessartine (Mn rich garnet), green muscovite, white k-feldspar. There are additional minerals that are either tourmaline and/or tantalite as well as fluorite and/or spodumene. In WA there are Pegmatites with similar mineral assemblages which contain economic amounts of lithium. There is also abundant manganese oxide coating of the host basalts adjacent to the pegmatite intrusions. The following guidelines have been published by the United States Geological Survey (“USGS”) for the discovery of economic lithium – tantalum pegmatites (LCT pegmatites): The potential for giant LCT pegmatite deposits are within Archaean aged rocks All LCT pegmatites were emplaced into orogenic hinterlands, even those now in the cores of Precambrian cratons. LCT pegmatites represent the most highly differentiated and last to crystallize components of certain granitic melts. Parental granites are typically peraluminous, S-type granites. The genetic links between a pegmatite and its parental granite have been established through various lines of evidence. In the clearest cases, the two can be linked by physical continuity (Greer Lake, Canada) (Ĉ S-t and others, 2005). The identification of possible granitic parents is a key step in evaluating a region for LCT pegmatite potential. Fertile, peraluminous granites typically contain coarse muscovite that is green rather than silvery; potassium feldspar that is white rather than pink; and accessory garnet, tourmaline, fluorite, and (or) cordierite (Selway and others, 2005). Fertile granites have high caesium, lithium, rubidium, tin, and tantalum, and low calcium, iron and magnesium
The most evolved pegmatites may contain orange, manganese-rich For personal use only use personal For spessartine All these are observed at Ives Find and therefore the project is considered prospective for lithium and/or tantalum bearing LCT pegmatites.
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5.0 Fairbairn Project 5.1 Introduction The Fairbairn project is located approximately 170 km north of Wiluna and 42 km east of the Plutonic goldmine. The project comprises of 400 km² situated along the extension of the Jenkins/Goodin fault approximately 100km northeast of the Degrussa copper mine. The project contains the historical Northling copper occurrence which consists of chalcopyrite intersected in drilling that assayed 4 m at 2.43% copper. While the source of this chalcopyrite has not been explained, when it is considered within the context of the geological setting along with the geophysical and satellite spectral analysis indicates the project is prospective for porphyry copper. In addition to the copper potential the project’s close proximity to the Marymia Inlier makes it prospective for Archaean lode gold mineralisation where Archaean structures transverse the project area. Finally the location of the project along the extension of the Goodin/Jenkins fault may also make the project prospective copper massive sulphide mineralisation similar to what is observed at Degrussa. 5.2 Location and Access The Fairbairn Project is located approximately 850 km northeast of Perth, Western Australia. The nearest towns are Wiluna, 170 km to the south, and Meekatharra, 230 km to the southwest. Most of the project area is on the Fairbairn 1:100,000 geological map sheet 2947, which is part of the Nabberu 1:250,000 geological map sheet SG 51-5. Exploration licence E69/2866 extends northwards onto the Bullen 1:250,000 geological map sheet SG 51-1. Access from Meekatharra is via the sealed Great Northern Highway for a distance of 220 km to the Marymia homestead turnoff, then 65 km to the homestead on an unsealed road. From the homestead four-wheel drive access is by station tracks and the vermin proof fence. These tracks may be impassable during wet periods. The area has an arid to semi-arid climate, with an average annual rainfall of only 250 mm. Rainfall can vary widely from year to year from droughts followed by very wet years, usually as a result of the spin-off from tropical cyclones and lows. Five classes of vegetation are recognised in the district, viz: mulga woodlands, acacia
and tea-tree scrub, grasslands with scattered trees, succulents and salt-lake For personal use only use personal For communities. Variations in vegetation can generally be attributed to changes in regolith, bedrock and rainfall.
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5.3 Regional Geology The tenements are located on the northwestern extremity of the Palaeo-Proterozoic Earaheedy Basin and the eastern end of the Archaean Marymia Inlier. The Meso- Proterozoic Collier basin lies to the north and northeast, and the Archaean Yilgarn Block to the south. The Marymia Inlier is interpreted to be part of the Yilgarn Craton. It lies within Proterozoic rocks of the Capricorn Orogen and consists of the Plutonic Well and Baumgarten Greenstone Belts and adjacent granitic rocks. The eastern extremity of the Baumgarten Greenstone Belt is exposed 5 km to the west of the western extremity of the project area. Granitic rocks of the Marymia Inlier outcrop within the project area, and to the north and NW of the project area, where they are commonly weathered and exposed in patchy outcrops or breakaways. Some of these granitic rocks are identified as monzogranite, consisting of microcline megacrysts set in a matrix of feldspar, quartz, biotite, muscovite, sericite, chlorite, and titanite. The monzogranite is locally affected by potassic alteration, resulting in the formation of biotite of hydrothermal origin. Fresh rocks are typically equigranular, medium to coarse-grained monzogranite consisting of K-feldspar, plagioclase, quartz, biotite, and secondary muscovite. The Earaheedy Group unconformably overlies the Marymia Inlier to the south and southeast. It comprises clastic and chemical sedimentary rocks which were deposited in the Earaheedy Basin. The Earaheedy Basin is exposed in an ESE plunging asymmetric syncline. The basal unit of the Earaheedy Group is the Yelma Formation, a succession of conglomerate, sandstone, stromatolitic dolomite, and shale varying in thickness from 10 - 1,500 m. The Yadgimurrin Member at the base of the Yelma Formation is a localised conglomeratic member with a thickness of more than 100 m comprising clasts up to 1 m across of granite, quartzite and chert, enclosed in an arkosic matrix. The 100 m thick Sweetwaters Well Member, consisting of stromatolitic dolomite, microbial limestone and chert breccia derived from dolomite, locally forms the uppermost part of the Yelma Formation. Stromatolite associations, bedding styles and possible evaporitic textures point to deposition in a saline coastal lagoon. The Yelma Formation is conformably overlain by the Frere Formation, predominantly composed of granular iron formation “GIF” of the Lake Superior type, interbedded with ferruginous shale and minor BIF. The total thickness of the Frere Formation is up to 1,200 m and in the vicinity of the project area it is at least 500 m thick. The Frere Formation has been subdivided into three lithotypes; GIF, shale and siltstone, and
For personal use only use personal For supergene enriched iron formation. It is generally thought that the GIF is the result of the deposition of iron rich sediments in a shallow water environment and the subsequent break up by wave action of the freshly deposited layers.
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The Chiall Formation conformably overlies the Frere Formation. The Chiall Formation locally consists of laminated siltstone and shale with minor lenses of quartz sandstone (Karri Karri Member), and sandstone and siltstone of the Wandi Warra Member. The Earaheedy Group is thought to have formed in a shallow marine to coastal depositional environment, which deepened towards the north. The Earaheedy Basin is deformed into a regional east to east-southeasterly trending, south verging, asymmetric syncline, which plunges gently towards the southeast. The northern margin of the basin and parts of the Marymia inlier are deformed in the Stanley Fold Belt, which forms the northern limb of the syncline. The fold belt is characterised by strike slip faulting, development of foliation fabrics, and possibly reverse faulting. The Stanley Fold Belt occurred as a result of compression from the northeast Deformation in the fold belt was focused on a pre-existing zone of weakness, probably a west-northwest trending deep crustal suture between the Yilgarn Craton and younger crustal rocks to the north. Northwest and northerly trending faults cut across both Archaean and Proterozoic rocks. The two most prominent faults are the NNW trending Lockeridge and Merrie Range Faults. East of the Merrie Range Fault, rocks of the Earaheedy Group are deformed into a series of small open folds with axial planes trending east and dipping north at 40o to 50o. To the northwest of the Fairbairn project area the unconformity between the Yelma Formation (the basal unit of the Earaheedy Group) and the Marymia Inlier is tectonised, with development of mylonites, locally interleaved with sheared monzogranite. Mafic dykes, quartz veins and breccia zones trend in the same direction as the foliation and mylonite zones. Sedimentary rocks of the Earaheedy Group are generally weakly metamorphosed, only attaining lower greenschist grade locally. Typical metamorphic assemblages in fine grained rocks are sericite, muscovite and chlorite. The Collier Group to the north unconformably overlies the Earaheedy Group. The Wonyulgunna Sandstone, the basal unit of the Collier Group, forms resistant rounded ridges rising above the surrounding sandplain. The unconformity with the Earaheedy Group is exposed where chert breccia of the Yelma Formation is overlain by quartz sandstone. The Wonyulgunna Sandstone post-dated the deformation of the Stanley Fold Belt.
For personal use only use personal For 5.4 Local Geological Setting The unconformable contact between the Archaean Marymia Inlier to the north and northwest and the Palaeo-Proterozoic Earaheedy Basin to the south and southeast traverses the project area in a northeast to east-northeast direction. The contact is
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irregular due to the gentle southeast plunge of the folding and displacement along the NNW striking Lockeridge Fault (fig 11). The Stanley Fold Belt has resulted in deformation of rocks of the Earaheedy Basin and Marymia Inlier in an east-northeast zone which encompasses all of the Fairbairn project area.
Figure 11: Fairbairn Project - Local Geology with Tenement Outlines. At Fairbairn Central, weathered granitic rocks form patchy outcrops interspersed with areas of Quaternary sheet wash and sandplain in an east to east-northeast trending zone through the central and southern part of the tenement. Outcrops of siltstone and shale belonging to the Yelma Formation occur within this zone. The remainder of the tenement, apart from a few scattered outcrops of granitic rock, is essentially covered by sheet wash deposits of sand, silt and gravel, and sandplain, comprising unconsolidated sand with minor silt and clay. Quartz veins up to several hundred metres long and with varying orientations, are present in both the granitic rocks and the Yelma Formation. An east-northeast trending mafic dyke within the central granitic zone is interpreted from magnetic data. The Lockeridge Fault traverses the northeast corner of the tenement. The strike direction of the fault within the tenement is to the NW, a significant deviation from the
For personal use only use personal For general North-northwest trend. On E52/2314 copper sulphide mineralisation was intersected in a diamond exploration drillhole in 1993 (Fig 12).
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Figure 12: Fairbairn Project – Cu Mineralisation in Historical Drilling 5.5 Regional Mineralisation The Plutonic and Marymia gold deposits are both located within the Plutonic Well Greenstone Belt to the west of the Fairbairn project area. The combined gold production from these two deposits since the early 1990s has been approximately 5 million ounces of gold. Exploration for gold within this greenstone belt continues to produce favourable results. The Degrussa copper and gold mine is located 85 km southwest of the Fairbairn project. The deposit was discovered by Sandfire Resources Limited in 2010 and started production in 2014. The initial JORC Code compliant Indicated and Inferred For personal use only use personal For resource of 10.67Mt at 5.6% Copper with 1.9 g/t gold and 15 g/t silver for 660,000 tonnes of Copper, 660,000 ounces of gold and 5.1 million ounces of silver. The Thaduna copper deposit is located 40 km southwest of Fairbairn. It was mined periodically from 1942 to 1971 and produced approximately 2530 tonnes of copper. In
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addition to the main Thaduna deposit there are several nearby satellite deposits that include Green Dragon, Ricci Lee and Rooney that also, produced small amounts of copper. The copper mineralisation is hosted within shears and quartz veins in greywacke and slate. Sandfire Resources Limited are currently carrying out further exploration of the area. The Enigma copper prospect is located just north of Thaduna and approximately 40km southwest of Fairbairn. A broad 1.3 km x 1.5 km zone of secondary copper mineralisation was delineated in aircore drilling by Sipa Resources in 2011. Sipa Resources sold the project to Sandfire Resources in 2014. The Contessa gold prospect is located approximately 20km southwest of Fairbairn. The prospect was discovered by Lodestar Resources in 2013 where aircore drilling delineated 700m strike of widespread alteration and supergene gold mineralisation. The Dixon gold prospect is located approximately 15km southwest of Fairbairn. The prospect was discovered by Australian Mines Limited in 2015 when 10m @ 8.79 g/t gold was intersected in drilling. Figure 13 shows the regional geological setting and deposits of the Fairbairn project.
Figure 13: Fairbairn Project – Regional Geology and Mineralisation For personal use only use personal For
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5.6 Previous Exploration No reports of exploration within the Fairbairn project area prior to the mid-1970s have been located. Since that time exploration has been undertaken for iron, base metals, diamonds and gold. During the mid-1970s, Dampier Mining (now BHPB) explored the Frere Formation for iron over the Miss Fairbairn Hills and Hawkins Knob. Layered iron formations similar to the Hamersley Province were investigated, and areas of hematite enrichment to 66% Fe with low phosphorous were discovered. Due to a general lack of structural deformation and enrichment, the tenements were relinquished in 1978. In 1977 Amax Exploration (Aust) Ltd explored the Miss Fairbairn Hills area for iron. Exploration included drilling, with the higher grade intersections being 22 m at 56.5% Fe and 4 m at 60.4% Fe. Chevron explored the Miss Fairbairn Hills area for base metals in the late 1970s. Exploration included geochemical surveys, magnetic and radiometric surveys, geological mapping and drilling. Follow up drilling to investigate a maximum value of 740ppm Cu from soil sampling failed to intersect copper mineralisation in basement rocks. In 1986 CRA Exploration commenced a program to explore for diamonds. A combined magnetic and radiometric survey was conducted by Aerodata Holdings Limited over their tenement area. Twenty-nine anomalies were identified and consequently followed up by sampling and helicopter or ground magnetic surveys. A RAB drilling program of 14 holes totalling 317 m was carried out over the magnetic anomalies. Drill hole logging suggested that the magnetic anomalies were due to ferruginous gravels at shallow depths of from 5 - 14 m and geochemistry supported a non-kimberlitic source. The project tenure was relinquished in December 1988. From 1989 to 1995 Stockdale Prospecting Limited (now DeBeers Exploration Australia) explored the area primarily for diamonds. Work undertaken included stream sediment and deflation loam sampling, airborne and ground magnetic surveying, and a RAB drilling program. Stockdale discovered ultramafic/kimberlitic intrusives, a small number of which such as the Nabberu No 1 pipe contained what was considered at the time to be uneconomic concentrations of diamonds. Part of Stockdale’s exploration program included a 1 x 1 km multi element soil and
For personal use only use personal For stream sediment sampling program which highlighted a number of potential gold anomalies. In 1993 Resolute Resources entered into a joint venture with Stockdale to further evaluate these anomalies and to explore the remainder of the tenements for gold and base metals.
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From 1993 to 1995 Resolute Resources explored the Stockdale tenements for gold. Stream sediment sampling identified areas of highly anomalous gold, with peak values of 164 and 101 ppb Au. A RAB drilling program failed to identify any gold or base metal mineralisation. In 1993 Northling Pty Ltd entered into a joint venture agreement with Pima Mining NL (“Pima”) to explore for diamonds on tenement E69/859, which covered part of the present day tenement E52/2314. Stockdale had previously explored this area. Exploration by Northling included stream sediment sampling, airborne magnetic and radiometric surveys, and an infra-red survey. Four magnetic anomalies were located. Anomaly 2PC145 was further evaluated by a three hole RAB drilling program, with drillhole DH3 intersecting copper sulphide mineralisation assaying 2.43% Cu over a 4 m interval from 58 – 62 m which is at the end of the hole. In 2008 PacMag Metals Limited (Southern Magnesium Pty Ltd) applied for an exploration licence covering the area within which Northling had intersected the copper sulphide mineralisation. The application was granted as E52/2314. Exploration by PacMag identified anomalous copper values from ferruginous rocks overlying the magnetic feature identified as 2PC145. In 2009 Quadrio entered into a joint venture agreement to explore E52/2314. Exploration in 2009 and 2010 included soil sampling, a ground magnetic survey, an electromagnetic/induced polarisation (EM/IP) survey and three RC drillholes. Soil samples were assayed for gold, copper and lead; drill samples were assayed for gold, copper, lead and zinc. Copper values for the rock chip samples ranged from 14 ppm Cu for a sample of siliceous chert to 2,420 ppm Cu for weathered siltstone. An orientation soil sampling program over an area of 900x700 m surrounding the original copper intersection was also undertaken. Four duplicate LAG samples were collected from each of 174 locations. The LAG samples returned assay values for copper delineating a strongly anomalous zone more than 400 m long, with a maximum value of 789 ppm Cu. The anomaly is open to the east and west (fig 14). The electromagnetic/induced polarisation survey delineated a weak chargeable IP anomaly at a shallow depth, interpreted to indicate possible disseminated sulphide mineralisation. Two of the RC holes (RC1 and 3) were drilled from south to north to test the original intersection. RC1 intersected minor chalcopyrite mineralisation at a depth corresponding to the original intersection with a maximum copper value of 260 ppm Cu over a 3 m interval from 81 to 84 m. RC1 also intersected 0.11 ppm Au from 24 to
For personal use only use personal For 27 m. Both RC1 and RC3 intersected a south dipping magnetite +sericite +chlorite alteration zone. RC2, drilled from south to north to test the weak IP anomaly, intersected elevated copper and zinc values in the upper oxidised section of the hole with a maximum copper value of 336 ppm Cu over a 3 m interval from 54 to 57 m.
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Elevated zinc values including 21 m at 177 ppm Zn were encountered from 36 - 57 m,
with the zinc mineral gahnite (ZnAl2O4) identified in the 54 to 55 m interval. Quadrio also carried out a soil sampling program on areas of in situ soils in the central and southern parts of the tenement (Figure 15). Samples were collected every 100 m along east-west traverses spaced at 400 m. The samples were screened and the fraction from 1.6mm to 7mm retained for assay.
Figure 14: Fairbairn Project – Copper Contour Plan.
The host rocks containing the anomalous copper mineralisation are siltstone and shale belonging to the Yelma Formation. An intermittent ferruginous zone extending over an east-west length of 600 m is partly coincident with, and also extends to the south of, the zone of anomalous copper values delineated by the LAG samples. This ferruginous zone is interpreted as a possible gossan, formed from the oxidation of disseminated sulphide mineralisation. The sediments are in contact with granite
For personal use only use personal For approximately 200 m to the north of the zone of anomalous copper mineralisation.
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Figure 15: Fairbairn Project – E52/2314 Soil Sample Traverses.
5.7 Recent Vanguard Exploration In 2011 Vanguard carried out exploration activities on E52/2314. Exploration included verification of previous work, geological mapping, rock chip sampling and geophysical interpretation. Drill cuttings adjacent to drillhole DH3, the hole drilled by Northling were examined
and found to contain sulphide mineralisation, including chalcopyrite (CuFeS2). Seven individual 1 m samples from drill holes RC1 and RC2, drilled by Quadrio were re- sampled and confirm the presence of anomalous copper and zinc values. Geological mapping to the south and east of drill hole DH3 extended the known area of the Yelma Formation and delineated a major shear zone with a strike direction of 60o. The shear zone, which is approximately 200 m to the south of drill hole DH3, is
characterised by the presence of discontinuous ferruginous outcrop and rubble. For personal use only use personal For During 2013, a RC drill program comprising fourteen holes for a 1510 m was completed but no significant mineralisation was intersected in any of the holes which covered three targets. In addition 43 rock chip samples were collected for assay.
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The company also completed a regional geophysical interpretation that extended northeast from the Degrussa copper mine through to the Fairbairn project. The interpretation indicates the Jenkins-Goodin fault continues northeast through to Fairbairn and is 1 km north of drill hole DH3 within E52/2314. The Jenkins – Goodin Fault Zone maybe an important primary control for the copper mineralisation seen at Degrussa. 5.8 Exploration Potential Vanguard concludes that the Fairbairn (Northling) copper discovery is of significance and that further exploration has a high probability of discovering additional copper mineralisation. Mineralisation may be associated with other commercial minerals including gold, silver, lead and zinc. Exploration of the known copper occurrence will extend beyond the area explored to date and will include detailed geological mapping and surface sampling, geophysical surveying, and RC drilling.
6.0 Valuation of the Project
When valuing any mineral asset/project it is important to consider as many factors as possible that may either assist or impinge upon the current cash value estimates of the mineral asset under consideration. In this Report AM&A considers that the primary features to be taken into account are the Tenement Security; Available Infrastructure; Relevant Expenditure on development, Resource Estimations and the general Geological Setting. Basically, these “Boxes are Ticked” as described above with regards to tenement security, infrastructure, previous exploration concepts and a favourable geological environment. 6.1 Selection of Valuation Methods The following valuation methods, as described above in section 2, are not considered applicable for the respective reasons provided:
The Discounted Cash Flow method cannot be used for the Project as the lack of mineral reserve estimates precludes a DCF; The Kilburn ‘prospectivity’ method - as the range of values generated is typically too wide to be realistic. Comparable transactions – with the recent general demise of the exploration industry, through lack of ‘high-risk funds’, this has curtailed much activity thus no similar recent relevant transactions could be located for similar projects.
For personal use only use personal For Real estate value which is usually based on a value ascribed to varying areas of tenement holdings which may consequently become unrealistic due to the varying areas of projects.
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The Empirical method was deemed not applicable since there are not yet any JORC Code (2012) compliant resource estimates. Accordingly the MEE method for the project has been adapted as the overriding basis for the estimation of the value. The MEE method was applied to the supplied historical expenditures for the project. The exploration potential is also considered with the value ranges as shown in the Appendix 1. 6.2 Valuation – MEE Method The historical expenditures were supplied by Vanguard and deemed applicable. The Reserve Bank Inflation Calculator was used to inflate the expenditures to a 2016 basis for the valuation, with PEM factors between 1.0 - 2.0 for Ives Find and 0.4 – 0.6 at Fairbairn applied to the total inflated expenditures thereby establishing a range of values. The exploration potential is also considered as a measure of worth. All details of the workings are summarised in Appendix 1. 6.3 Valuation Conclusions The summary result for the method is presented in Table 8. As stated above the MEE method was selected as the most appropriate method for valuation estimate purposes. Table 7: Summary Range of Current Values.
A$M Method Low High Preferred MEE 1.14 2.11 1.62 Rounded 1.1 2.1 1.6
This Report concludes that the cash value of 100% of the Vanguard Copper Project in Western Australia at 7th June, 2016, is ascribed at $1.6M from within the range of $1.1M to $2.1M. Yours faithfully,
For personal use only use personal For
Allen J. Maynard Brian J. Varndell BAppSc(Geol), MAIG, MAusIMM. BSc(SpecHonsGeol), FAusIMM.
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Competent Persons Statement
The information in this report which relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Allen Maynard, who is a Member of the Australian Institute of Geosciences (“AIG”), a Corporate Member of the Australasian Institute of Mining & Metallurgy (“AusIMM”) and independent consultant to the Company. Mr Maynard is the Director and principal geologist of Al Maynard & Associates Pty Ltd and has over 35 years of exploration and mining experience in a variety of mineral deposit styles. Mr Maynard has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for reporting of Exploration Results, Exploration Targets, Mineral Resources and Ore Reserves”.(JORC Code). Mr Maynard consents to inclusion in the report of the matters based on this information in the form and context in which it appears.
Competent Persons Statement
The information in this report which relates to Exploration Targets, Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Brian Varndell, who is a Fellow of the Australasian Institute of Mining and Metallurgy and independent consultant to the Company. Mr Varndell is an associate of Al Maynard & Associate Pty Ltd and has over 40 years of exploration and mining experience in a variety of mineral deposit styles including iron ore mineralisation. Mr Varndell has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for reporting of Exploration Results, Exploration Targets, Mineral Resources and Ore Reserves”.(JORC Code). Mr Varndell consents to inclusion in the report of the matters based on this information in the form and context in which it appears.
For personal use only use personal For
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7.0 References
Valuation AusIMM - JORC Code, 2012. Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserve, prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australasian Institute of Geoscientists and Minerals Council of Australia (JORC), 2012 Edition.
AusIMM. (2005): "Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (the VALMIN Code)" 2005 Edition.
ClM, (2003): - "Standards and Guidelines for Valuation of Mineral Properties. Final Version, February 2003". Special Committee of the Canadian Institute of Mining, Metallurgy and Petroleum on Valuation of Mineral Properties (CIMVAL).
Oxford Dictionary of Current English; for any terms not covered in the Glossary: Oxford University Press.
Rudenno, V. 2009: "The Mining Valuation Handbook" 3rd Edition.
Reports Ives Find Project - References
Stewart, AJ and Bastrakova, I 1997 Lake Violet Preliminary Edition (1:100 000 scale geological map) Australian Geological Survey Organisation, Canberra
Stewart, AJ 2008 Geology, structure, and mineral resources of the Lake Violet 1:100 000 sheet, Western Australia: Geological Survey of Western Australia, Record 2007/21, 42p.
FARRELL, T. R., 2001, Wiluna, W.A. (2nd edition): Western Australia Geological Survey, 1:250 000 Geological Series Explanatory Notes, 28p.
Morris, PA 2002 Regolith materials Wiluna WA, Sheet SG 51-9; Western Australia Geological Survey, 1:250 000 Regolith Geochemistry Series
Horvath, HS 07/12/1999 Great Central Mines Limited, Bullock Well Surrender Report (Wamex a59900)
Abeysinghe, PB May 1992 Great Central Mines, Jundee Tenements Annual Report (Wamex a37287)
Anon., 2006 Great Australian Resources Ltd Ives Find Project Annual Report ; including
For personal use only use personal For references to Cyprus Gold and Kalbarra Mining exploration activities (Wamex a73698)
McRae, WM November 1983 Northpac Exploration Collavilla Mine Geological Report (Wamex a13455)
Thompson, RL 16 May 1988 Sabre Resources NL Collavilla Prospect Initial
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Exploration Report (Wamex a24959)
Bradley, D and McCauley, A Open-File Report 2013-1008 A Preliminary Deposit Model for Lithium-Cesium-Tantalum (LCT) Pegmatites
Chapman, EG and Kriewaldt, M 10 February 1978 Esso Exploration and Production Australia Inc Mineral Exploration at Erawalla Report (Wamex a7438)
Tylich, M May 1992 Asarco Australia Ltd Bullock Well Annual Report (Wamex a35738)
Lewis, CR 5 April 1996 Great Central Mines Jundee East Project Annual Report (Wamex a48101)
Anon., May 2016 Northern Star Resources, Resources Rising Stars Corporate Presentation
Anon., June 2016 Metaliko Resources Limited Yandal Project Web Site information
Anon., June 2016 Gold Fields Ltd Darlot Project Web Site information No Author, April 2016 Echo Resources Ltd, Advancing Julius Corporate Presentation
Anon., May 2016 Alloy Resources Ltd, The Horse Well Gold Discoveries Corporate Presentation
Anon., June 2016 Blackham Resources Ltd, Matilda gold production next quarter Corporate Presentation
Hon. Lionel F Kelly, Minister for Mines, 1st May 1954 List of Cancelled Gold Mining Leases Department of Mines, Western Australia
King, JD September 2010 Ives Find Project Annual Report (unpublished) Poole, PE
February 2012 Ives Find Annual Report (unpublished)
Poole, PE November 2012 Ives Find Annual Report (unpublished) Poole, PE
December 2013 Ives Find Annual Report (unpublished) Poole, PE November
2014 Ives Find Annual Report (unpublished) Kerr, I November 2015 Ives Find
Annual Report (unpublished)
Fairbairn Project - References
Adamides, N. G., Pirajno, F., and Hocking, R. M., 2000, Geology of the
For personal use only use personal For Fairbairn 1:100 000 sheet: Western Australia Geological Survey, 1:100 000 Geological Series Explanatory Notes, 26p.
Hocking, R.M., Pirajno, F., Jones, J.A., and Adamides, N.G. 2003, Nabberu, W.A. Sheet SG 51-5 (2nd Edition): Western Australia Geological Survey, 1:250 000 Geological Series.
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Tyler, I. M., and Hocking, R. M., 2001, Tectonic units of Western Australia (scale 1:2 500 000): Western Australia Geological Survey
Blackburn, G 2003 CRC LEME Troy Creek Pt-Pd-Au Prospect NABBERU DISTRICT, WESTERN AUSTRALIA
Jones, J.A., Pirajno, F., Hocking, R.M., and Grey, K. 1999-2000 Annual Review GSWA Revised stratigraphy for the Earaheedy Group: implications for the tectonic evolution and mineral potential of the Earaheedy Basin
Paul A Morris, Andrew.J Sanders, Franco Piranjno, Joan A Faulkner, and Julian Coker; Regional Scale Regolith Geochemistry: Idnetification of Metalloid Anomalies and the extent of bedrock in the Archean and Proterozoic of Western Australia.
Morris, P.A., Sanders, A.J., and Faulkner, J.A., Geochemical mapping of the Nabberu 1: 250 000 sheet Perth 1997, GSWA
Abeysinghe, P.B., and Hocking, R.M., 2005 Mineralization and geology of the Earaheedy area (scale 1:500000): Western Australia Geological Survey, Report 96, Plate 1.
Bunting, J.A., Brakel, A.T., and Commander, D.P. GSWA 1:250 000 Geological Series Explanitory Notes Nabberu Western Australia Sheet SG/51-5 Perth, Western Australia 1982
Pirajno, F., Hocking, R.M., Reddy, S.M. and Jones, A.J., 2009 A review of the geology and geodynamic evolution of the Palaeoproterozoic Earaheedy Basin, Western Australia. Earth Science Reviews.
Hawke, M.L., Meffre, S., Stein, H. , Hilliard, P., Large, R., Bruce Gemmell, J., 2015 Geochronology of the DeGrussa volcanic-hosted massive sulphide deposit and associated mineralisation of the Yerrida, Bryah and Padbury Basins, Western Australia
Robinson, K., and Gellatly, D.C., January 1978 Amax Exploration (Australia) Inc Final Report on Iron Ore Exploration Nabberu Basin, Western Australia (Wamex a7448)
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Mitchell, M.S. January 1993 Stockdale Prospecting Ltd Lake Nabberu Reduction Report (Wamex a38484)
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Poole, P.E. 7 February 2013 Vanguard Exploration Ltd Fairbairn Copper Project Annual Report (unpublished)
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Kerr, I. 20 May 2016 Vanguard Exploration Ltd Old Marymia Project Annual Report (unpublished)
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Anon., 9 June 2016 Talisman Mining Ltd Springfield Project Update Company ASX announcement
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For personal use only use personal For
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8.0 Glossary of Technical Terms and Abbreviations
Anomaly Value higher or lower than the expected or norm. Base metal Generally a metal inferior in value to the precious metals, e.g. copper, lead, zinc, nickel. Complex An assemblage of rocks or minerals intricately mixed or folded together. Diamond drill Rotary drilling using diamond impregnated bits, to produce a solid continuous core sample of the rock. Dip The angle at which a rock layer, fault of any other planar structure is inclined from the horizontal. Fault A fracture in rocks on which there has been movement on one of the sides relative to the other, parallel to the fracture. Intercept The length of rock or mineralisation traversed by a drillhole. JORC Joint Ore Reserves Committee- Australasian Code for Reporting of Identified Resources and Ore Reserves. Mineralisation In economic geology, the introduction of valuable elements into a rock body. Ore A mixture of minerals, host rock and waste material which is expected to be mineable at a profit. Outcrop The surface expression of a rock layer (verb: to crop out). Primary Mineralisation which has not been affected by near surface mineralisation oxidising process. Quartz A very common mineral composed of silicon dioxide-SiO2. RAB Rotary Air Blast (as related to drilling)—A drilling technique in which the sample is returned to the surface outside the rod string by compressed air. RC Reverse Circulation (as relating to drilling)—A drilling technique in which the cuttings are recovered through the drill rods thus minimising sample losses and contamination. Reconnaissance A general examination or survey of a region with reference to its main features, usually as a preliminary to a more detailed survey. Remote Sensing Geophysical data obtained by satellites processed and presented Imagery as photographic images in real or false colour combinations. Reserve In-situ mineral occurrence which has had mining parameters applied to it, from which valuable or useful minerals may be recovered. Resource In-situ mineral occurrence from which valuable or useful minerals may be recovered, but from which only a broad knowledge of the geological character of the deposit is based on relatively few samples or measurements. Shear (zone) A zone in which shearing has occurred on a large scale so that the rock is crushed and brecciated. Stratigraphy The succession of superimposition of rock strata. Composition, sequence and correlation of stratified rock in the earth’s crust. For personal use only use personal For Strike The direction or bearing of the outcrop of an inclined bed or structure on a level surface.
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Abbreviations
g gram m3 cubic metre kg kilogram mm millimetre km kilometre M million km2 square kilometre oz troy ounce m metre t tonne m2 square metre
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Appendix 1: Details of Valuation Estimates.
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Appendix 2: Ives Find Project - List of all Vanguard RC drillhole Collars
Hole No Easting Northing RL Azimuth Dip Hole Hole (MGA Z51) (MGA Z51 Depth Type (m) IFRC001 278412 7021803 543 250 -60 60 RC IFRC002 278406 7021788 542 250 -60 44 RC IFRC003 278395 7021775 542 340 -60 54 RC IFRC004 278390 7021748 541 340 -60 48 RC IFRC005 278375 7021743 541 340 -60 58 RC IFRC007 278168 7021861 539 270 -60 48 RC IFRC011 278828 7021050 538 180 -60 64 RC IFRC012 278775 7021052 538 180 -60 48 RC IFRC014 278419 7021784 542 250 -60 60 RC IFRC015 278414 7021775 542 250 -60 48 RC IFRC016 278364 7021734 541 340 -60 52 RC IFRC017 278391 7021723 541 340 -60 68 RC IFRC020 278408 7022044 546 270 -60 31 RC IFRC021 278422 7022002 546 270 -60 50 RC IFRC022 278431 7021979 547 270 -60 34 RC IFRC023 278418 7021942 546 270 -60 50 RC IFRC024 278429 7021941 546 270 -60 37 RC IFRC025 278400 7021919 546 270 -60 64 RC IFRC026 278383 7021900 545 270 -60 30 RC IFRC027 278378 7021880 544 270 -60 40 RC IFRC028 278364 7021858 543 270 -60 30 RC IFRC029 278377 7021839 543 270 -60 36 RC IFRC030 278378 7021818 542 270 -60 34 RC IFRC031 278374 7021797 542 270 -60 40 RC IFRC032 278384 7021858 543.5 270 -60 58 RC IFRC033 278403 7021859 544 270 -60 58 RC IFRC034 278749 7021391 541 225 -60 40 RC IFRC035 278736 7021350 541 225 -60 48 RC IFRC036 278680 7021465 543 225 -60 40 RC IFRC037 278667 7021480 543 225 -60 34 RC IFRC038 278651 7021490 542 225 -60 30 RC IFRC039 278631 7021498 542 225 -60 22 RC IFRC040 278614 7021512 542 225 -60 32 RC IFRC041 278602 7021526 542 225 -60 40 RC IFRC042 278625 7021523 542 225 -60 64 RC IFRC043 278724 7021424 542 225 -60 40 RC IFRC044 278744 7021283 541 315 -60 28 RC
IFRC045 278738 7021263 540 315 -60 40 RC For personal use only use personal For IFRC046 278775 7021058 538 270 -60 40 RC IFRC047 278782 7021017 538 270 -60 46 RC IFRC048 278990 7021045 537 225 -60 47 RC IFRC049 279003 7021058 537 225 -60 58 RC IFRC050 278964 7021060 538 225 -60 52 RC IFRC051 278447 7021978 547 270 -60 64 RC IFRC052 278456 7021944 547 270 -60 52 RC
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Hole No Easting Northing RL Azimuth Dip Hole Hole (MGA Z51) (MGA Z51 Depth Type (m) IFRC060 278403 7021686 541 340 -60 114 RC IFRC061 278416 7021648 540 340 -60 136 RC IFRC065 278418 7021785 542 340 -60 42 RC IFRC069 278771 7021256 540 315 -60 50 RC IFRC070 278357 7021692 540 340 -60 92 RC IFRC071 278706 7021159 539 180 -60 50 RC IFRC072 278802 7021014 538 270 -60 64 RC
Total 2,609
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